For most ARMs, the adjustment date occurs annually. The time between a change in rates is called an adjustment period, and the length of this period depends on the loan. What About ARMs? 4 Loan Questions Worth AskingĬlients with ARMs need to know their adjustment date, because that’s when they may see a change to the interest rate in an adjustable-rate mortgage. The disadvantage, of course, is that ARMs make it hard to plan and budget since there is always the possibility (and current reality) of rates increasing. Since an ARM’s interest rate fluctuates over time depending on various market factors, there are some experts who believe they save borrowers money in the long run. One of the most common addenda, and an easy example for clients to understand, is the lead paint disclosure for homes built before 1978, which alerts buyers to potential hazards.Ĭlients might be interested in an ARM because it allows borrowers to take advantage of interest rate decreases without having to go through a whole refinance process and pay additional closing costs. They must be agreed upon and signed by both parties. But if and when the contingencies have been met, the property will be listed as “ pending.”Ĭlients will come across all sorts of addenda, or supplemental documents that modify a specific part of an existing contract. There is always a chance a sale might not go through, especially in today’s wild interest rate market. Let them know that it’s totally fine, assuming the seller agrees, but make sure they understand that the property has an offer with contingencies that have not yet been met. Your client might wonder if they can still view a property that’s active with contract (also known as “active under contract”). Related Article House Hunting Checklist to Give Your Real Estate Clients That Explains Everything (PDF Download) But if you shepherd your clients through the process with the greatest attention to detail, they won’t forget it. There are plenty of things out of your control, like a foundation crumbling, undisclosed liens, or all the seller’s DIY repairs. It might feel stressful, but handling contingencies well is actually a time when you, as the agent, can really shine. A contingency might be the buyer selling their current house, requiring certain repairs to be made, or obtaining a clean termite inspection. To help your clients understand contingencies, use the word “conditional.” If a property is active contingent, a buyer has submitted an offer to purchase a property, but the sale won’t be finalized until certain conditions, or contingencies, are met. Make sure clients who see an acceleration clause in their mortgage contracts understand that this allows their lender to demand repayment of the loan in full if they default on the loan. If you want to work with real estate investor clients, read our own Sean Moudry’s simple, yet thorough run down: “ How to Explain 1031 Exchange Rules to Your Clients.” A The catch is that they must sell one property and buy a similar one within a set time frame. This tool, also known as a like-kind exchange, allows investors to defer paying capital gains taxes on a sale. Download it now and add it to your new homebuyer drip campaign for 2023!Ĥ Key Interest Rate Questions That Could Save Your Clients MoneyĪnd now we present the 131 real estate terms you need to know-and be able to define for clients-in 2023: So we’ve included a handy download with questions your clients should ask their mortgage broker. After all, great communication leads to closed deals.įurthermore, in today’s market, understanding our complex mortgage industry could actually help you close more deals and maybe even save clients money. These real estate definitions will help you ensure you’re communicating with clients effectively. That’s why we compiled this comprehensive list. Even if you know every one of the 131 real estate terms on this list and how to use them, your clients expect you to be their interpreter throughout the transaction. Whether you’re a veteran agent or a rookie hoping to sound authoritative during your first transaction, you need to be able to succinctly explain common real estate terms and definitions to your clients.
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