5 Terms you Might Not Know as a First Time HomeownerWhether you're just entering the market or you've got your real estate agent's number on speed dial, you've probably encountered words and phrases
5 Terms You Might Not Know As A First Time Homeowner
5 Terms you Might Not Know as a First Time Homeowner
Whether you're just entering the market or you've got your real estate agent's number on speed dial, you've probably encountered words and phrases that are new to you: Encumbrance, Amortization, Earnest Money, Restrictive Covenant, Easement Rights.
As you navigate the process, it can be hard to keep track of all the new terminology. Here is a cheat sheet created from ABODO you can refer to the next time you're in a bind.
An encumbrance is the real-estate equivalent of a "pre-existing condition." It's a broad category that can include easements, zoning restrictions, liens, claims, or even pending legal action. Encumbrances lower a property's value, but they don't necessarily prevent its sale. It is, however, the seller's responsibility to alert potential buyers to all encumbrances.
This refers to a gradual repayment of a loan over a fixed amount of time. Your mortgage, for example, is a loan amortization. (It's not a coincidence that it shares a base with "mortgage.") Fun fact: according to the logophiles at Merriam Webster, the word derives from Vulgar Latin's "admortire," which means "to kill." So, when you amortize a loan, you're "killing it off." That should make writing those monthly checks a little more exciting, right?
Earnest money essentially proves to the seller that the buyer is serious about purchasing a home. If the sale goes through, earnest money is applied toward the down payment. If the sale falls apart, you'll typically loose it. Bummer.
A restrictive covenant is an encumbrance that limits the way a piece of property can be used. It can regulate the size or number of buildings to be constructed on a piece of property, the purpose to which a building can be put, and many other factors pertaining to the use of the land. Restrictive covenants can apply to properties in perpetuity or be more specific to a sale.
Easement rights grant control of property to use outside entities that don't own the property. For instance, a utilities company with a pipe underground in your backyard might have an easement on your property, which allows them to maintain that pipe even though you own the land. Another example: If a house's previous owner installed a driveway that passed through part of the neighbor's property, he or she probably negotiated easement rights with that neighbor. Technically, your neighbor might have the "right of way" on that portion of your driveway.
You can usually see any easement rights on a plat, which is a map showing boundaries, divisions, and buildings on a particular piece of property.
As you move closer and closer to signing a mortgage, you'll hear words and phrases that might leave you scratching your head. Don't feel like you need to carry around a dictionary, and when it comes to your real estate agent, don't be afraid: Just ask!
Blog Post by Guest Blogger, Lizzy, from ABODO!