Key Terms To Know When Buying A Home
By Stuart Glasure, Fri Dec 9th

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Turn your dream of home ownership or moving up into a reality,but do it right. The real estate market is a difficult one, andshould not be entered casually. There are so many legal/realestate terms, contracts, listing agreements, disclosurestatements, title documents, etc. Getting as much good homebuying advice and becoming an intelligent homebuyer is one ofthe best things you can do to avoid making costly mistakes. Doyour homework, know your real estate terms, get your hands on asmuch expert information as you can, and hire a good agent. Withthis in mind, the following items are important elements for ahomebuyer's core knowledge.

Buyer's Agent

Buyer's Agent is the real estate broker or licensed agent withwho created a legal contract with a buyer to become theexclusive buyer's representative in searching and negotiatingfor real property. An exclusive buyer agent has, by code ofethics, your interests in mind with the planning and evaluatingproperty, negotiations, financing, inspections, etc.

Exclusive Agency Listing

This is a common type of real estate listing agreement. Aspecific broker is given the exclusive right and authorizationto market the seller's property. A key to this agreements isthat if the property is sold while the listing is in effect, theseller must pay the broker a commission regardless of who sellsthe property. Therefore, this type of listing agreement offersthe best opportunity for brokers to earn a commission. TheExclusive Agency Listing is also known as an exclusive right tosell listing.

Debt-to-Income Ratio

The debt-to-income ratio is a percentage figure used in thelending industry to estimate how much (as a percentage) of yourmonthly income will be going to pay your monthly debt payments(and how much you can afford). The debt-to-income ratio iseasily calculated by dividing your fixed monthly debt expensesby your gross monthly income. It is calculated by taking yourprospective monthly debt payments (PITI, auto loans, creditcards, student loans, personal loans, alimony, child support,etc.), divided by your gross monthly income. A percentage ofless than 40% is considered to be a good debt serviceindicator.

Earnest Money

Earnest Money (escrow deposit) is the specific monetary fundsprovided to bind an real estate sales agreement or some othertransaction requiring a deposit. The deposit acts as evidence ofgood faith in purchasing real estate. The amount of earnestmoney varies based on the type of property being purchased andlocal market conditions, but is truly one mort part of the salescontract that must be agreed to by both parties. The seller orbroker places the money in an escrow or trust account untilclosing, when it becomes part of the funds applied to thepurchase price. Earnest money is forfeited by the buyer if theyfail to carry out the terms of the contract agreement. In theevent the property does not close, the sales agreement spellsout the conditions under which buyer would forfeit the earnestmoney.

Grant Deed

The grant deed (or just deed) is the legal document

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that is usedas mechanism to transfer ownership of real estate from one party(grantor) to the new owner (grantee). The grantor will sign thedeed as part of the closing and the deed will be notarized byyour title agent officer (acting as a qualified notary public).The conveyance through a deed (by gift or sale) is considered avoluntary act of an owner.

Lead Paint Disclosure

In March of 1996, the Environmental Protection Agency (EPA) andthe Department of Housing and Urban Development (HUD) publisheda final rule, Lead; Requirements for Disclosure of KnownLead-Based Paint and/or Lead-Based Paint Hazards in Housing, (61FR9064-9088). This final rule requires persons selling orleasing most residential housing built before 1978 to providepurchasers and renters with a federally approved lead hazardinformation pamphlet and to disclose known lead-based paintand/or lead-based paint hazards.

Purchase and Sale Agreement

Ah...you find the house you want to call home and you will makeyour offer by submitting a contract for purchase and saleagreement. This is your blueprint for the entire transaction.The contract defines both parties' legal relationship and spellsout their rights and duties.

Sellers Disclosure

In the purchase and sale of an existing home, the sellers mustcomplete a seller's disclosure statement regarding the home.Disclosures cover a variety of topics, including the conditionof title, the availability services, flood issues, easements,zoning, and details regarding the history and the condition ofthe house. Unless the buyer waives review of this statement, theseller must deliver a completed statement to the buyer forreview prior to or within a certain time after the purchase andsale agreement has been signed by both parties. The buyer thenmay elect to terminate the transaction by giving timely andappropriate notice to the seller. If the buyer does not object,then the disclosures are deemed to be acceptable to thebuyer.

Most state laws mandate that disclosures be on special forms theseller must sign and date. Also note, that if there is a realestate broker or agent involved in the transaction, and if theyhave personal knowledge of any latent defects, the agent islegally obligated to disclose those defects to the potentialpurchaser, regardless of whether the seller discloses ordisclaims.

Title Insurance

Title insurance is the insurance which protects both the lenderand/or the homeowner against loss resulting from any defects inthe chain of title or claims against a property that were notuncovered in the title search, and were not specifically listedas exemptions to the title coverage on the title insurancepolicy. Potential defects may run to through fee history (chainof title) and to any lien encumbrances.

About the author:http://www.HomeBuyingIntelligenceMagazine.com provides articles, guides, and quizzes about home buying andselling. Test your knowledge with free real estate quizzesavailable at: http://www.HomeBuyingIntelligenceMagazine.com/quiz-zone.cfm.