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A to T of Realty – common words associated with home buying (part 2)

26 June, 2023
home buying-property-owner-offer

This is the second part of the blog to demystify you of all terms or words associated with the home buying process. Chances are that some you’ve heard already and some you will hear in the course of buying your new property. Here goes:

Documentation related terms

Title deed provides information about the owner of the property, his/her rights or privileges, description and location. Title deeds are usually registered and deposited with the Sub-Registrar Offices in India, where the property allotment/sale transaction occurs. It is a must if ownership is to be transferred from one person to another.

Conveyance is the legal transfer of a property from one owner to another.

Deed of Assignment refers to a legal document that records the transfer of ownership of a real estate property from one party to another. It states that a specific piece of property will belong to the assignee and no longer belong to the assignor starting from a specified date.

Contingency in a contract is a condition that if not met, alters or cancels all existing terms e.g. a contract might state that if the buyer does not approve the inspection report of the property, he does not have to complete the purchase. Or the seller might include a contingency asking for proof that the buyer is financially able to close the deal.

Force Majeure is a clause that is included in contracts to remove liability for unforeseeable and unavoidable catastrophes like natural disasters or man-made conflict and diseases that prevent participants from fulfilling obligations.

Disclosure is the making known of a fact that is not transparent e.g. a home seller may disclose a flaw in the property, such as quake-prone construction or potential flooding.

Acceptance is agreeing to the terms of an offer and neither buyer nor seller can back out without facing consequences.

Counter offer is the rejection of an offer to enter into a contract, where the rejecting party includes a different offer that changes the terms of the original offer in some ways.

Escrow is the holding of funds or documents by a neutral third party, prior to closing your deal. An escrow agent is a person or a company that handles escrow arrangements for a fee.

Contract is entered into by the seller and buyer of a property. This only becomes binding when both parties have signed the contract and the purchaser has handed over the agreed deposit.

Purchase related terms

Down Payment is a sum a buyer pays upfront when purchasing a home. It represents a percentage of the total purchase price, and the balance is usually applicable for finance.

EMD or Earnest Money Deposit is a partial payment (deposit) demonstrating commitment in a contractual relationship, and commonly made at the time of creating the purchase offer.

Stamp Duty is a Government tax on the purchase price of a property.

Tax Clearance (37-1) is the application form number used for submission, along with processing fees, to the Income Tax Authority for grant of clearance for lease transaction of not less than 12 years, or for any sale transaction. Without it, transactions are incomplete.

Post purchase terms

Appreciation is an increase in the value or worth of a property caused by external economic factors, rather than by the owner making improvements. E.g. increased market demand or inflation can cause properties to appreciate.

Depreciation is the gradual loss of the value of a property that occurs through external economic conditions, the property’s age, natural wear and tear or deterioration.

Mutation of a Property is the transfer or change of title ownership in revenue records of the local municipal corporation due to change in the ownership from gift, inheritance or succession.

Freehold is the full ownership of both the property and the land on which it stands.

Leasehold is land held under a lease for years, without ownership or right to sell.

Home Insurance is a general insurance, which insures the property against damage caused by unexpected events such as fires, storms, lightening, theft and vandalism.

Homeowners Association is an organisation of owners who, as elected office-bearers, manage upkeep of common areas in a building or gated complex by collecting monthly proportionate maintenance charges from all residents/owners.

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