home buyingIf you are a novice at real estate investment or looking to purchase your first home, there’s a lot of new information to wade through. Home buying is a highly technical field that comes complete with its own unique set of legal procedures and unfamiliar jargon. Before you wade into this swamp of lawyers, brokers and sellers it’s very wise to familiarize yourself with the field. Consider these three important home buying terms before getting in over your head in a real estate negotiation.

Closing costs

Closing costs are hidden costs of home buying that most newbies don’t expect going into a deal. Purchasing a property is actually a much more expensive endeavor than the price tags on houses might lead you to believe. In reality, the purchase price for a piece of property is only a small piece of the entire financing puzzle. You should expect to pay around 30-35% more than the purchase price to complete any real estate sale. The majority of those added costs come from legal fees that must be paid for the handling of all the contracts required to solidify even the simplest real estate deal.

REO

REO properties are properties that have been foreclosed upon and repossessed. These properties are no longer owned by a resident o typical homeowner and often present enticing opportunities for investment. Before you pull the trigger on any REO, compare the price to other foreclosures in the area. If there are no better deals around and no homes in preforeclosure, then REOs are an acceptable next resort.

Escrow

Once you have been approved for a mortgage and settled on a purchase price for your new piece of property, the home moves into escrow. The building remains in escrow – essentially ownership limbo – until the details of the sale have been finalized and the brokers and lawyers have had the chance to work out all the papers and extract their pound of flesh. Escrow holdings usually carry interest, so no matter how long your property languishes in this state you won’t be losing money.

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