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Sunday, October 05, 2008

Do the words we use sometimes confuse?

Sometimes we in the real estate business forget that others are not used to our "language." I have worked for years in the medical profession both clinically and administratively. Anyone who has gotten a prescription and tried to interpret those "ii TID PO PRN" directions knows what I am talking about. By the way those prescription directions are simply means "take 2 of whatever the medication is, three times a day, by mouth as needed," quite simple when you know the lingo!

Purchasing a home can be a complicated process, especially for first-time buyers as well as those delving into short sales and REO properties! I was reading an article this morning on the Century 21 web site and ran across a similar article which inspired this post.

What is the difference between a broker and salesperson. A broker is a properly licensed individual, or corporation, who serves as a special agent in the purchase and sale of real estate, a salesperson is an individual employed or associated by written agreement by the broker as an independent contractor. The salesperson facilitates the purchase or sale of real estate.

Once you decide to purchase, a salesperson will prepare a sales contract to present to the seller along with your earnest money deposit. The sales contract is the document through which the seller agrees to give possession and title of property to the buyer upon full payment of the purchase price and performance of agreed-upon conditions. The earnest money is a buyer’s partial payment, as a show of good faith, to make the contract binding. Often, the earnest money is held in an escrow account. Escrow is the process by which money is held by a disinterested party until the terms of the escrow instructions are fulfilled.

After the buyer and seller have signed the contract, the buyer must obtain a mortgage note by presenting the contract to a mortgage lender. The note is the buyer’s promise to pay the purchase price of the real estate in addition to a stated interest rate over a specified period of time. A mortgage lender places a lien on the property, or mortgage, and this secures the mortgage note.

The buyer pays interest money to the lender exchange for the use of money borrowed. Interest is usually referred to as APR or annual percentage rate. Interest is paid on the principle, the capital sum the buyer owes. Interest payments may be disguised in the form of points. Points are an up-front cost which may be paid by either the buyer or seller or both in conventional loans.

In general, there are two types of conventional loans that a buyer can obtain. A fixed rate loan has the same rate of interest for the life of the loan, usually 14 to 30 years. An adjustable rate loan or adjustable rate mortgage (ARM) provides a discounted initial rate, which changes after a set period of time. The rate can’t exceed the interest rate cap or ceiling allowed on such loans for any one adjustment period. Some ARMs have a lifetime cap on interest. The buyer makes the loan and interest payments to the lender through amortization, the systematic payment and retirement of debt over a set period of time.

There are other terms and steps associated with the real estate purchase process. Please feel free to email me any questions you may have as well as if I can assist you with the purchase of a home in the Viera, Rockledge or Suntree area of Brevard County, Florida.

Gary Waters, Florida licensed real estate agent, Century 21 Baytree Realty, Rockledge Florida, email or direct 321-693-3850.

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