Entering the world of real estate, whether as a buyer, seller, investor, or even just a curious enthusiast, can be both exciting and overwhelming.
As with any specialized field, real estate comes with its own unique vocabulary that might seem like a foreign language at first. But fear not! In this article, we’ll guide you through some fundamental real estate terms that are essential to understanding the ins and outs of property transactions and investments.
1. Property Appraisal: A property appraisal is an evaluation of a property’s market value by a qualified appraiser. This assessment helps determine the fair price of a property, crucial for both buyers and sellers to make informed decisions.
2. Equity: Equity is the difference between a property’s current market value and the outstanding mortgage balance. It represents the ownership interest of the property owner.
3. Down Payment: The down payment is the initial amount of money paid by a buyer when purchasing a property. It’s a percentage of the property’s purchase price and is paid upfront, with the remainder covered by a mortgage.
4. Closing Costs: Closing costs are the fees and expenses associated with finalizing a real estate transaction. These can include attorney fees, appraisal fees, title insurance, and more.
5. Title: The title refers to the legal ownership of a property. A clear title indicates that there are no outstanding legal claims or liens on the property.
6. Mortgage: A mortgage is a loan used to finance the purchase of a property. The property itself serves as collateral for the loan. The borrower makes regular payments to the lender until the loan is paid off.
7. Interest Rate: The interest rate is the percentage charged by the lender for borrowing money through a mortgage. It affects the total amount of interest paid over the life of the loan.
8. Listing: A listing is a property that’s actively for sale. It includes details such as the property’s features, price, and location.
9. Pre-selling: These pre-selling properties offer a unique opportunity. This category includes properties that have not yet been built or are in the early stages of construction. For buyers interested in these properties, the financial process is distinct. Instead of a spot cash down payment, the buyer commits to paying a monthly equity installment. This installment, divided over several months, typically aligns with the anticipated turnover date of the property. It’s important to note that opting for pre-construction stage properties often comes with cost advantages compared to ready-for-occupancy options. The more affordable nature of this approach can make it an appealing choice for those looking to make a wise investment while securing a future living space.
10. Ready for Occupancy (RFO): When you’re looking to purchase a RFO property, it means the unit is already in a condition suitable for immediate occupancy. This option comes with its own set of advantages, allowing you to settle into your new home without delay. To secure a RFO property, the buyer typically needs to make a spot cash down payment, usually ranging from 10% to 20% of the total contract price. This payment allows you to move in, provided that the bank loan has been approved and is ready for a take-out loan process. This streamlined approach ensures you can swiftly transition into your new living space once all financial arrangements are in place.
11. Assumed property, equity period: In situations involving an assumed property, the current owner continues paying the monthly equity. When a new buyer steps in, they are required to make a spot cash payment, referred to as the assumed price, to the current owner. The new owner then takes over the payment of the remaining equity and the loanable amount, facilitated through either bank or PAG-IBIG financing.
12. Assumed property, bank loan period: In the scenario of an assumed property with a bank loan in progress, the current owner has completed the downpayment and started paying the monthly amortization. For the new buyer, an assumed price, typically comprising the sum of the owner’s payments and a possible return on investment (ROI), needs to be paid in cash. Subsequently, the new owner will assume the responsibility of repaying the remaining loanable amount through bank or PAG-IBIG financing.
13. Transfer charges: Transfer charges encompass the expenses incurred for processing the title of the condo or lot before the unit turnover to the buyer.
14. Condominium Certificate of Title: It serves as legal evidence of ownership for a condominium unit. Validation and registration of title certificates are overseen by the local Land Registration Authority.
15. Transfer Certificate of Title: It is the legal document that confirms ownership of a property. Similar to the CCT, validation and registration of title certificates are overseen by the local Land Registration Authority.
Understanding these basic real estate terms is a fantastic starting point on your journey into the real estate world. Whether you’re considering buying, selling, or investing, having a grasp of these terms will empower you to navigate discussions, negotiations, and transactions with confidence.
And remember, at Melro Realty Brokerage, we’re here to guide you every step of the way, providing expertise and support to ensure your real estate endeavors are a success.
