The language of real estate can be confusing – especially all the legal jargon, like “escrow” and “liens.” If you’re going to be successful on the real estate market, though, you need to be able to speak this language fluently. Whether you’re an ambitious investor or you’re just trying to sell your house, here are four real estate terms you should be familiar with.
- Escrow. If you’re selling your house, this is a term you should know. The word “escrow” refers to money held by a neutral third party to be distributed according to a set of instructions. When you list your house on the market, banks will often have you open an escrow account to make sure that the homeowner’s insurance and taxes are paid on time. Trying to move can be stressful, but it’s even worse if you need to remember to make large, periodic payments. By holding money in escrow, you can get the bank to pay your fees for you.
- Liens. A lien is a claim or hold on a property, and you’ll sometimes hear this word when you attempt to buy a foreclosed home. If the previous owner didn’t pay property taxes to the state or was behind on their insurance, a lien can be placed on the property so that the new owner is forced to pay off the debts before they can take the title for their own. Typically, you want to avoid buying a house that has a lien on it – and make sure to never get a lien placed on your own home, because it could kill the property value.
- Refinancing. Refinancing your home is the act of renegotiating the terms of your mortgage to adjust the rate or length of the loan. This can be a good decision if you have a 30-year loan and you suddenly find yourself in a better spot financially. When this happens, you can increase your payments so that the loan will be paid off in 10 years instead.
These are only a few of the terms that every real estate investor should be familiar with. Remember that you can’t control a situation you don’t understand, so if you’re buying, selling or flipping a house, make sure to learn the definition of every confusing phrase or word you come across.
