Real Estate Lingo: 10 Terms Everyone Should Know

Buyer's Agent

A buyer’s agent, known in Real Estate as the "Selling Agent" (not to be confused with the Seller's Agent, see below) represents the party looking to purchase the home or property. Buyer's agents often meet their clients at houses to show them around, as well as write up the offer, and deal with the mortgage broker and seller's agent, or listing agent, to make sure the deal can close once accepted by the seller.

Listing Agent, A.K.A. Seller's Agent

A listing agent works on behalf of the parties looking to sell a home or property in a real estate transaction. They first present to the potential sellers their case for why they should be hired to sell the home, and then, if hired, hold open houses as well as make the home accessible with lockboxes (if vacant) so buyer's agents can show homes to their clients. They are responsible for marketing the home for maximum exposure if that is the seller's wish, as well as coming up with an effective pricing strategy. 

Dual Agency

Dual agency occurs when an agent ends up representing both the buyer and seller in a real estate transaction, thus earning double commission. For example, if an agent represents the seller, and the buyers visit an open house and do not have an agent, said agent could serve as the agent for both parties.. However, many have argued that this is an ethical dilemma, as an agent has certain duties of responsibility to their clients, and those duties may overlap in a dual agency situation. Their have been many litigations regarding this subject. 

Pre-Approval Letter

A pre-approval letter (different from a pre-qualification letter!!) is an official letter from the lender stating that the borrower’s credit has been run, all information has been verified, and that they are approved to borrow ‘X’ amount of money, based on the appraisal. It is not final approval, however it states to the seller and their agent that there is a high likelihood of the deal closing should they enter into contract.

Pre-Qualification

A pre-qualification letter means that, only based on the verbal information the borrower has provided, they are approved to borrow ‘X’ amount of money. This is taken less seriously than a pre-approval letter because the income and assets have not been verified by the lender and therefore the loan might not be approved if the buyer doesn’t realistically qualify.

Contingencies

A contingency is a sentence put in the offer letter that states the offer is valid ONLY IF certain conditions are met. Think about it as a form of ‘protection.’ If the conditions are not met, the offer becomes void and open to renegotiating. Some of the most common contingencies are:

  • Loan Contingency:

This is a Contingency based on the buyers obtaining financing for the home. This usually depends on the letter and can be greatly hurried along by getting a pre-approval letter from the lender. 

  • Inspection Contingency:

This is a Contingency based on the home inspection report coming back without any major problems in the home. If any problems are discovered, the offer is open to negotiation based on the cost to repair the issues. If there’s a huge problem, the buyers may even want to back out of the deal and not purchase the house at all!

  • Appraisal Contingency:

This is a Contingency based on the appraisal coming in “at value” – that means, at or above the agreed-upon purchase price. This is often waived on cash-only deals so that the buyers can save money and time on the appraisal.

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RPA (Residential Purchase Agreement)

This is a standardized form from the CAR (CA Association of REALTORS) that contains the purchase price, information, and names of both parties on multiple pages. It specifies exactly how and when funds will be paid for the specific deal, the amounts and dates, and all agreements and concessions made by the buyer and/or seller.

Appraisal

An appraisal is a third-party opinion of value. This is usually based on comparable sales within the area of the “subject property” (the house for sale) as well as a detailed visual inspection. Appraisals matter because banks generally will not loan more than a home's appraisal value, so it is up to the buyer to come up with the difference, even if the buyer is pre-approved for an amount higher and if the price has been agreed upon. 

Escrow

When an impartial third-party, such as a title company or lawyer, holds onto funds during, in this case, a real-estate transaction. The title company acts as an intermediary between buyer and seller until close of escrow, when funds have been dispersed and the property and deed are transferred. 

CLosing

This is the end of the escrow period. Also known as Close of Escrow. This means that the transaction is completed and the sale is now final. Documents and funds held onto by the intermediary can be dispersed to the parties involved. This is where keys exchange hands between agents, and when buyers and sellers can rest assured that the deal has gone through.

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Thank you for checking out this week's Sweet 650 Homes Realtor's blog! For more answers to your real estate questions, or if you are thinking about moving to or from the San Mateo County area, don't hesitate to call Ramy Sghayer, Realtor at (650)691-5189,  seven days a week or email at ramy.sghayer@century21.com!