From A to C
Amenities
Home buyers don’t want to purchase just any home with their hard-earned money. They want a residence with numerous amenities — in other words, features that make the listing in question desirable. Substantial square footage, an open kitchen concept, a walk-in closet, smart-home features (e.g. automated thermostat): These are all amenities many buyers look for in properties today — ones seller’s agents should promote heavily in their marketingAbsorption Rate
Commonly referred to as the inverse of months’ supply, the absorption rate paints a slightly different picture: how many months it would take for all homes for sale in a given real estate market to sell provided no other homes were listed during said period. Per the fine folks at Realtor.com, a healthy absorption rate for a housing market is roughly five to seven months.
Abstract of Title
All information pertaining to a particular property is recorded and maintained by local municipalities in the form of an abstract of title. This overarching document contains every document that’s ever been produced for and affiliated with a residence. For instance, any time the deed and title changes hands or a lien is placed, there will be a written record in the abstract denoting all parties involved, the financial details, and so on.
Addendum and Amendment
During the course of a transaction, a home buyer or seller may want to make a request of one another in the form of an addendum or amendment. Sometimes, this is a change to an existing portion of the contract (an amendment). Other times, it’s something they want to add to the contract (an addendum). An amendment is often made to a housing agreement when there’s an error. An addendum could happen, for instance, if a buyer wanted to keep a seller’s washer and dryer, thus requiring new contract language.
Adjustable-Rate Mortgage (ARM)
Predictability with one’s mortgage is often comforting to many buyers. Some, though, prefer to roll the dice a bit and select adjustable-rate mortgages. The interest rates for these types of home loans can vary after a fixed-rate period as determined by the lender. Sometimes, the rates will go up, causing clients of yours who choose an ARM to have to pay more per month to stay current on their loans. The opposite can be true as well, though, depending on market conditions.
Amortization
This is the period during which home buyers will have to pay back their mortgage to their lender — both the principal and interest accrued. Regardless of the home loan type — adjustable- or fixed-rate — secured by a new homeowner, they’ll pay relatively consistent totals to their lender on a monthly basis. If your client has a 30-year mortgage (the most common mortgage type), they’re slated to complete their mortgage payments after that span.
Appraisal
It can be difficult to assign an accurate value to a given property without knowing all of the extraneous details associated with. That’s where an appraiser comes in. This professional is an unbiased third party brought into housing deals to offer their expert real estate insights regarding what they believe a given residence is worth. This viewpoint is primarily developed by gathering data on the home itself, the local neighborhood and, the entire local/regional market.
Appreciation
When your clients purchase a property, it’s often with the intent of not only moving into a more preferable home than their previous one, but also to have that home appreciate in value over time. Ideally, the longer a homeowner owns a residence, the more valuable it becomes. Reasons for increased value for a property include improving economic conditions in the local market, further housing and business development nearby, and the exact location of a given residence.
As-Is
Many home sellers are willing to make one or more concessions to buyers interested in their properties, just so they can expedite the deal and/or prevent it from falling through. Other sellers, however, prefer to simply offer their home as-is — meaning they’re unwilling to make any such changes to the property prior to offloading it. Technically speaking, the as-is state of a home is the standard for any housing transaction. Usually, it’s on the buyer to request a modification. Some sellers are willing to budge, while others refuse to do so.
Assessment
Whereas a certified real estate appraiser can assign a certain value to one’s property based on their statistical findings and general industry acumen, an assessment filed by one’s local government differs slightly. This assessment is made for one primary reason: to ascribe a property tax to a residence. Some industry pros recommend carefully examining this assessment, as it can often be larger than an appraisal provided, meaning something is likely amiss — and leaving homeowners with a larger tax bill.
Assumable Mortgage
It’s exactly what you (likely) think it is: A home buyer takes on the existing mortgage taken out by the current homeowner/seller and pays off the remainder of the loan. This isn’t a terribly popular option for buyers — and, as a Trulia blog post points out, there are some restrictions with assumable mortgages — but it’s yet another avenue for buyers to take in their quest to purchase their first, next, or even dream home. Buyers who find it difficult to get a home loan with the desired terms are often ones who will assume a mortgage from sellers.
Balloon Mortgage
Owing as little money as possible each month to lenders is a dream come true for some buyers. Buyers willing to take a relative risk with their home loan can have this dream become a reality should they secure a balloon mortgage. In essence, any buyer who obtains this type of home loan will owe a huge, one-time payment at the end of their loan-term period to their lender. Those intrigued by this uncommon option would have to be certain they can save enough over the duration of their mortgage to pay such a lump sum.
Bill of Sale
Legal confirmation of a housing transaction is an obvious must-have when signing on the dotted line as a buyer or seller. A bill of sale lays out the exact terms of a deal: final sale price, names of the buyer and seller, their contact information, and other important details associated with a home sale. In short, this document protects both parties of the transaction should either side argue there’s an issue with the transaction. More often than not, though, these issues rarely arise after the t’s are crossed and i’s are dotted.
Breach of Contract
From home buyers getting cold feet about purchasing a residence after starting paperwork to home sellers rescinding an accepted bid when they receive a better offer, there are several ways in which both parties can breach their contract. Once funds from a buyer go in escrow and contracts have been signed, a deal is essentially done. Having said that, that still doesn’t stop some buyers and sellers from rethinking their decision and, ultimately, trying to get out of the transaction altogether. These instances tend to lead to length legal proceedings.
Built-Ins
Permanent shelving, entertainment area, and furniture are some of the most common types of built-ins that can entice buyers to make offers on one’s home. Well, as long as those built-ins are structurally sound, useful for potential buyers, and aesthetically appealing. As a New York Times ask-the-editor outlines, sometimes, it’s best for sellers to eliminate certain built-ins if they or their representation think it could be more of a deterrent to receiving high offers as opposed to something that aids their efforts to sell (and for the right dollar amount).
Buy-Down
Buyers with poor credit who can’t get ideal mortgage terms (or a mortgage at all) have an unusual option at their disposal — one many buyers don’t know about: the ability to buy down a mortgage. With this option, buyers would receive a standard, 30-year home loan, but they’d pay the first three years worth of mortgage interest upfront. This guaranteed money for lenders gives them security, should those to borrowers default — and it gives buyers in weaker financial standing the chance to own their very own residence.
Buyer’s Agent
Given you’re likely a beginner real estate agent if you’re reading this, chances are you know already that this type of agent niche is the optimal one for you. Buyer’s agents represent — you guessed it — the buyer side of a transaction. In this role, you’d be paid by the seller’s agent (or their brokerage, if they’re apart of one) after a deal is closed. It’s typically best to start out as a buyer’s agent so you can learn the ins and outs of what buyers want and get lots of experience (buyer’s agents tend to work far more deals than seller’s agents).
Buyer’s Market
It’s simple supply and demand: A surplus of homes for sale in a market tends to lead to lower prices across the board for those listings and favorable conditions for home buyers. This buyer’s market often leads aspiring homeowners to snatch up these residences while the prices remain low. However, competition can get fierce for low-priced properties, so it’s always best to advise your buyer clients to act quickly when they find a home that catches their eye. They could lose out on their dream home in a matter of hours in certain buyer’s markets.
Closing
Yet another real estate definition that’s exactly what you think it is: the period during which you work with your client, agent counterpart, and their client to nail down the terms for closing a home purchase. Closing can take a day or two … or it can drag on for weeks. It all depends on how well you’re able to negotiate with your agent peer and how your client and theirs are able to meet in the middle to finalize everything. It’s not uncommon for deals to fall through during the process, meaning it’s vital to carefully guide your client through this oft-stressful experience.
Closing Costs
Nothing is easy when it comes to wrapping up a real estate deal — particularly for home buyers. There are about two dozen specific closing costs your clients will have to pay when they complete their purchase: from application and attorney fees to homeowners and title insurance. it can be complicated for buyers to comprehend all of these fees, meaning it’s on your — their representation — to lay them all out for them and explain in detail the purpose behind each distinct one. Closing cost calculators can help you and your clients gauge what they’ll have to pay.
Commission
This is the money you’re owed at the very end of deals you close. As noted, this commission comes from the listing agent’s brokerage, not your clients. Once the seller’s agent collects their commission from their firm, they’ll, in turn, shell out the appropriate amount to you or, if you work at a brokerage, your broker. Commissions are negotiated on the seller’s agent’s end. The typical going rate for commissions is about 6% for both the buyer’s and seller’s agents of a given deal, meaning you’d get roughly 3% for each transaction.
Commitment Letter
Securing a home loan in this day and age can be a nightmare for many buyers. One of the most exciting days for these individuals during the buying process, though, is when they get their commitment letter from their lender. While this letter isn’t a legally binding document, it does signiify the first step in the buying journey is complete: a lender agreeing a potential borrower is worthy of borrowing. This letter is handed out to buyers after they have been pre-approved and a loan underwriter has deemed them worthy of taking out a mortgage.
Common Area
Renters who lease units in apartment complexes or home buyers who purchase residences in multifamily complexes often have to share common areas. Pools, gyms, lounge areas, basketball courts, parking lots — these are all types of standard common areas found in apartment building and condo complexes. To maintain these common areas, those who lease or purchase property in these areas agree to allocate an equal percentage of money, which can then be added to a common area fund.
Comparables
Sellers who want to determine the value of their homes can do the research themselves by getting access to local property records. Or, if they’re savvier about securing this data, they can turn to local real estate professionals who have served the area and know how to get easy access to accurate figures for comparables homes. A common means to generate home seller leads online is to create a home valuation page, where sellers can enter their address and you can then learn about homes near them.
Comparative Market Analysis (CMA)
Similar to finding comparables for potential home seller clients, you can also put together a comparative market analysis, or CMA, that denotes more than just other local property values. A comprehensive CMA report should incorporate recently sold listings in your market, intricate details about the properties sold (e.g. square footage, amenities), and the most recent monthly and annual home sales data. This data and info can then be visualized in a graphic-heavy listing presentation report you can share with leads during in-person sales pitches.
Contingencies
Not every real estate transaction goes smoothly. Some will incur unforeseen issues, like structural damages to a listing only unearthed after an inspection or failure of home financing to come through. In these cases, contingencies are placed into home purchase agreements so buyers have the right to back out of a deal or demand certain items be amended, removed, or added to a contract. Fortune Builders highlights five essential contingency clauses agents should ensure are placed in contracts for their buyer clients.
Cost Sheet
Telling your buyer clients all of the closing costs and other fees they’ll have to pay at the end of a housing deal is crucial. These items can and should be added to a cost sheet, which buyers can easily refer to throughout the process to ensure they know what financial obligations they have when it comes time to close. Some fees listed on this sheet may ultimately be paid by a seller, should negotiations result in this change, but for the most part, the onus falls on buyers to pay off each charge listed on a cost sheet, which is typically given to them by their lender.
Counteroffer
The art of negotiation is something every top-producing real estate agent needs to succeed in the long run. In just about every housing transaction, the process will look like this: A buyer makes an offer — more often than not, below asking price — then the seller makes a counteroffer. The two parties meet somewhere in the middle, one party concedes to the other, more counteroffers are made, or the deal is taken off the table or rejected outright. It’s on you, the agent, to strike a balance with your counterpart agent to get a deal done for your client.