| Buying

The Glossary For Buyers and Sellers

Agent: An agent would represent you in any negotiation, deal or transaction regarding the sale or purchase of a home. 

Appraisal: The appraisal is the estimated market value as currently stipulated for any piece of property. Typically an “appraiser” determines this value through comparables around the community.

Assessed Value – The value placed on a home by municipal assessors for the purposes of determining property taxes.

“As-is”: This is important to know as a seller, given that it grants you the right to say that you will not have to make any repairs or correct any problems with your property upon sale.

Bidding war: Any home seller would love this situation, as it typically involves two or more buyers competing for your property by offering higher bids, as in an auction.

Brokerage: An agency managing both the buying and selling of property for clients. Typically, in this case, a brokerage firm would represent you in the sale of your property.

Buyer’s agent: This would be the real estate agent representing the “buyer” of your property, negotiating contracts straight through closing.

Buyer’sMarket- An economic situation in which goods or shares are plentiful and buyers can keep prices down, benefitting the buyer in terms of low prices and a high supply of homes in the market for competition.

Closing – The final steps in the transfer of property ownership. On the Closing Date, as specified by the sales agreement, the buyer inspects and signs all the documents relating to the transaction and the final disbursements are paid. Also referred to as the Settlement.

Closing Costs – The costs to complete a real estate transaction in addition to the price of the home, may include: points, taxes, title insurance, appraisal fees and legal fees.

Closing statement:Verifiable document detailing all charges, credits and cash deposits for the transaction.

Commission: This is what is paid to a broker or agent upon sale of the house.

Comparable: When evaluating the value of your property, looking at other similar homes and seeing how they’ve been priced on the market would determine how you’re going to price yours. The similar homes out there are considered “comparables.”

Competitive Market Analysis (CMA): A very detailed evaluation of specific homes listed or sold on the market based on location, style and amenities similar to your own property. You complete this analysis to come up with an accurate price point.

Contingency – A clause in the purchase contract that describes certain conditions that must be met and agreed upon by both buyer and seller before the contract is binding.

Cooperative – A private business organization that is owned and controlled by the people who use its products, supplies, or services.

Counter-offer – An offer, made in response to a previous offer, that rejects all or part of it while enabling negotiations to continue towards a mutually-acceptable sales contract.

Conventional Mortgage – A mortgage that is not insured or guaranteed by the federal government.

Curb appeal: Essentially, how your home looks from the outside — everything from your front door to your front lawn — would be considered your “curb appeal.” 

Days on market:Days on market (DOM, alternatively active days on market, market time, or time on market) is a measurement of the age of a real estate listing.

Debt-to-Income Ratio – A ratio that measures total debt burden. It is calculated by dividing gross monthly debt repayments, including mortgages, by gross monthly income.

Depreciation: The value of a home can drop due to physical or functional deficiency resulting in depreciation.

Disclosures:The buyer is told, or disclosed, of all federal, state, county and local requirements of buying, owning, renting, or improving on a home, or anything else of relevance in the industry.

Down Payment – The money paid by the buyer to the lender at the time of the closing. The amount is the difference between the sales price and the mortgage loan. Requirements vary by loan type. Smaller down payments, less than 20%, usually requires mortgage insurance.

Earnest Money – A deposit given by the buyer to bind a purchase offer and which is held in escrow. If the property sale is closed, the deposit is applied to the purchase price. If the buyer does not fulfill all contract obligations, the deposit may be forfeited.

Equity – The value of the property, less the loan balance and any outstanding liens or other debts against the property.

Easements – Legal right of access to use of a property by individuals or groups for specific purposes. Easements may affect property values and are sometimes part of the deed.

Escrow – Funds held by a neutral third party  until certain conditions of a contract are met and the funds can be paid out. Escrow accounts are also used by loan officers to pay property taxes and homeowner’s insurance.

Fixed-Rate Mortgage – A type of mortgage loan in which the interest rate does not change during the entire term of the loan.

For Sale By Owner (FSBO): A way to sell real estate without using an agent. FSBO sellers do this so they don’t have to pay an agent commission.

Home Inspection – Professional inspection of a home, paid for by the buyer, to evaluate the quality and safety of its plumbing, heating, wiring, appliances, roof, foundation, etc.

Homeowner’s Insurance – A policy that protects you and the lender from fire or flood, a liability such as visitor injury, or damage to your personal property.  See our blog What is Homeowner’s Insurance for more information.

Inclusions: To “sweeten the deal,” perhaps, you, as the seller, can include anything from the washing machine to the above-ground swimming pool. Such additions to a contract would be considered “inclusions.”

Lease option: This is also kind of known as a “rent-to-own” option. If you’re renting out your property to a tenant, you may give the buyer the option to purchase the property, transferring title, deed and mortgage over.

Lien – A claim or charge on property for payment of a debt. With a mortgage, the lender has the right to take the title to your property if you don’t make the mortgage payments.

List date: Whenever you officially list your property on the market.

List price: Whatever price you list for the property.

Listing agreement: This involves a broker finding a buyer for your property. You would pay a commission with the listing agreement just for the broker to find a buyer as well.

Listing appointment: This is what an agent would schedule with you to determine if you want that listing agreement to help find a buyer possibly interested in your property.

Lockbox:Instead of dealing with passing around keys, you can get a “lockbox” typically hanging from the doorknob with the keys in it. It’s used for agents to enter your property for the purpose of showing and selling the home during open houses.

Market Value – The amount a willing buyer would pay a willing seller for a home. An appraised value is an estimate of the current fair market value.

Mortgage Insurance – Purchased by the buyer to protect the lender in the event of default (typically for loans with less than 20% down). Available through a government agency like the Federal Housing Administration (FHA) or through private mortgage insurers (PMI).

National Association of REALTORS® (NAR): The National Association of Realtors (NAR) is a national organization of real estate brokers, created to promote the real estate profession and foster professional behavior in its members. The association has its own code of ethics to which it requires its members to adhere to.

Option Fee– The Option Period can be “bought” for a fee known as the Option Fee in which the amount can be negotiated between the buyer and seller.

Option Period- specified number of days during which the buyer has the right to have the property inspected and can cancel the contract for any reason. See our blog Option Period: A Simple Guide for more information.

Patronage –  A refund of a portion of the interest the borrower pays on a loan.

Pending: When a contract has been agreed upon and completed (but the transaction has not taken place, yet), the deal is considered “pending.”

Possession Date – The date, as specified by the sales agreement, that the buyer can move into the property. Generally, it occurs within a couple days of the Closing Date.

Pre-Approval Letter – A letter from a mortgage lender indicating that a buyer qualifies for a mortgage of a specific amount. It also shows a home seller that you’re a serious buyer.

Principal – The amount of money borrowed from a lender to buy a home, or the amount of the loan that has not yet been repaid. Does not include the interest paid to borrow.

Purchase Offer – A detailed, written document which makes an offer to purchase a property, and which may be amended several times in the process of negotiations. When signed by all parties involved in the sale, the purchase offer becomes a legally-binding sales agreement.

Real Estate agent: The hired person representing the buyer or seller in the purchase or sale of a property.

REALTOR®️: A real estate agent who is a member of the National Association of Realtors. These agents abide by a code of ethics set by the NAR, and are often times top performing agents.

Secondary Market – The market in which existing mortgages are bought and sold.

Staging – The act of preparing a private residence for sale in the real estate marketplace. The goal of staging is to place your furniture and accessories in appealing ways to feature the home without clutter, allowing prospective buyers to see the features that matter the most.

Survey – The process of locating and measuring a property’s boundary lines to determine the exact amount of land that a homeowner owns. A survey will also locate and measure any easements or encroachments on a property.

Title – The right to, and the ownership of, property. A Title or Deed is sometimes used as proof of ownership of land. Clear title refers to a title that has no legal defects.

Title Insurance – Insurance policy that guarantees the accuracy of the title search and protects lenders and homeowners against legal problems with the title.

 Title Search – A historical review of all legal documents relating to ownership of a property to determine if there have been any flaws in prior transfers of ownership or if there are any claims or encumbrances on the title to the property.

Transaction: When you have an interested buyer who makes an offer and you either counteroffer (and buyer accepts) or you just accept, leading to closing or escrow, that sums up everything involved in a real estate “transaction.”

Truth-In-Lending Act (TILA) – Federal law that requires disclosure of a truth-in-lending statement for consumer loans. The statement includes a summary of the total cost of credit.

Under contract: When you stipulate this in a listing, you ensure that a buyer has the exclusive dibs on a contract for purchase of the house. No buyer can make a better offer in the hopes of stealing the bid. A buyer may ask that you stipulate this on a contract.

Walk-through: A final walk-through is an inspection performed anywhere from a few hours to a few days before settlement. It’s primary purpose is to make certain that the property is in the condition the buyers agreed to buy — that agreed-upon repairs, if any, were made, and nothing has gone wrong with the home since they last looked at it.

 

 

 

 

 

 

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