100 Real Estate Definitions for Beginner Agents
You may have aced your exams to become an agent … but do you know the most important real estate definitions? You know — the ones every top producer knows like the back of their hand and understands how they fit into their day-to-day operations and overall business model?
If you’re unfamiliar with these essential real estate definitions, you can breathe easy. We have gathered 100 such terms we think every real estate agent, broker, and industry member should have down pat and explain each and every one of them relates to your everyday work.
From A to C
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.
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.
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.
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.
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.
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.
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.
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.
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).
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.
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).
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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From D to H
Deed and Title
Buyers and sellers often misunderstand the real estate definitions for deed and title, thinking the two are interchangeable. This is false. In short, the title is a document that proves you own a property. The deed is the legal documents that facilitate the transfer of deeds from one party to another (seller to the buyer of their home). To make the deed — and, therefore, the transfer of property — legally binding, it needs to be approved by a judge or at an assessor’s office, depending on local housing regulations.
Department of Housing and Urban Development (HUD)
Not everyone can afford to spend a half-million on a new home. Some buyers have to rely on government entities, like the Department of Housing and Urban Development, to buy homes. Thankfully, this enterprise’s primary objective is to help low-income residents identify and purchase residences that fit their budgets and provide assistance throughout the entire buying journey. Buyers who work with HUD can buy foreclosed properties with one to four units the department then owns outright and can sell to whoever qualifies.
While a confluence of the perfect conditions in one’s home and market can lead to appreciation in their property’s value, the opposite can lead to the depreciation of a residence’s value. Reduced housing development, a poor local economy and jobs market, an aging and deteriorating home, unruly neighbors — these are all common traits of properties that depreciate over time. Some of these factors are out of a homeowner’s control. Factors related to one’s home, though, can be improved in some instances (e.g. fixing structural issues, adding built-ins that historically improve home values).
It’s considered highly unethical for a home seller and their representation to not disclose any defects or problems with their property when they list it. Disclosing all issues with a home for sale is an absolute must for sellers. Failing to do so could lead to not only withdrawn offers from or legal issues with potential buyers, but also a damaged reputation on the part of the agent who works with that seller. In short, advise your clients to be as open and upfront about any issues at their property when showing it to possible buyers.
It used to be that a 15-20% down payment on a residence was pretty much the standard for most home purchases. Most of today’s down payments fall in the 5-20% range, with some even as low as 3%, if the homes purchased are real estate-owned properties the government owns. The general rule is the more a buyer is willing to put down on a home, the lower their mortgage interest rate will be. Offering mortgage calculators like this one on your real estate website can help potential clients determine how much they can afford to put down.
Getting double the commission for a single real estate transaction is the dream, right? Well, it’s one that’s possible with dual agency: representing both the buyer and seller during a deal. There are several pitfalls to this type of work, however — chief of which is you can’t effectively represent either party during said transaction. Another roadblock to success as a dual agent is both buyers and sellers are confused as to the role of this agent. You can learn about legal complications of dual agency from Bernice Ross via Inman News.
Earnest Money Deposit
Given how lengthy the negotiation process during home sales can be for buyers, it’s ideal for them to provide sellers with a little security should the deal fall through. An earnest money deposit is the perfect solution to show sellers they are committed to following through on their purchase. There is no one magic number to allocate for one’s deposit. The good news about these deposits for home buyers is they can then use that money toward the eventual down payment on the listing.
As mentioned, there are a variety of factors that can cause a home’s value to depreciate — and not all of them are associated with the home itself. Many of them pertain to external factors, like the regional economy and a lack of high-value properties nearby. These external contributors to residential depreciation are referred to as economic obsolescence: things that are out of a homeowner’s (and home seller’s) control. When representing buyers, it’s always best to point out these elements if they exist in a market where they’re looking to buy.
Sellers often make updates to their properties before putting them on the market: adding a new garage, building an extension with a new bedroom, having an in-ground pool constructed, and so on. One thing these individuals need to be careful with when making these alterations to their homes is encroachment: accidentally making structural changes that surpass their property line and move into another homeowner’s lot. Ensure any sellers you work consult you before they decide to make any modifications to their property so you can advise them on how to avoid encroachment.
Sellers want assurances from buyers toward the end of housing transactions that their efforts to close the deal will be rewarded with money from buyers. The concern for sellers is putting in lots of work to finalize a deal, only for buyers to walk at the eleventh hour. Escrow ensures buyers’ money is secured by a third party until transaction is 100% done. Upon this time, the money will be transferred to the seller. Usually, the buyer and seller in a deal will determine together who the escrow holder should be.
Home buyers who need more time to evaluate whether or not to move forward with a purchase agreement or simply need to get their finances in order often request an extension of sellers. Now, it should be noted, sellers in no way have to grant an extension of buyers, particularly if they’re at the proverbial goal line. On the other hand, if they don’t grant an extension to buyers, those buyers could abandon the deal altogether, leaving sellers to re-list their home and start the process all over again.
Fair Market Value
The whole point of having an appraisal and assessment completed for a home for sale is to determine that property’s value. Generally speaking, the dollar figure put forth by the appraiser and assessor is averaged out with other residential figures from the local market. Comparable sale prices are factored in, thus giving sellers a relative fair market value for their home. As Investopedia notes, developing a fair market value for a listing is an imperfect science, but this is the typical formula for gauging what one’s home could go for if listed.
Federal Housing Administration (FHA)
The main purpose of the FHA is to provide insurance for private home loans provided to borrowers who purchase HUD-owned homes (it’s an agency underneath the HUD umbrella of government entities). This helps lessen the risk taken on by mortgage lenders who tender loans to risky borrowers — often those who have financial difficulties and, thus, need to turn to HUD for their housing needs. Its mortgage insurance program has been around since the 1930s and helped nearly 3 million borrowers purchase homes from 2013-17.
Fixed-Rate Mortgage (FRM)
This is far and away the most popular type of mortgage given to borrowers today. Why? Because, as noted in our real estate definition for adjustable-rate mortgages, fixed-rate mortgages are the same each and every month of the amortization period. There is no potential fluctuation with interest rates, as there is with ARMs. So, as long as your clients lock into a low rate, they can more capably plan their finances around their consistent monthly payments to their lenders.
For Sale By Owner (FSBO)
Chats with your leads will reveal some of them have considered going the for-sale-by-owner route to list and sell their home. It’s on you to convince these prospects this is a poor decision (well, without being overly critical, of course). The most obvious reason why is you, an agent, have a wealth of experience and/or expertise that can be invaluable for inexperienced, unsavvy sellers. Unsurprisingly, FSBOs continue to plunge in popularity — meaning more sellers understand the countless benefits of working with seasoned, knowledgeable real estate pros.
It’s an unfortunate reality that many borrowers — especially during and following the recent housing crisis at the turn of the decade — defaulted on their loans. To pay off all, most, or at least some of the remainder of their mortgages, these borrowers’ properties are placed in foreclosure. If you have a buyer interested in saving a little money, going the foreclosed avenue could be ideal, given banks often want to get as much back for these residences as possible. Just know there are some key mistakes to avoid when helping clients buy foreclosures.
Essentially the opposite of economic obsolescence, functional obsolescence refers to a worsening of the physical nature of a property which has led to a lower home value. A leaking and cracked roof or a crumbling staircase are prime examples of deficiencies in a residence that can lead to diminished home values. As WorkingRE points out, though, superadequacies — or over-improvements — can also contribute to functional obsolescence. For example, breaking down a wall to turn two rooms into one could decrease the property’s value.
Good-Faith Estimate (GFE)
Borrowers have numerous things on their plate when shopping for mortgages: from getting pre-qualified and pre-approved to trying to secure a good interest rate. One aspect of this research process that can ease the stress a little bit is a good-faith estimate, or GFE, provided from lenders to prospective borrowers. This GFE (or Loan Estimate and Closing Disclosure Form, as Zillow notes it’s now often called) lists out all of the costs associated with obtaining a mortgage from a particular lender, including title charges, escrow, and attorney fees.
Grantee and Grantor
This is a fairly straightforward real estate definition: A grantor is the home seller who transfers their deed to a grantee, the home buyers. According to The Balance, there are different types of deeds a grantor can convey to a grantee — this will vary from state to state. This means it’s best for your buyer or seller client to have an attorney present when going over the contractual details of a transaction to ensure everything regarding a deed transfer goes smoothly for your client. The deed that will be transferred will outline all specs for the property in question.
Home-Finding or Relocation Assistance
It’s never easy to pack up one’s life and move to an entirely new city (and possibly state) for one’s job. Since there are a million moving parts (no pun intended) to relocating to a new area for work, employers often hire home-finding (or relocation) service providers. These companies make the transition as simple as possible for employees — and one task they handle is hooking the workers in question with the ideal real estate agent in the area they are moving to and/or from. One agent can handle a home sale side, while the other can deal with the purchase side.
Buyers get to live in a residence they can experience life memories in — and build equity in. The more mortgage balance a borrower pays off, the more home equity they gain. Equity is basically the difference between one’s property value and how much they owe left on their mortgage. Conducting home improvement projects and putting more down on a home can increase equity. In the long term, though, the best way for your buyer clients to get more from their investment is to continue to pay their mortgage in full and on time.
An appraiser provides sellers a specific home value figure at which they recommend sellers list their home for sale. An assessor determines a home’s value to figure out the appropriate property tax for that residence. A home inspector investigates the physical structure of a house to locate any structural deficiencies and ensure everything is up to code. Common items an inspector will check for include heating and cooling systems, insulation, walls, floors, and ceilings. Any issues found in a home can lead to issues in a housing transaction.
We’re going to take a wild guess and say you’ve already figured out what a home value is by this point — but for the sake of due diligence, let’s explore the concept some more. Ask 10 appraisers to assign a value to your client’s property, and they’ll likely come back with 10 different numbers. It’s a partly subjective task to provide an estimated value to a property, given the many factors that affect home values: the value of nearby residences, recent home sales figures, economic factors. The important thing is to get at least a couple of opinions for any sellers you represent to get as accurate a figure as possible.
Insurance covers homeowners when unforeseen issues arise with their homes: the garage door collapses, a tree hits the siding, et cetera. A home warranty covers problems with appliances within one’s home. Broken pipes, malfunctioning heating, a washer and dryer in need of repair — these are arguably the most common items a home warranty covers for homeowners. Buyers obviously would enjoy the benefits of securing a warranty for their new residence, but it can provide sellers with a safety net of sorts should they need to fix things in their home when selling.
Homeowners Association (HOA)
In order to maintain — and even improve — the value of an entire street’s, neighborhood’s, or development’s home values across the board, homeowners associations ensure all owners within a particular area upkeep their properties as preferred. Buyers who purchase properties that operate within a homeowners association are bound by the rules of said HOA. That means whatever rules and regulations an HOA has set up for homeowners (e.g. keeping a lawn in tip-top shape, using sprinklers only during certain days/hours) are mandatory.
Homeowners Insurance (HOI)
If you own a home yourself, you already know about homeowners insurance and how it’s mandatory for those who purchase residential units. What you may not know already is there are different types of homeowners insurance. Dwelling coverage, for instance, can provide owners with money to repair or rebuild their homes should substantial damages occur. Add-on policies can also be affixed to your primary policy. For example, sewage-backup insurance can cover expenses related to fixing your home after sewage water damages it.
From I to P
Internet Data Exchange (IDX)
You’re able to feature homes for sale from your Multiple Listing Service on your real estate website to generate leads … but did you know there’s an easier way to feature only the properties you want to promote? By taking advantage of the Internet Data Exchange, or IDX, you can streamline the types of listings that appear on your website. Some site providers, like Placester, offer seamless IDX integration, meaning you can showcase certain properties on your homepage and a completely different set of properties on other pages, like ones for specific districts or neighborhoods.
Even your average home inspector is an ace when it comes to unearthing issues with a home for sale — but even these professionals can’t spot everything wrong with a listing. Latent defects, like mold hiding beneath the surface of a floor or wall, can often go unfound by inspectors. This makes it incredibly important for buyers and their representation to ensure every nook and cranny of a listing is researched. Without this due diligence, your buyer could end up with a lemon of a home — something no agent wants to see for their client.
Lessee and Lessor
Commonly known as a landlord, the lessor is the owner and operator of an investment property. They rent out their unit(s) to renters — or lessees. If you want to ease into your career as a real estate agent, you can work with renters looking to lease. Lessors who operate large-scale properties, like apartment buildings with a dozen or more units, often work with leasing agents to fill their units year-round. Some represent their listings themselves, but more often than not, these landlords hire out agents (or teams of agents) to fill the available openings.
A worst-nightmare situation for home sellers and their agents is having a lien placed against their residence. This happens when a party says they are owed a debt by the owner of a property. Oftentimes, a lien is presented to prevent the sale of a home: An alleged owner or co-owner of a property can stop a housing transaction from moving forward. There are voluntary liens, which is a standard one given from lenders to borrowers. Then, there are involuntary liens — usually in the form of tax liens and construction liens for unpaid taxes and renovation costs.
A home’s value is certainly a primary factor when it comes to creating the initial list price, but there are other factors as well — including the listing agent’s gut and intuition. Sales reps need to take into account whether it’s a buyer’s or seller’s market, what other listings have sold for nearby recently, and how the home for sale’s specs compare to similar properties in the community. At the end of the day, it comes down to the agent’s subjective recommendation to their clients and their client’s feedback. If your client wants to sell their home quickly as opposed to the best possible price, these tips and tricks from Zillow can help.
This may seem like the most basic real estate definition, but it’s nonetheless important to know all about listings: from how they’re added to the Multiple Listing Service to how you can promote homes for sale online. In short, a listing is what you help your buyer clients attempt to purchase (you research the market where they want to buy and provide a list of best-fit homes for sale to them) or help your seller customers sell (through constant digital and offline promotion).
You’ve made the transition to a sellers’ agent — congrats! Now, it’s on you to find the best real estate leads to nurture into new clients. You want to get home sellers to select your agency to represent their property sale over all other sales reps in your market — in other words, you want to get them to enter into a listing agreement with your firm: a period during which you have a finite amount of time (usually 90 days) to sell their residences.
If you’re lucky, sellers will want to hire you by simply looking at your real estate website and deeming you the best local agent. This doesn’t happen often, though. Rather, sellers will look at your site an request an in-person meeting so you can provide you’re the best agent for them. Listing presentations like these offer you the chance to show off your industry experience and expertise and convince sellers you know how to get the job done — and can do so for them. You can discover several real estate listing presentation best practices (and a free presentation template) in this Placester Academy guide.
In one form or another, nearly every professional is a salesperson — even if that’s not your title. In the case of mortgage originators, their goal, first and foremost, is to convince potential borrowers their home loan product is the premier one for them. Once they’ve got hopefully home buyers hooked, they can then get the ball rolling with those individuals and teach them about their specific mortgage offerings and which pairs best with their particular financial situation.
Loan-to-Value Ratio (LTV)
Lenders are usually only willing to finance a finite amount of one’s home purchase so they don’t put themselves in financial jeopardy with their mortgages. To ensure they only provide the absolute necessary amount of money to a borrower, lenders calculate the loan-to-value ratio. They take the size of a home loan and divide that by the value of a property a borrower is interested in purchasing to get this ratio. A high LTV is riskier for lenders than a lower one since it means they’ll lend more money to their customers — but that doesn’t mean they’re not willing to offer high ones. It depends on how fiscally solvent a borrower is.
A small box that’s used to store the keys to a home for sale so buyer’s and seller’s agents alike can gain access to it and show off the listing to prospective buyers may sound very straightforward: That’s the basic real estate definition for lockbox. Today, there are several sleek lockbox options for agents: Some are keypads, some use infrared technology to allow agents to scan a code that gives them access to a listing’s keys. The bottom line is these devices are requisites for agents nowadays — both for security purposes (tracking who opens a lockbox) and providing necessary access to buyer’s agents (so they can provide tours).
Loss mitigation was quite popular during the recent housing crisis. Many homeowners fell severely underwater on their home loans. To ensure they received at least some return on investment from the mortgages they provided to these owners, banks and lenders hire third-party loss mitigation specialists to act as mediators. In short, these professionals help homeowners come up with a modified repayment plan. Sometimes, this repayment plan requires homeowners to liquidate their assets.
Mortgage Rate Lock
Let’s say a prospective borrower gets pre-qualified and -approved by a lender and interest rates at the time are low. They’re ready to secure a loan from the lending institution, but realize it takes time to obtain a mortgage. Therefore, they’ll ask their lender if they can lock in at that low rate so they don’t risk taking on a mortgage with a higher rate upon closing. This rate lock to potential borrowers allows them to capitalize on the low rates and, in all likelihood, pay lower points (fees to the lender) when signing for their loan.
Multiple Listing Service (MLS)
Agents need data – and lots of it — regarding listings on the market to sell them. Buyers want to know everything there is to know about a home for sale before they make offers. Multiple Listing Services — of which there are roughly 900 in the U.S. — compile this data when a home goes on the market and make that information available to all agents in their given area. There are MLSs for just about every local housing market across the country, with a few exceptions. Agents, such as yourself, can then integrate this listing data on their real estate websites.
Though it doesn’t signify the deal is done, mutual acceptance gives agents a reason to smile, as they’re that much closer to finalizing a transaction. This takes place when both a buyer and seller agree to the rough terms and conditions associated with a home sale. Nothing is guaranteed at this point in time, but it’s a clear indication you and your agent counterpart need to work with one another (and as quickly as possible) to get all of the paperwork in order so you can get to closing day — and that much closer to your hard-earned commission.
National Association of REALTORS® (NAR)
“America’s largest trade association,” the National Association of REALTORS® is the premier real estate industry organization. Found in 1908 and featuring upwards of 1.1 million members, NAR provides education, training, data, and business resources for its members, who have to join their local real estate association to join. Once they do join, NAR members have the ability to gain additional certifications and designations under the NAR umbrella to further show they’re more knowledgeable than just the average agent (in other words, it’s in your best interest to become a REALTOR).
Home sellers don’t simply want to put their residence on the market without knowing that the price at which they intend to sell it will produce hefty returns. This means they, along with their agent, need to develop a seller net sheet that outlines what they anticipate earning from their sale. Similarly, buyers want to know all costs associated with a home purchase, meaning it’s in their best interest to create a buyer net sheet that outlines all expenses.
It may sound strange — even a bit backward — for a home seller to offer to finance a buyer’s purchase of their property, but this type of owner financing is actually not as rare as you may believe it to be. This typically only occurs when a seller is fiscally well-off enough to provide a loan to a buyer. Why would a buyer rather get a loan from a seller than a bank, you ask? Well, not every buyer has the financial standing to get mortgages from proper lenders. So, in these situations, they can try to find listings on the market for which the owner is willing to offer assistance — with interest attached, of course.
As a seller’s agent, you’ll want to get your client’s listing in front of as many people as possible via your real estate marketing strategy. The math is simple: The more prospective buyers you get interested in your property, the better your chances are of securing more offers — and possibly even a bidding war. Some sellers prefer to keep news of their home for sale quiet and, in turn, avoid listing their property on their local MLS. In this case, their residence is a pocket listing — hidden away from buyers. Seller’s agents can still attract attention to these kinds of listings by leveraging their networks, but many industry pros advise clients against going this avenue with their homes for sale.
Pre-Approval and Pre-Qualification
These two terms may seem like they refer to the same action potential borrowers take before securing a mortgage, but they are slightly different. In order to be pre-approved for a home loan, a future buyer needs to be pre-qualified. Pre-qualification occurs when a lender determines a borrower has all of their finances in order and is a worthy person to receive a mortgage. Pre-approval occurs after this period and is a written statement from a lender — the same one. who pre-qualified a borrower or a different one — that says they’re willing to lend that person money for their home purchase.
Principal, Interest, Taxes, and Insurance (PITI)
These are the elements that comprise a monthly mortgage — PITI for short. The principal accounts for the larger portion: the actual loan itself. Interest is paid, as it’s how the lender makes money. Property taxes and homeowners insurance are usually rolled into monthly home loans as well. Lenders will provide these monies to the appropriate parties — local governments/municipalities and insurance providers — for borrowers, but this isn’t always how mortgages are structured. Sometimes, borrowers will pay these expenses separately.
In addition to your buyer clients signing contracts pertaining to their actual mortgages provided by lenders, they’ll also have to sign a promissory note. This is a declaration that states they will pay back their home loan in its entirety. Once a borrower has repaid their loan debt in full, they will be released from their mortgage and promissory note accordingly (a.k.a. one of hte best days in a homeowners life: when they pay off everything and are free and clear financially).
From Q to Z
When your client sells their home, they will transfer their warranty deed over to the new owner. This document provides the deal has been finalized and the buyer now has full control and ownership of the property. A quit-claim deed, on the other hand, is a deed that changes hands, from one person to another, but when there is no money involved. The residence in question hasn’t been sold. Rather, the owner simply decides to transfer the deed to the second party. These deeds comie into play most frequently when someone decides to give their residence to someone else in their family at no cost.
Not only do mortgage lenders expect to be paid with interest based on loans they give to borrowers, but they also have a partial ownership stake in borrowers’ residences until they pay off their loans completely. Once a loan is paid off, lenders will release borrowers from their contractual obligations with them via a reconveyance deed. This may worry some borrowers, knowing their bank owns a piece of their property, but you can reassure your home buyer clients this is simply how lending transactions work.
Repair and Improvement (R&I)
This refers to how much it would cost to enhance one or more aspects of a home for sale. In some cases, buyers will purchase homes knowing they’ll have to conduct repairs and improvements to certain elements of their new residence. Other times, they’ll request (or mandate) sellers take care of any issues before they finalize purchases for their properties. Who is responsible for fixing a home before the paperwork is completed for a deal isn’t always the same. As noted by Bankrate, state laws pertaining to repairs to homes for sale and if sellers need to handle them vary from state to state.
Real Estate-Owned (REO)
This is just a fancier way of saying foreclosed homes now owned by banks and other lending institutions. Per RealtyTrac, real estate-owned properties offer buyers with little disposable income to purchase homes the opportunity to achieve homeownership. The foreclosure listing site also notes, however, it can often be difficult for interested buyers to identify the decision-maker tasked with selling REO residences, meaning it can be a long and arduous process in most cases to purchase these properties.
Real Estate Settlement Procedures Act (RESPA)
Transparency is something every borrower should get from their mortgage lenders during their home purchase process. Unfortunately, this has not always ben the case, as some lending institutions have failed to disclose certain fees and language in contracts that has led to countless issues for borrowers — and countless lawsuits against lenders. As the Consumer Financial Protection Bureau notes, this legislation requires lenders to be 100% upfront about every aspect of loans they provide home buyers in an effort to prevent fraud and misleading during the borrowing and repayment periods.
Many buyers and sellers throw around the term “REALTOR” and assume it’s the same thing as an agent. While a REALTOR is a real estate agent, they are also much more than that. They have the proven training and education that distinguishes them from beginner agents. That’s not to say beginner agents aren’t ideal representatives for buyers and sellers. It simply means REALTORS are the preferred choice by many of these individuals because the title of REALTOR indicates a deeper level of training, experience, and resources they can offer their clients that the average agent, more often than not, simply can’t offer.
One of the perks of being a REALTOR is you can join your local REALTOR Association. This group comprises all REALTORS in a particular area — city, state, or region — and offers members of the organization ongoing education, in-depth housing data, and other resources to help elevate their careers. Meetings and special events are held regularly for these Associations, both of which allow members to network with one another and learn about the latest news and trends for their commuity.
REALTOR® Code of Ethics
The promise to work in the best interests of their clients and abide by all rules and regulations set by local, regional, and national governments and the National Association of REALTORS itself: That pretty much sums up the REALTOR Code of Ethics, a mandate every member of the trade group must follow in their day-to-day. Treating all parties associated with a real estate transaction with fairness and providing the best services possible is what separates REALTORS from all other agents.
Right of First Refusal
This is one of the more complicated real estate definitions listed here. In essence, of the owner of a property decides to sell their residence and a second party holds a right of first refusal, they have to be offered the chance to purchase the home before any other potential buyers. Sellers can offer right of first refusal to interested buyers and still market the home in the meantime. But if someone else makes an offer, the seller has to allow the person with the right of first refusal to match or exceed that offer. If they do neither, the seller is free to sell the property in question to a different buyer. (Just a little confusing, right?)
You’re a beginner real estate agent — but that doesn’t mean you can’ daydream from time to time to wonder what it’d be like to represent home sellers, right? The main reason many buyer’s agents aspire to be seller’s agents is they can get the bigger-fish clients more often, whereas when they represent buyers, it’s more of a volume game: work as many deals as possible to earn a sizable income. As a seller’s agent, you take on more responsiblities — marketing a client’s property, staging adn showing their home, etc. — but that works can pay off if you sell the home for a considerable dollar amount.
The two sweetest words any homeowner about to offload their residence wants to hear: “seller’s market.” This occurs when the demand is far higher than the supply, which bumps up housing prices in a given area and generally leads to lots of bids (and bidding wars) for certain properties. Sometimes, prices get too steep for many buyers in these conditions, though. If you represent a seller in these times, know when to get them to drop their asking price so they can reinvigorate the interest in their listings.
A short sale happens when a homeowner is in dire straits with their mortgage payments and, to pay the remainder of their home loan (or most or some of that balance) to settle the loan, they agree to sell their property for less than it’s worth. This is an alternative to foreclosure for these sellers, which is obviously a much worse situation. Not all lenders will agree to short sales. In fact, homeowners who conduct short sales often need to prove financial hardship to their lenders before commencing.
Buyers typically want to know every last detail about a property before making an offer, including the exact square footage of the land on which a home exist. Sellers also want this information when they decide to list their home so they can have it at the ready for potential bidders. Surveyors secure this information by analyzing the entire lots where properties reside and provide their findings in the form of maps and reports to homeowners.
Many of today’s top producers not only close deals for buyers and sellers, but they also invest in their own properties to flip at a later date. If you end up investing at any point or one of your clients decides to do so (and hire you to sell the home later), know that sweat equity can help save you and them some major dollars. This essentially entails putting in manual labor to fix a property so it raises the value of a residence, which can later help when the owner wants to sell. In other words, instead of hiring pros to complete home maintenance, the owner takes on that load.
Due to a variety of potential title “defects” title insurance is secured by both home buyers and their lenders. This insurance covers them should in the event another party lays claim to a residence, issues pertaining to forgery or fraud are brought against a homeowner, or problems related to the deeds arise. As outlined in an Inman News piece, it’s quite rare for a title insurance claim to be made, but it can happen. That makes having the protection of this insurance essential, as it can provide peace of mind for new homeowners.
When you close a deal for one client, that is a transaction side: one half of a housing agreement. Most agents typically only work one side of the fence: with buyers or sellers. Some, though, work with both types of parties. Over time, agents accumulate more closed deals, and they use this sales history to bolster their real estate marketing. Social proof is an excellent way to market your business. Just remember: The quantity of your transactions isn’t the biggest thing that attracts new clients. It’s the quality of service you offer them.
Truth In Lending Act
Comparison shopping is something practically every consumer partakes in on a nearly daily basis — whether they realize it or not. From low-expense purchases like clothes and decor to high-cost buys like, say, homes for sale, they review all of their options carefully to find the best and, in often cases, most affordable one. The Truth in Lending Act was established to ensure all costs associated with obtaining a mortgage are provided to prospective borrowers so they can comparison shop and get the best loan that fits their distinct needs.
A home buyer’s goal is to find not only a pristine property they can purchase but also to find one that’s so pristine, nothing else needs to be done for them to move in. No alterations need to be made to the exterior or interior. These turn-key listings are not entirely rare, but chances are, any buyer you represent will want one or two changes made to a listing they intend to acquire. But on those occasions when buyers agree to purchase without making these requests, you’ll find the transaction moves along smoother than most others.
You may think this role is one and the same as a home loan originator … but that’s actually a common misconception. The originator organizes all of the paperwork associated with providing a mortgage to borrowers. The underwriter reviews all of that paperwork to make sure everything is in order and that borrowers are truly qualified to receive such a loan. Should the underwriter discover something off with a loan (e.g. lower buyer credit score than the one listed), they alert the originator, who will then have to rework the mortgage terms.
Both the home seller and buyer have placed their John Hancocks on the dotted line: That’s when a home is officially under contract. There are still several steps that take place after this occurrence, but odds are if you and your client navigated your client to this point, you’re in good shape to ensure the deal completes as it should. Once your client has signed, you can focus on the next tasks at hand: getting everything set for closing day and preparing your client to either move in (if they’re buyers) or out (if they’re sellers).
Veterans Affairs (VA) Loan
The Department of Veteran Affairs (VA) offers these special mortgages to veterans of the U.S. military. Active-duty members of the Army, Navy, Air Force, and other branches of the military typically become eligible for these loans after six months of service. One thing to explain to any military members whom you serve is that only certain types of properties can be purchased using a VA loan. So, before working with clients who secure these types of mortgages, be sure to conduct thorough research so you know how to find them the perfect home based on their specific loan specs.
About 99% of your client’s purchase is complete. They’ve worked with sellers on concessions. The sale price is set. Move-in day has been scheduled. All that’s left to do is conduct a walkthrough of their new home. Anything and everything within the residence should be examined to make sure it’s in perfect condition (or at least the condition specified in the paperwork). Any problems that arise — stained floors, cracked windows, leaky faucets, etc. — should be brought up ASAP with the seller’s agent.
An expired listing is a home on the market which has yet to be sold and, thus, the agent in charge of selling it no longer represents it or the sellers. A withdrawn listing, on the other hand, is a home for sale yanked off the market altogether by the seller, but done in a way that doesn’t void their contract with an agent. This usually occurs when a seller gets cold feet regarding offloading their home. However, as this post from Realtor.com notes, there are a handful of reasons why a seller may withdraw a listing.
Many existing homes today are built exactly on top of property lines. These often exist in urban areas, where buildings are constructed quite close to one another and use all of their allotted land space to build. Buyer clients who show interest in a listing with a zero-lot line may often get away with lowball offers, given there is no excess property for them to use for other purposes and the square footage is likely minimal. Of course, this depends on the market size and popularity, but this type of home is generally advantageous for buyers with limited budgets.
(Last updated on
June 22, 2023