Learning about real estate with Dr. Saied

BY JAY BRIJPAUL

“Good news Bev, your blood pressure is back to normal.” said Dr. Saied.  Bev thought that buying a home was an easy task. She never knew that real estate jargon was like learning Swahili.  Her blood pressure shot up.  Dr. Saied, her family physician, wanted to get to the source of the problem.

“What made your blood pressure soar?” queried Dr. Saied. “My realtor said that I needed a stress test to buy a house.”  Dr. Saied explained that the lenders required buyers to go through a financial stress test and not one for her heart. He explained that a financial stress test is designed to find out how much a buyer can afford and if the interest rate increased, whether she can fetch the heavier financial burden.

“Mortgage is like postmortem and mortuary. I guess a mortgage means that I will pay until death?” asked Bev. The composed doctor explained that the word “mort” means death and “gage” connotates a pledge. A mortgage is a security, usually the property, given for a pledge. Mortgage is therefore a security given for a loan which must be paid back even if the borrower dies. The lender is the mortgagee and the borrower the mortgagor.

Dr. Saied’s secretary, Janice, was listening in and wanted to know about closing costs. Dr Saied pointed out that it is the cost linked to the purchase or sale of a home such as sales tax, lawyer fees and lender fees. He suggested that in addition to the down payment, buyers should put aside about 1.75% of the value of the property for such expenses. Bev was the last patient and Dr. Saied was in a mood to talk real estate. The phone buzzed.

Jason, Dr. Saied’s broker, was broke and wished to borrow money. Dr. Saied explained that he can only lend to Jason if there is enough equity in his home. Equity is the chunk of money remaining after deducting the amount owed on the mortgage from the current sale price of the home. Dr. Saied will lend Jason as a second mortgage. A second mortgage is a mortgage taken out on a home that already has a mortgage. If Jason cannot pay the mortgages, the first lender can sell the property and if there is any money left over, then the second will get paid.  Second mortgages are high risk and are associated with higher interest rates.

Dr. Saied, before proceeding to arrange the mortgage, asked for an appraisal on Jason’s property. An appraisal is an estimate of the value of the property based on what similar properties recently sold for. With an appraisal, Dr. Saied can calculate the equity remaining before he continues. A licensed property appraiser would research the property through MLS. MLS, or multiple listing services, is a real estate service that collects data on properties that are for sale and those that are sold from all the realtors who are members. Each property is called a listing.

Janice was prequalified for a mortgage and when she bought her home the lender turned her down. Dr. Saied explained that when a buyer is prequalified, it’s only an estimate of how much she can afford. It does not investigate the finer details such as her credit and her ability to pay. Pre-approval imposes such responsibilities where the buyer completes an application and all the necessary documentation for review. If successful, the lender would issue a commitment letter to the buyer.

Bev’s fingers fumbled in her purse as she extracted a listing of a property. She needed some clarity. The listing stated that the home was “a link detach”. The foundation walls below ground are linked by two common walls running lengthwise along the entire stretch of homes. The cross-foundation walls are then constructed, and earth is thrown between the homes. Above ground, it looks like a detached, but below it is linked.

It was twilight before everyone went home. Bev intuitively knew that Dr. Saied was the man to help her. There were many more appointments and the relationship grew.