Glossary

Closing Costs After saving for a down payment, house hunting and applying for a mortgage, closing costs can come as an unpleasant surprise. ​ What are Closing Costs? Closing costs include the myriad fees for the services and expenses required to finalize a mortgage. You’ll have to pay closing costs whether you buy a home or refinance. Most of the closing costs fall on the buyer, but the seller typically has to pay a few, too, such as the real estate agent’s commission. (Buying a home for the first time? See our tips for first-time home buyers.) ​ How much are closing costs? Average closing costs for the buyer run between about 2% and 5% of the loan amount. That means, on a $300,000 home purchase, you would pay from $6,000 to $15,000 in closing costs. The most cost-effective way to cover your closing costs is to pay them out-of-pocket as a one-time expense. You may be able to finance them by folding them into the loan, if the lender allows, but then you’ll pay interest on those costs through the life of the mortgage. When buying a home, you can comparison shop and negotiate some of the fees to lower your closing costs. And some states, counties and cities offer low-interest loan programs or grants to help first-time home buyers with closing costs. Check with your local government to see what’s available. Your lender is required to outline your closing costs in the Loan Estimate you receive when you first apply for the loan and in the Closing Disclosure document you receive in the days before the settlement. Review them closely and ask questions about anything you don’t understand. ​ List of Closing Costs (may not be comprehensive depending on the situation)​ Property-related fees Appraisal fee: It’s important to a lender to know if the property is worth as much as the amount you want to borrow. This is for two reasons: The lender needs to verify the amount you need for a loan is justified and make sure it can recoup the value of the home if you default on your loan. The average cost of a home appraisal by a certified professional appraiser ranges between $300 and $400. Home inspection: Most lenders require a home inspection, especially if you’re getting a government-backed mortgage, such as an FHA loan insured by the Federal Housing Administration. Before lending you hundreds of thousands of dollars, a bank needs to make sure the home is structurally sound and in good enough shape to live in. If the inspection turns up troubling results, you may be able to negotiate a lower sale price. But depending on how severe the problems are, you have the option to back out of your contract if you and the seller can’t come to an agreement on how to fix the issues. Home inspection fees, on average, range from $300 to $500. Loan-related fees Application fee: This covers the cost of processing your request for a new loan and includes costs such as credit checks and administrative expenses. The application fee varies depending on the lender and the amount of work it takes to process your loan application. Assumption fee: If the seller has an assumable mortgage and you take over the remaining balance of the loan, you may be charged a variable fee based on the balance. Attorney’s fees: Some states require an attorney to be present at the closing of a real estate purchase. The fee will vary depending on the number of hours the attorney works for you. Prepaid interest: Most lenders require buyers to pay the interest that accrues on the mortgage between the date of settlement and the first monthly payment due date, so be prepared to pay that amount at closing; it will depend on your loan size. Loan origination fee: This is a big one. It’s also known as an underwriting fee, administrative fee or processing fee. The loan origination fee is a charge by the lender for evaluating and preparing your mortgage loan. This can cover document preparation, notary fees and the lender’s attorney fees. Expect to pay about 0.5% of the amount you’re borrowing. A $300,000 loan, for example, would result in a loan origination fee of $1,500. Discount points: By paying discount points, you reduce the interest rate you pay over the life of your loan, which results in more competitive mortgage rates. The cost of one point equals 1% of the loan amount. So for a loan of $250,000, a 1-point payment would be $2,500. Generally, paying points is worthwhile only if you plan to stay in the home for a long time. Otherwise, the upfront cost isn’t worth it. Mortgage broker fee: If you work with a mortgage broker to find a loan, the broker will usually charge a commission as a percentage of the loan amount. The commission averages from 0.5% to 2.75% of the home’s purchase price Mortgage Insurance Fees Mortgage insurance application fee: If you make a down payment of less than 20%, you may have to get private mortgage insurance. (PMI insures the lender in case you default; it doesn't insure the home.) The application fee varies by lender. Upfront mortgage insurance: Some lenders require borrowers to pay the first year’s mortgage insurance premium upfront, while others ask for a lump-sum payment that covers the life of the loan. Expect to pay from 0.55% to 2.25% of the purchase price for mortgage insurance, according to Genworth, Ginnie Mae and the Urban Institute. FHA, VA and USDA fees: If your loan is insured by the Federal Housing Administration, you’ll have to pay FHA mortgage insurance premiums; if it’s guaranteed by the Department of Veterans Affairs or the U.S. Department of Agriculture, you’ll pay guarantee fees. In addition to monthly premiums, the FHA requires an upfront premium payment of 1.75% of the loan amount. The USDA loan upfront guarantee fee is 1%. VA loan guarantee fees range from 1.25% to 3.3% of the loan amount, depending on the size of your down payment. Property taxes, annual fees and insurance Property taxes: Buyers typically pay two months’ worth of city and county property taxes at closing. Annual assessments: If your condo or homeowners association requires an annual fee, you might have to pay it upfront in one lump sum. Homeowners insurance premium: Usually, your lender requires that you purchase homeowner’s insurance before settlement, which covers the property in case of vandalism, damage and so on. Some condo associations include insurance in the monthly condo fee. The amount varies depending on where you live and your home’s value. Title Fees Title search fee: A title search is conducted to ensure that the person selling the house actually owns it and that there are no outstanding claims or liens against the property. This can be fairly labor-intensive, especially if the real estate records aren’t computerized. Title search fees are about $200, but can vary among title companies by region. The search fee may be included in the cost of title insurance. Lender’s title insurance: Most lenders require what’s called a loan policy; it protects them in case there’s an error in the title search and someone makes a claim of ownership on the property after it’s sold. Coverage lasts until the loan is paid off. Owner’s title insurance: You should also consider purchasing title insurance to protect yourself in case title problems or claims are made on your home after closing. The owner's coverage lasts as long as you or your heirs own the property. The cost of the owner’s policy is about 0.5% to 1% of the purchase price, according to the American Land Title Association. Whether the buyer or seller pays for title insurance varies by region. A discount is sometimes offered when both the lender’s and owner’s policies are purchased at the same time. Mortgage Closing Documents With so many closing costs to consider, it’s obvious you’ll face a lot of paperwork just prior to and during the loan signing. Two of the most important closing documents are the Loan Estimate and the Closing Disclosure. You’ll receive the Loan Estimate three days after applying with a lender. It will officially detail all fees, the interest rate and the other costs to close your loan. It’s legally binding, so you’ll want to read it carefully. Then, three days from loan settlement and prior to making the big commitment, you’ll receive the Closing Disclosure from your lender. It confirms — or makes minor adjustments to — what you saw on the Loan Estimate. Again, it’s worth a big cup of coffee and a thorough review. ​ Mortgage closing costs: summary Appraisal fee ($300-$400) Home inspection ($300-$500) Application fee (varies) Assumption fee (varies) Attorney’s fee (hourly or flat fee) Prepaid interest (based on loan amount) Origination fee (about 0.5% of loan amount) Discount points (1 point costs 1% of the loan amount) Mortgage broker fee (0.50% to 2.75%) Mortgage insurance application fee (varies) Upfront mortgage insurance (0.55% to 2.25%) FHA, VA and USDA fees (1% to 3.3%) Property taxes (two months’ worth) Upfront HOA fee (varies) Homeowners insurance (depends on home value and location) Title search fee (about $200) Lender’s title insurance (varies) Owner’s title insurance (0.5% to 1% of purchase price)

Home Inspection Many buyers include a clause in their offer making the sale closing contingent upon a satisfactory inspection report. This makes sure that if any unacceptable material defects exist on the property, the buyer has a chance to renegotiate or cancel the sale. ​ Buyers should not rely solely on the home seller's disclosures, but should hire an independent home inspector to examine the property. Even after having lived in the property, the seller is unlikely to know all its troubles, particularly if the attic or subspace is difficult to access. ​ Home inspections cover nearly every element in and around home and other structures on the property. Roofing, full exteriors, structural elements, full interiors, plumbing, electrical, heating and air conditioning, and all of the components of these are subject to inspection . ​ Inspections begin on the outside of the property, walking around the exterior of the home. Next, the roof is inspected, then the garage, and finally the inspector goes inside the home. ​ Once inside, the inspection starts at the top, preferably in the attic, and works down through the house, checking floors, walls, plumbing, stairs, and other elements until the inspector reaches the crawlspace or basement. ​ A well-written inspection report will discuss problems as far ranging as the heating and cooling systems, electrical systems, plumbing, walls, drainage, basement, foundation, and flooring.

REALTOR (R) Buyer's Agent A REALTOR (R) is real estate professional that is both a licensed real estate agent or broker AND a member of the National Realtor's Association. They are experts in the residential real estate process and help represent Sellers and Buyers during their real estate transaction. ​ On this page, we will discuss the role, duties, and responsibilities of the Buyer's Agent: ​ Role Showings: Buyer's Agents will contact seller properties to schedule time and access for property showings. Negotiations: Buyer's Agents will assist the Buyer in the Offer Negotiation process when a Buyer decides to purchase a property. Management: Buyer's Agents will assist the Buyer in managing the entire buying process by organizing all of the requisite documents and ensuring all parties involved in the transaction are active in ensuring the buying process is being executed. ​ Benefits - You do not need a real estate agent to buy a home; in fact, some home buyers leave the Buyer's Agent out of the equation. However, you might benefit from hiring one. ​ To save time. Agents can often help you find homes in your price range, and they may have access to more properties than what you’ll see online. To get information and help with negotiations. Good agents should have wealth of information to help you make a decision. And, they’ll handle a lot of complex paperwork on your behalf. Offer Contract Contingency Negotiations Home Inspection Reports Appraisal Reports Earnest Money Escrow Extension Requests Another plus is that your agent will handle a ton of paperwork on your behalf. Unless you love filling out forms – and have experience in real estate transactions – this is a chore best left to the professionals, who should ensure that everything is done by the book. You could easily make a mistake with these documents. Mistakes can cause deals to fall apart or (worse) make you liable for an inadvertent breach of contract. (Licensed agent will have errors and omissions insurance to limit this risk.) An experienced agent will make sure that everything that needs to take place — counter-offers, extensions, appraisal, inspection, walk-through, loan approval — happens when it’s supposed to and how it’s supposed to.​ Market expertise: Conducting a home search by yourself can be a full-time job. Though the Internet makes it easy to find homes in your price range, a good agent usually has access to more properties. That includes For Sale By Owner (FSBO) properties and homes that aren’t yet listed. In addition, some sellers of desirable homes do not wish to “go public.” Only agents (and their colleagues) working with those sellers even know about those so-called “pocket listings.” The exception: There is ONE instance in which you must use an agent to purchase property. That applies if you bid on FHA foreclosure properties. The Department of Housing and Urban Development (HUD) requires all bidders to use licensed agents. ​ ​​

Annual Percentage Rate (APR) Mortgage APR includes the interest rate, point and fees charged by the lender. APR is higher than the interest rate because it encompasses all these loan costs. ​ APR Comparison ​ APR is a tool that lets you compare mortgage offers that have different combinations of interest rates, discount points and fees. Comparing APRs is most useful if you plan to keep the loan for more than six or seven years. But if you plan to keep the loan for less than six or seven years, APR comparisons could be misleading. That's because the APR calculation assumes that you'll keep the loan for its entire term. But not every borrower does that. Most people sell the home or refinance the loan before it's paid off. ​ As a hypothetical example, let's say you're comparing two offers on a $200,000 loan for 30 years: ​ Loan A : You could borrow $200,000 with an interest rate of 4.25%, paying a 1% origination fee, no discount points and $1,000 in other fees. The 1% origination fee costs $2,000, and other fees are $1,000. Total fees: $3,000 . Loan B : You could pay a discount point to reduce the interest rate. In this offer, you could borrow $200,000 with an interest rate of 4%, paying a 1% origination fee, 1 discount point and $1,000 in other fees. The 1% origination fee costs $2,000, the 1 discount point costs another $2,000, and other fees are $1,000. Total fees: $5,000 . ​ Conclusion : Loan A has a higher interest rate (4.25%) and lower fees ($3,000), while Loan B has a lower interest rate (4%) and higher fees ($5,000), because you could pay $2,000 to buy 1 discount point to cut the interest rate by 0.25%. As you see in the table below, Loan B has a lower APR, which means that you end up paying less over the 30-year life of the loan when you include principal, interest and upfront fees.

Counter Offer When sellers receive a purchase offer from a would-be buyer, remember that unless they accept it exactly as it stands, unconditionally, the buyer will be free to walk away. Any change the proposed buyer makes in a counteroffer puts the seller at risk of losing that chance to sell. ​ Who pays for what items is often determined by local custom. Sellers can, however, arrive at any agreement they and the buyers want about who pays for different costs. Some examples of what can be negotiated on who pays: ​ Buyer's closing costs Points to the buyer's lender Buyer's broker fee Repairs required by the lender Home protection policy ​Termite inspection Survey ​ Sellers may feel some of these costs are not their responsibility, but many buyers—particularly first-timers—are short of cash. Helping a buyer may be the best way to get a home sold. ​ Whether you're buying or selling, make sure a real estate agent and/or an attorney evaluate all terms in the offer and counteroffers. ​ As soon as both parties accept the written offer, you have a legal contract. ​ You can accept or reject it or to even make your own counteroffer—for example, "We accept the counteroffer with the higher price, except we still insist on having the pool table." ​ Each time either party makes any change in the terms, the other side is free to accept or reject the offer or counter again. The document becomes a binding contract only when one party finally signs an unconditional acceptance of the other side's proposal. ​​

Illinois Contract

What Is Escrow? Escrow is when a neutral third party holds on to funds during a transaction. In real estate, it’s used as a way to protect both the buyer and seller during the home purchasing process. After a property is purchased, the new homeowner continues to put money into escrow as a means of paying mortgage and insurance payments. ​ For example, earnest money is an amount paid in to escrow early in the home purchase process to essentially put a “hold” on the property for the buyer. It’s a way of showing serious intent that the buyer is going to stay true to their offer, and protects sellers from having to deal with buyers putting out multiple offers or going into negotiations on multiple properties. At closing, the earnest money payment is generally taken out of escrow and put toward the buyer’s down payment. ​ The purpose of escrow is two-fold. It guarantees the seller that the buyer has the funds needed for the purchase and that the money will be handed over once the title is transferred, and it guarantees the buyer that they won’t be scammed by a fraudulent seller who actually holds no claim to a title. Ultimately, escrow helps ensure trust in a high-stakes transaction where neither party may be familiar with each other and where both have a lot to lose. ​ Escrow vs Escrow Account ​ Here’s a set of terms that are closely related but not to be confused with each other. Many people have trouble understanding real estate escrow because they mistake it for an escrow account, so it’s important to know the difference. ​ An escrow account is a separate account managed by a lender to collect advance insurance payments and tax payments from a homeowner. Usually, a lender will add up the total amount due for these payments in a year, divide it by 12, and tack on that extra amount to each mortgage payment. When those payments are due to either a homeowners insurance agency or the IRS, the lender pays them for the homeowner out of the escrow account. Many states, but not all, require lenders to pay interest to homeowners on their escrow account. ​ The simplest way to think of the difference is Escrow happens during the process of buying/selling the home. After the house is sold or purchased, Escrow Accounts are where your mortgage payments are partially paid to in order to pay for your PMI payments and property taxes . ​ ​

Types of Mortgages There are four main types of mortgage loans. They are the Conventional Loan , FHA Loan , VA Loan, and the USDA Loan . The one that works best for you will depend on your situation: ​ Conventional Loan - When most people think of a mortgage, they’re thinking of a conventional loan. Conventional loans are the closest you can get to a ‘standard’ mortgage. There are no special eligibility requirements, pretty much all lenders offer them, and you can qualify with just 3% down and a 620 credit score. Conventional loan requirements vary by lender. However, all conventional loans have to meet certain guidelines set by Fannie Mae and Freddie Mac. These include a 620 credit score, a debt-to-income ratio lower than 43%, and at least a 3% down payment. The mortgage also has to be within conventional loan limits: up to $510,400 in most areas. If you apply for a conventional loan with better credentials — like a credit score of 740+ and 20% down payment — you’ll get access to lower rates and a lower monthly payment. On the flip side, maybe you’re just on the edge of qualifying for a conventional loan. If you have a credit score right around 620, and higher levels of debt, you’ll want to be extra sure to shop around. Thanks to their wide availability and low rates, conventional loans are the most popular mortgage in the U.S. In fact, almost 3 in 5 buyers use a conventional loan when they buy a house or refinance. Minimum down payment for a conventional loan It’s a common myth that you need a 20 percent down payment for a conventional loan; you can actually get one with as little as 3 percent down. All told, there are six major options for conventional loan down payments, ranging from 3-20 percent. Conventional 97 loan — 3% down Fannie Mae HomeReady loan — 3% down Freddie Mac Home Possible loan — 3% down Conventional loan with PMI — 5% down Piggyback loan (no PMI) — 10% down Conventional loan without PMI — 20% down For more information about HomeReadyTM and Conventional 97, and piggyback loans, contact your mortgage professional. If you’re in Illinois and would like assistance in learning more about mortgages, ask us and we can point you to a few mortgage professional options. ​ FHA - An FHA loan is a mortgage insured by the Federal Housing Administration. FHA insurance protects mortgage lenders, allowing them to offer loans with below-average interest rates, easier credit requirements, and low down payments (starting at just 3.5%). FHA loans are especially popular with first time, lower-income, and/or lower-credit home buyers, thanks to their flexibility and low rates. But FHA financing isn’t limited to a certain type of buyer — anyone can apply. To qualify for an FHA home loan, you’ll need to meet these requirements: A 3.5 percent down payment if your credit score is 580 or higher A 10 percent down payment if your credit score is 500-579 A debt-to-income ratio of 50% or less Documented, steady employment and income You’ll live in the home as your primary residence You have not had a foreclosure in the last three years ​FHA loans usually have below-market interest rates. That means they’re lower, on average, than comparable conventional loans. Note, the APR on an FHA loan is often higher than the APR on a conventional loan. That’s because FHA rate estimates include mortgage insurance, while conventional rate estimates assume 20% down and no mortgage insurance. ​ USDA Loans - USDA loans are mortgages backed by the U.S. Department of Agriculture as part of its USDA Rural Development Guaranteed Housing Loan program. USDA loans are available to home buyers with low-to-average income for their area, offer 100% financing with reduced mortgage insurance premiums, and feature below-market mortgage rates. USDA home loans are putting people in homes who never thought they could do anything but rent. USDA loans are special mortgages meant for low- to moderate-income home buyers. These loans are guaranteed by the US Department of Agriculture. That guarantee acts as a form of insurance protecting USDA mortgage lenders, so they’re able to offer below-market interest rates and zero-down home loans. USDA runs this program to encourage homeownership and economic development in rural areas. Insurance - USDA “guarantees” its loan program — meaning it offers protection to mortgage lenders in case USDA borrowers default. But the program is partially self-funded. So, to keep it running, the USDA uses homeowner-paid mortgage insurance premiums. ​As of 2016, this is the current mortgage insurance rates ​For purchases, 1.00% upfront fee paid at closing, based on the loan size As a real-life example: A homebuyer with a $100,000 loan size in Blacksburg, Virginia, would be required to make a $1,000 upfront mortgage insurance premium payment at closing, plus a monthly $29.17 payment for mortgage insurance. USDA upfront mortgage insurance is not paid as cash. It’s added to your loan balance for you. ​Eligibility - USDA eligibility is based on the buyer and the property. First, the home must be in a qualified “rural” area, which USDA typically defines as a population of less than 20,000. Second, the buyer must meet USDA income caps. To be eligible, you can’t make more than 15% above the local median salary. You also have to use the home as your primary residence (no vacation homes or investment properties allowed). Borrowers also have to meet USDA's "ability to repay" standards including: ​Steady job and income, proven by tax returns FICO credit score of at least 640 (though this can vary by lender) Debt-to-income ratio of 41% or less in most cases See if a property is eligible for the USDA Loans: https://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?pageAction=mfhc ​ VA Loan - VA loans are mortgages backed by the U.S. Department of Veteran Affairs for veterans who have served in the United States armed forces. VA Loan Eligibility for Veterans ​Most veterans must complete a minimum term of qualifying active-duty service to be eligible for a VA loan, though this requirement does have a few exceptions. The minimum term of service varies depending on the dates of that service. Veterans serving from August 2, 1990 through The Present Day ​Veterans who served from August 2, 1990 through the present day must have completed 24 months of continuous service or a full period of at least 90 days during which they were called or ordered to active duty. Veterans serving from September 8, 1980 through August 1, 1990​ Veterans who served from September 8, 1980, through August 1, 1990, must have completed 24 months of continuous service or a full period of at least 181 days of active duty. The beginning date that applies to officers for this requirement is October 17, 1981.​ Veterans serving from May 8, 1975 through September 7, 1980 Veterans who served from May 8, 1975, through September 7, 1980, must have completed 181 continuous days of active duty. The ending date that applies to officers for this requirement is October 16, 1981.​ Veterans serving from August 5, 1964 through May 7, 1975 Veterans who served from August 5, 1964, through May 7, 1975, must have completed 90 days of active duty. The beginning date that applies to veterans who served in the Republic of Vietnam for this requirement is February 28, 1961.​ Veterans serving from February 1, 1955 through August 4, 1964 Veterans who served from February 1, 1955 through August 4, 1964 must have completed 181 continuous days of active duty.​ Veterans serving from June 27, 1950 through January 31, 1955 Veterans who served from June 27, 1950 through January 31, 1955 must have completed 90 days of active duty.​ Veterans serving from July 26, 1947 through June 26, 1950 Veterans who served from July 26, 1947 through June 26, 1950 must have completed 181 continuous days of active duty.​ Veterans serving from September 16, 1940 through July 25, 1947 Veterans who served from September 16, 1940 through July 25, 1947 must have completed 90 days of active duty.​ Additional eligibility requirements for veterans ​Veterans who were discharged due to hardship, government convenience, reduction-in-force, certain medical conditions or a disability connected to military service can be eligible for a VA loan even if they don’t meet the minimum term of service requirement. Veterans who were dishonorably discharged are not eligible for the VA home loan program. VA Loan Eligibility for Non-Veterans​ - The VA home loan program is available to non-veterans, too. This eligibility class includes certain active military borrowers, their families, and others.​ Service members on active duty Active-duty service members can be eligible for a VA loan after they have served 90 days of continuous active duty. Army, Navy, Air Force and Marines are eligible.​ Military spouses Some military spouses can be eligible for a VA loan, too.​ If the service member to whom the spouse is married is alive, the spouse can be eligible if the service member has been officially declared missing in action (MIA) or a prisoner of war (POW) for at least 90 days. This eligibility is limited to one-time use. If the service member to whom the spouse was married has died, the surviving spouse can be eligible if he or she hasn’t remarried and the service member died on active duty, was a totally disabled veteran or was a veteran who died as a result of a service-connected disability. Spouses who have remarried may be subject to more complicated rules. A consultation with a VA-approved lender may be required. A spouse who obtained a VA home loan with an active-duty service member or veteran who subsequently died can be eligible to refinance that VA loan with a new VA loan at a lower interest rate through the VA streamlined refinance program. The service member's or veteran’s death need not be related to his or her service in this case. Children of active-duty service members or veterans, whether alive or deceased, aren’t eligible for VA loans as a benefit of the parent’s service. Reservists and National Guard members Members of the National Guard and Reserves can be eligible for VA loans if they have completed six years of service in the Selected Reserve or National Guard and they continue to serve in the Selected Reserve or were honorably discharged, placed on the retired list or transferred after honorable service to the Standby Reserve or an element of the Ready Reserve other than the Selected Reserve.​ Other people eligible for VA loans Individuals who have completed service with certain federal government organizations also can be eligible for VA loans. Examples include cadets at the U.S. Military, Air Force or Coast Guard Academy, midshipmen at the U.S. Naval Academy, World War II merchant seamen, U.S. Public Health Service officers and National Oceanic & Atmospheric Administration officers.

Open House For the Seller Open Houses are a great way to allow the general public access to view your property. Your Realtor will be present to facilitate and host the guests as they arrive to view your home. Open Houses are a great way to allow more people into the home and see the property. Some might just be neighbors who are curious to see your home. But, it’s a great opportunity to have more eyes on the property because they might know someone who is interested! Open Houses are not just for those interested in buying but also those who might know someone who is buying. ​ For the Buyer Open Houses are great opportunities to see a home without prior coordination. Once an open house is scheduled by a Seller, buyers can visit the property anytime within that window. Unlike a scheduled showing, a Buyer will not be allocated an exclusive time slot to view the property. Instead, there may be multiple Buyers at the property simultaneously depending on the traffic coming through to visit the property. Open Houses are generally not a good time to negotiate with a Seller’s Agent because they may be attempting to assist and answer multiple Buyers’ questions during the Open House. It is usually better to contact the Seller’s Agent after the Open House is over to negotiate or submit an offer . ​ ​

Appraisal Whether you’re buying a home using a mortgage, refinancing your existing mortgage, or selling your home to anyone other than an all-cash buyer, a home appraisal is a key component of the transaction. If you’re a buyer, owner, or seller, you’ll want to understand how the appraisal process works and how an appraiser determines a home’s value. ​ The Basics An appraisal is an unbiased professional opinion of the value of a home and is used whenever a mortgage is involved in the buying, refinancing, or selling of that property. A qualified appraiser creates a report based on a visual inspection, using recent sales of similar properties, current market trends, and aspects of the home (e.g., amenities, floor plan, square footage) to determine the property’s appraisal value. The borrower usually pays the appraisal fee, which can be several hundred dollars. When the appraisal value is lower than expected, the transaction can be delayed or even canceled. ​ The Appraisal Process and How Values Are Determined​ Because the appraisal primarily protects the lender's interests, the lender will usually order the appraisal. An appraisal costs several hundred dollars and, generally, the borrower pays this fee. According to the Appraisal Institute, an association of professional real estate appraisers, a qualified appraiser should be licensed or certified—as required in all 50 states—and be familiar with the local area. Per federal regulations, the appraiser must be impartial and have no direct or indirect interest in the transaction. A property's appraisal value is influenced by recent sales of similar properties and by current market trends. The home's amenities, the number of bedrooms and bathrooms, floor plan functionality, and square footage are also key factors in assessing the home's value. The appraiser must do a complete visual inspection of the interior and exterior and note any conditions that adversely affect the property's value, such as needed repairs. Typically, appraisers use Fannie Mae's Uniform Residential Appraisal Report for single-family homes. The report asks the appraiser to describe the interior and exterior of the property, the neighborhood, and nearby comparable sales. The appraiser then provides an analysis and conclusions about the property's value based on their observations. ​ The Appraisal Report Must Include: A street map showing the appraised property and comparable sales used An exterior building sketch An explanation of how the square footage was calculated Photographs of the home’s front, back, and street scene Front exterior photographs of each comparable property used Other pertinent information—such as market sales data, public land records, and public tax records—that the appraiser requires to determine the property's fair market value

Earnest Money ​ Earnest money is an amount paid in to escrow early in the home purchase process to essentially put a “hold” on the property for the buyer. The money is deposited once an offer has been accepted . It’s a way of showing serious intent that the buyer is going to stay true to their offer, and protects sellers from having to deal with buyers putting out multiple offers or going into negotiations on multiple properties. At closing, the earnest money payment is generally taken out of escrow and put toward the buyer’s down payment. ​ A REALTOR®, title company, or an attorney can usually hold this deposit. The amount varies from community to community, and it becomes part of your down payment. ​