NJ Real Estate Lingo Explained

NJ real estate

In New Jersey, real estate contracts are required to be written in “plain language” to make sure even those inexperienced with buying and selling real estate can understand the terms of the agreement. However, a lot of real estate terms that are considered
“plain language” can still be confusing. Unfamiliar real estate terms can make it seem like the people around you are speaking a foreign language. This list of 14 real estate terms will help you make informed decisions during your future NJ real estate transactions.

Amortization:

This is a method of adjusting the ratio of principal to interest over time in order to equalize the monthly payment over the life of a mortgage or loan. So, while initially the interest payment will be high and the principal payment will be low, by the end of the loan the interest payments will be low and the principal payments will be high. Amortization of a loan will impact your ability to finance your property, making your payments standardized throughout the life of the loan.

Appraisal:

A lender will require a licensed appraiser to estimate the value of a home based on an investigation of the property and the selling price of similar homes in the area. This will help the lender determine if they will agree to mortgage a property.

Competitive Market Analysis (CMA):

CMA is a comparison of one property to other properties of similar size, style, location, and internal/external features that have recently sold or are on the market. This helps real estate agents determine how much money a house may be worth at any given time and help establish a listing price.

Contingencies:

In real estate, a contingency is a specific condition that must be met before closing. There are several different kinds of contingencies for the buyer and seller in a real estate transaction. The buyer will need to make sure they can get financing for the sale while the seller must ensure the home can pass an inspection, among other responsibilities.

Closing & Closing Fees:

Closing is the final step in a real estate transaction process. This is where the documents are submitted and carried out and when the sale of the property is complete. At closing, a closing statement will be issued listing the financial responsibilities of both buyer and seller. Closing costs include loan origination fees, attorney fees, discount points, and recording fees. This is typically somewhere between 3% and 5% of the price of the property.

Down Payment:

This is the amount of money a buyer will pay in cash initially in order to purchase a property. This is not financed and is typically anywhere from 5% and 25% of the overall value of the property. The bigger the down payment, the less a buyer will have to finance.

Escrow:

Escrow is when a neutral third party is hired during a real estate transaction to handle money transactions and hold documents as agreed upon by the buyer and seller of a property. They basically ensure the smooth transfer of ownership from seller to buyer and make sure all paperwork is handled correctly.

Fixed-rate mortgage and Adjustable-rate mortgage:

There are two kinds of conventional loans: fixed-rate and adjustable-rate. Under a fixed-rate mortgage, the interest rate stays the same throughout the entirety of the loan. Under an adjustable-rate mortgage, the interest rate can change over the course of the loan at the five, seven, and ten year marks. Depending on market conditions, this means your loan rate could increase drastically.

Inspection:

Once an offer is made on a home, the potential buyer will schedule an inspection. This typically costs between $500 and $800 and includes a full assessment of the property, including plumbing, structural stability, heating, electricity, and any appliances included in the sale.

Lien:

This is a legal claim or action on a property used as security for the payment of debt. A lien may be in place on a property for issues like an unpaid contractor or unpaid taxes.

Listing:

A listing is a home or property that is for sale. The home is often listed on online real estate sites or in real estate publications. This is how sellers alert potential buyers that their property is for sale.

Offer:

An offer is made by the buyer as an initial price offered to the seller. The offer can be accepted, rejected, or countered with a different offer by the seller.

Pre-approval Letter:

This is a letter from a bank or lending institution indicating the estimated amount they are willing to lend. This letter will help you determine how much you can afford as you start looking for houses and allows the seller to see that you will be able to get a loan when you need it.

Title Insurance:

Most mortgage lenders will require a buyer to pay title insurance as part of closing costs on a property. After a seller has accepted a buyer’s offer, title insurers will search through public records to determine whether or not the home seller had rights to the title of the house and that there are no liens on the property. This report is typically done within a week.

Veitengruber Law has extensive experience handling complex real estate transactions, from short sales to closings to refinancing and mortgage modification. Real estate transactions often involve complicated legal contracts. When you partner with us, we will advocate for your best interests and make sure you can make informed decisions about your real estate goals.

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