Kevin P. Scanlan, who serves on the board of directors at ABoR, spoke with Community Impact Newspaper to help define a handful of important real estate buzz words.
PRIVATE MORTGAGE INSURANCE (PMI)
Private mortgage insurance, commonly referred to as PMI, is an amount of money that is often rolled into a monthly fee alongside a homebuyer’s mortgage payments designed to offset a smaller initial down payment on a house. Although Scanlan said PMI payments are most often rolled in with monthly mortgage payments, they can also get taken care of as an up front lump sum payment. PMI is designed to protect the lender if the buyer is unable to pay his or her mortgage.
According to Scanlan, these fees are typically only assigned to homebuyers who paid less than 20 percent of the closing price as a down payment.
PMI payments can be removed once the buyer has built at least 20 percent equityin the home. The lender must automatically cancel the PMI once the buyer’s paid equity reaches 22 percent.
ESCROW PAYMENTS
When a homeowner chooses to escrow his or her property taxes, he or she is electing to set aside money each month to go toward his or her property tax bill rather than pay for the bill in one large payment. Essentially, the mortgage company pays the property taxes on behalf of the homeowner annually, while the homeowner pays toward that cost each month.
“A lot of people like it because now you don’t have to write a giant check,” Scanlan said.
Scanlan also said that he has noticed a prominent trend of lenders that affix an “escrow waiver fee” for homeowners who choose to pay their property taxes on their own. This boils down to a mortgage company charging borrowers for opting out of escrow payments, and Scanlan said those fees can be as high as half a percentage point of the total mortgage.
“If someone wants to pay their taxes at the end of the year, they shouldn’t be penalized for that. If you’ve got a good real estate agent for you they can tell your lender ‘No,’” Scanlan said.
Terms to know when putting an offer in for a house
These are three real estate jargon terms that are essential to know when heading into the process of submitting or accepting offers on a house.
MULTIPLE-OFFER SITUATION
If a listing agent receives multiple offers on a home, he or she will reach out to real estate agents interested in the property to inform them that the property is in a multiple-offer situation.
These situations are becoming more frequent in the Austin-area housing market, according to Scanlan, and create environments for potential buyers to put up bids substantially above the asking price.
“A lot of times these buyers, it is their third or fourth or fifth try to buy a house and they keep getting outbid,” Scanlan said. “Everyone has to step up.”
BEST AND FINAL OFFER
When in a multiple offer situation, a listing agent will reach out to those interested bidders and tell the real estate agents to submit their “best and final offer” by a deadline.
“Game on,” Scanlan said. “If you want the house, [you are] going to have to increase [an] offer from full price to overmarket.”
COMING SOON
Scanlan has seen a trend of more and more listing agents advertising homes as “coming soon” properties, meaning the house is not yet officially on the market but is expected to be ready for sale within 21 days.
“‘Coming soon’ has become known for ‘You better
get your butt over there and take a look at it …
because we’re going to get multiple offers on it,’” Scanlan said.
The “coming soon” listing allows interested parties to preview the property, and limited details are provided about the listing. Many times a property listed as “coming soon” may not even hit the full market, per Scanlan.