Use this glossary as a general guide for commonly used terms in real estate transactions. Talk to Prestige Properties Team Tipton for more information on these and other real estate-related terms.
A fiduciary is one who acts legally on behalf and in the best interests of another. There are certain common-law duties attached to fiduciary. In real estate, if you become the “agent” of your client, you are acting legally in their best interests.
A real estate agent is an individual who is licensed to negotiate and arrange real estate sales; works for a real estate broker. Negotiate and arrange can include showing property, listing property, filling in contracts, listing agreements, and purchase contracts. Real estate agents generally are licensed to operate under the supervision of a real estate broker.
A report done by a licensed appraiser using comparable properties based on features and properties that are in the same area or as close as possible. Also, the sold properties selected need to have been sold as recently as possible. If only older sales are available, adjustments may need to be made for market valuation changes. Appraisals are usually required to be done by mortgage lenders to protect their interest in case of a default.
A real estate broker is a person licensed to negotiate and arrange real estate transactions. This would include writing contracts for listing and purchasing homes, land and commercial properties. The broker is a higher level license than a real estate agent and would be authorized to hire real estate agents to work under the broker’s supervision.
A process where your real estate agent and you determine the criteria you are looking for in a property and input those features in the multiple listing service profile under you and you may then get sent listings that will match those criteria when they come up on the market.
Before any escrow can close, all the terms of the purchase contract must be met; then the seller transfers the deed and the buyer deposits the funds.
Comparable market analysis or brokers price opinion …… Using comparables, it’s an analysis done by real estate agents to establish a home’s market value. It is not an appraisal.
Comparable properties to the subject property usually used in determining the value of a property.
A contingency is a provision in a real estate contract that specifies the contract would cease to exist upon the occurrence of a certain event, i.e. appraisal, home inspection, sale of another property.
A variety of required and customarily given documents that contain Material Facts about the property which can be anything that would affect the buyer’s decision to purchase or the price and terms the buyer offers. In other words, if you have knowledge about a defect it should be disclosed.
Provides electronic signature technology and Digital Transaction Management services for facilitating electronic exchanges of contracts and signed documents. DocuSign’s features include authentication services, user identity management and workflow automation. Signatures processed by DocuSign are comparable to traditional signatures.
The dual agency definition is commonly referred to when a real estate agent is representing both buyer and seller in the same real estate transaction. Since the agent has promised a duty of confidentiality, loyalty and full disclosure to both parties simultaneously, it is necessary to limit these duties in this situation, if both parties consent to dual agency law.
This relationship involves the following limitations:
- The Agent will deal with the Buyer and the Seller impartially.
- The Agent will have a duty of disclosure to both the Buyer and the Seller.
- The Agent will not disclose that the Buyer is willing to pay a price or agree to terms other than those contained in the Offer, or that the Seller is willing to accept a price or terms other than those contained in the Listing.
- The Agent will not disclose the motivation of the Buyer or the Seller to sell unless authorized by the Buyer or the Seller.
- The Agent will not disclose personal information about either the Buyer or the Seller unless authorized in writing.
- The Agent will disclose to the Buyer the defects about the physical condition of the Property known to the Agent.
Before receiving an offer both you and the other party will be asked to consent in writing to this new limited agency relationship.
When buyers execute a purchase contract, the money the buyer is initially putting up to secure the contract, to show “good faith;’ it is usually refundable up until a certain time period agreed upon by buyer and seller.
Escrow is a process where sellers and buyers give funds and documents to a neutral third party for disbursement to the parties upon completion of terms and conditions. When a purchase offer has been signed by both sellers and buyers and an earnest money deposit has been put into a trust account, the transaction is said to be “in escrow:• In some parts of the country, escrow has a different meaning.
Loans from the Federal Housing Administration (FHA) are popular options for borrowers because they allow you to buy a home with a relatively small down payment. Designed to promote home ownership, FHA loans make it easier for people to qualify for a mortgage. An FHA loan is a home loan that is insured by the FHA.
In other words, they offer a guarantee to your bank: if you fail to repay the mortgage, FHA will step up and repay the bank instead.
A fixture is real property and conveys with the transfer of real estate. It is not personal property. Every state has its own guidelines for what constitutes a fixture, but here are the five tests California courts use to determine what is a fixture and what is not.
The sale of a property that is being sold by the property owner.
Is the process of wiring money from the mortgage lender to escrow prior to closing a real estate transaction. Interest is charged from the day of funding and not from the date of closing because funding often occurs a day or two before closing.
A service done through a 3rd party that helps ensure fixing something that could possibly break or malfunction in a clients new home. Although specific plans provide for specific types of coverage, most operate the same way.
- If a home system or appliance breaks or stops working, the home owner calls the home warranty company.
- The home warranty company calls a provider with which it has a business arrangement.
- The specific provider calls the home owner to make an appointment.
- The provider fixes the problem. If an appliance is malfunctioning and cannot be repaired, depending on contract coverage, the home warranty company will pay to replace and install the appliance.
- The home owner pays a small trade service fee (less than $100).
Liquidated damages allows the seller to collect the buyer’s deposit if the buyer does not complete the transaction due to the buyer’s default. Most purchase contracts contain contingencies that allow the return of the earnest money deposit to the buyer. If the buyer releases all contingencies and then does not complete the transaction or decides to cancel, the seller is entitled to the buyer’s deposit in an amount up to 3% of the purchase price.
An exclusive right-to-sell listing is the most common type of listing. It gives the broker the exclusive right to earn a commission by representing the owner and bringing a buyer, either through another brokerage or directly. The owner pays both the listing and selling broker fees. The owner cannot sell the property herself without paying a commission, unless an exception is noted in the contract.
A device used by those in the real estate profession to gain access to a property for showings and or inspections with the permission of the homeowner.
Just about any type of disagreement or dispute can be resolved using mediation or arbitration. Usually the dispute will be resolved more quickly and at a lower cost than through litigation of any type. Repair and inspection issues, costs for repairs, earnest money disputes, and claims of misrepresentation about the condition of the property, appliances or fixtures are all examples of situations where mediation and arbitration are effective and less expensive.
A Multiple Listing Service is a marketing database set up by a group of cooperating real estate brokers. Its purpose is to provide accurate and structured data about properties for sale. It is also a mechanism for listing brokers to offer compensation to buyer brokers who bring a buyer for their listed property.
Property deeds are legal instruments that are used to assign ownership of real property, to transfer title to the land and its improvements such as a house. Words used to convey property transfer may be grant, assign, convey or warrant, but they basically all do the same thing, they transfer the interest of the person selling the house to the person buying the house. This is the final step in being able to close.
A real estate purchase contract is a binding agreement (between two or more parties with legal capacity) to purchase real property. It is based on legal consideration.
A short sale is a property that nets the lender less, after all costs of sale are deducted, than the amount the lender is due. It is in the bank’s best interest to approve the short sale if the bank will make more money through the short sale than to foreclose. It is estimated that banks might save 25% to 30% on foreclosure costs to grant a short sale over a foreclosure, but some investor guidelines make it more profitable for the bank to foreclose.
An abstract of title is a written history of all the recorded documents and proceedings related to a specific property. If you’re going to buy a home with liens on it, you need to know what they are and how much. You don’t want survey problems either. You also don’t want claims on the property hiding out there; an example being an ex spouse claiming ownership not shown on the title.
An individual that ensures that a real estate transaction is done according to time frames and ensure various disclosures and inspections are completed.
The TILA-RESPA rule consolidates four existing disclosures required under Tl LA and RESPA for closed-end credit transactions secured by real property into two forms: a Loan Estimate that must be delivered or placed in the mail no later than the third business day after receiving the consumer’s application, and a Closing Disclosure that must be provided to the consumer at least three business days prior to consummation.
The VA home loan program is one of the many benefits available to service members and veterans. The VA does not make the loan. The funds are supplied by a bank or other financial institution, which means they do have the right to decline applicants they feel do not meet their predetermined criteria.