Selling a Home: Terms You Need to Know

A 1031 Exchange is a tax aspect of the Internal Revenue Code to let a real estate investor who meets all the prerequisites to sell their property and postpone paying taxes on the property gain. By doing a 1031 exchange, the owner can get rid of their investment property, use all of the equity to get a replacement investment property, reschedule the capital gain tax that would normally be paid, and leverage all of their equity into the replacement property.

A breach of contract is when a party is in violation of an explicit obligation or failure to do the provisions in the contract agreement. In the sector of real estate, a breached contract happens typically in two ways: 1) a failure to do what is in the property listing agreement between the broker and the seller. 2) a violation of the terms in the sales contract between the buyer and the seller.

Contingencies in real estate contracts are exact clauses in the contract that must be fulfilled by both the buyer and the seller or give a way to void the contract. For example, a current home sales contingency is usually used when a buyer puts an offer on a home before selling his/her existing home. The buyer may need to sell the present home before being able to qualify and afford buying a new home. Therefore, the offer is contingent upon the sale of the current home. Average contingencies are home inspections and home appraisals.

The Alienation Clause Due on Sale Clause is the specific wording in a mortgage or deed which states the lenders option to force that the balance of the secured debt becomes instantly due and payable if the property is sold by the borrower, thus stopping the homeowner/borrower from transferring the debt without the lender’s approval. Comes from the term alienate, meaning to transfer or convey the title to a property from one person to another.