Be it buying or selling, there are some important real estate terms in Bangladesh that you need to know when dealing with property. For example, if you are a buyer who wants to take a home loan, you have to know about your debt-to-income ratio. And when it comes to getting a mortgage, your pre-approval letter will determine how much the bank will lend you. But no bank will lend you more than the FSV or Forced Sale Value of your property. Now, some of these terms may confuse you, whereas having a clear understanding of these terms is crucial. Keeping that in mind, I have discussed some of the most important real estate terms or jargon that are commonly used in Bangladesh.
Appraisal
In real estate, an appraisal is when your bank sends out an appraiser to get a professional opinion on the value of your property. This helps the bank to gather the estimated value of the property and determine if the property is worth the money that the buyer is seeking during the home sale.
Closing
Closing refers to the final act of the property transaction where both parties sit together to finalize the deal by signing all the documents. After this buyers pay the down payments and closing costs to close the deal.
Closing Cost
Closing cost is an assortment of fees that are generally involved in property transactions. This includes fees charged by a lender, the title company, attorneys, insurance companies, taxing authorities, homeowner’s associations, real estate agents, and other closing settlement. These fees are typically paid during the closing of a real estate transaction.
Comparative market analysis (CMA)
Comparative market analysis or CMA is done to determine the accurate value of a property by comparing the price of a similar one located in the same neighborhood or area.
Debt-to-income ratio (DTI)
DTI is a number in percentage used by mortgage lenders to determine your ability to repay debt. It is calculated by adding your total debt expenses with your monthly housing payment and divided the sum by the gross monthly income and then multiply the result by 100. The lower your ratio the less risky you are to your lenders.
Equity
When you take a mortgage to purchase your property, the lending institution will burden you with interest on the home until you repay the loan. Home equity is the portion of the current value of the home that the owner currently possesses. To put it simply, your home’s equity is the current value of your home minus the mortgage balance.
Forced sale value (FSV)
FSV or Forced sale value is a widely used credit jargon used by banks. This is the price that mortgage lenders expect the property to reach at auction if sold after repossession. Usually, FSV is around 70% of the real market value of the property.
Home Owners Association (HOA)
This is a private association that manages a planned community or condominium that set rules and regulations to keep the community going smoothly. When you buy a property that is managed by an HOA, you accept to abide by the rules and regulations set by the association and also agree to pay its monthly or annual due.
Inspection
Home inspection or inspection, in general, is an important real estate term in Bangladesh. It is done by a professional inspector who inspects a property for issues that need to be repaired including plumbing, foundation, electrical fittings, and other features.
Non-encumbrance-certificate (NEC)
Non-encumbrance-certificate or NEC is one of the most important things to check during the validation process of a property’s ownership. This certification states that the property that you are dealing with is devoid of encumbrance and safe to transact.
Pre-approval letter
The pre-approval letter contains all the information regarding how much money a bank will lend a buyer. This helps a buyer to determine what they can afford. A pre-approval letter is issued by a bank containing the terms and conditions along with the loan amount, interest rate, and loan type after checking the buyer’s debt-to-income ratios along with cash on hand and credit history.
Every industry has its own jargon and real estate is no different. Whether you are a property dealer or just an avid real estate enthusiast, these are some of the most important real estate terms in Bangladesh that you need to know.
Do you have any questions? Let us know in the comments section below.
