Whether you are buying or selling a home, the real estate industry and Realtors will use terms that you may not know the meaning of. In fact, I've spoken to Buyers and Sellers who said their previous Realtor's would use terms that would make them confused and not truly understand what was being asked of them. After the Buyer or Seller signed the agreement, they didn't really know what they were committing to. Never, ever, sign anything without a thorough understanding of what is being asked of you.
Anyone who is in the market to buy or sell a home should be familiar with the terms below. I will do my best to define the most common Real Estate terms in a typical transaction.
I hope after reading this article you will be a little more comfortable when it comes to buying/selling a house.
1. Exclusive Right to sell -- An exclusive right-to-sell listing is the most commonly utilized listing agreement. It gives the Broker/Realtor (typically the seller deals with a Real Estate Agent) the exclusive right to earn a commission by representing the owner and bringing in a Buyer, either through another brokerage or directly.
2. Multiple Listing Service - This is the database where all the local (e.g. all San Diego County) homes are located and every Real Estate agent in good standing uses it to access all the available listings (homes) for sale. This is the same database where Realtor.com and the other majors search engines grab their data.
3. Escrow - It's a process. Escrow is neutral 3rd party hired by the Buyer and Seller to handle the real estate transaction.
4. Initial Deposit - This represents the money that will be held in escrow during the selling process. If the Buyer defaults, at no fault of the Sellers, this money could potentially be passed to the Seller. Buyers always ask how much earnest money deposit is required. Typically, there is no set requirement. In California, contracts must contain consideration to be valid, but that amount can be as little as one dollar.
5. Contingencies - These allow a Buyer or Seller to cancel a contract without penalty (Buyers will get their earnest money deposit back). The following contingencies may apply: loan, inspections, appraisal and the sale of an existing home (these are just a few).
6. Disclosures - These are any material facts about the subject property that could affect the Buyer's decision to purchase the property. By law, real estate agents cannot fill out any Sellers' home disclosures unless the agent is the Seller or a party to the transaction. Examples of disclosures are: Lead Based Paint, death in the home, potential noise problems in the area, foundation problems, roofing, and plumbing or electrical issues. These are just a few that may arise in a real estate transaction.
7. Counter Offer -- The Seller generates Counter offers after a Buyer has submitted an offer to purchase. Typically, counter offers will state that the Seller has accepted the Buyer's offer subject to the following conditions. Some of the conditions may be the Seller wants more money, an increase in deposit and a 30 days escrow - not 45 days.
8. Close of Escrow - The day title transfers to the new Buyers..
The above are few Real Estate terms that you will hear and read about when buying or selling a home.