10 Essential Terms Every Agent Should Know
The world of real estate comes with the jargon that makes it go round. During the process of becoming a real estate agent, learning these terms are quite important for clear communication and understanding. So, here are 10 essential terms every agent should know:
What does Buyer’s Agent mean?
A buyer’s agent refers to the real estate professional who represents the interests of a buyer all through the process of purchasing a home.
The agent would typically ensure that the buyer gets the best deal possible, and also provides seasoned advice whenever necessary.
The major reason that buyers opt to be represented by an agent is because of their expertise, experience, and a sense of security that using an agent gives. Any agent can decide to be a buyer’s agent.
What does Listing Agent mean?
A listing agent is primarily responsible for determining a competitive price for the home and then marketing the property. They may also serve as a seller’s agent, by representing the interests of the seller all through the sales process.
Alternatively, they may simply list the property and leave the seller to decide on how they want to go about the sale—this is particularly common in For Sale By Owner (FSBO) situations.
So, the key difference between a listing agent and a seller’s agent lies in the fact that a listing agent can stop at the listing, while a seller’s agent would list, market the property, and handle the entire sales process.
What does Dual Agency mean?
In simple terms, dual agency refers to a situation where the same agent represents both the buyer and seller in a real estate transaction. This doesn’t happen often and is illegal in certain states (it is legal in California).
For dual agency to work, you would need to have the listing to start with, and then be approached by a buyer to represent them too. Some believe that this may cause some conflict of interest, however, provided you fulfill the interests of both parties, then there shouldn’t be any problems.
The upside is that the process is smooth, and the agent gets a double commission (buyer’s and seller’s agent commission).
What is a Pre-Approval Letter?
A pre-approval letter is given to an individual planning to buy a house if everything looks good after the lender has reviewed their complete mortgage application, verified provided information, performed a credit check.
The pre-approval letter usually details an offer from the lender to lend the potential buyer a particular amount and is valid for up to 90 days. In the hierarchy of documents that prove creditworthiness, it comes only second to a purchase contract.
What is a Pre-Qualification Letter?
A pre-qualification letter usually comes after an individual has been deemed to pre-qualify for a home loan. It is one of the necessary documents in the early stages of the home buying process and usually gives an estimate of what the individual can borrow.
Pre-qualification also affords the opportunity to explore mortgage options and a chance to interact with the lender to determine the best option based on specific needs.
What is a Contingency in real estate?
Contingent implies that “something depends on certain circumstances” or it is an “if-then” situation.
If a house is listed as contingent in real estate, it implies that there has been an offer made, and said offer has been accepted. However, before the transaction can be completed, some extra criteria need to be fulfilled.
The three most common real estate contingencies are appraisal, inspection, and financing. An appraisal contingency guarantees that the property would have a minimum, specified price tag while an inspection contingency grants the prospective buyer the right to inspect the home within a stated period.
For a real estate deal to be completed, all three boxes must be ticked.
What is an RPA (Residential Purchase Agreement)?
A Residential Purchase Agreement (RPA) is a basic and important document that outlines all the information relating to a real estate transaction between a buyer and a seller. It could include details about settlement, price, option to terminate as well as disclosures like lead-based paint use.
The seller is mandated under law to disclose any issues concerning the property to the buyer at this point.
What does Escrow mean?
Escrow highlights a legal arrangement where a neutral third party temporarily takes ownership of large sums, property, or any other assets until a particular condition has been fulfilled.
In real estate, escrow usually lasts up until the purchase agreement is fulfilled. It serves to protect both the seller and buyer during the course of the real estate transaction.
What does Short Sale mean?
A short sale in real estate occurs when a homeowner is forced to sell off their property for less than what is left on the mortgage as a result of a distressing situation. A third party acquires the property and all proceeds go to the lender (usually the bank).
The lender can then opt to pursue recouping the balance via a deficiency judgment which would mandate the seller to pay the full balance or a portion. Alternatively, the lender can opt to forgive the outstanding balance. Certain states mandate that in any short sale, the balance should be legally forgiven.
Before a short sale can proceed, the lender must receive documentation detailing why a short sale is the best course of action. If approved, the lender then signs off to allow the short sale, otherwise regarded as a pre-foreclosure sale to proceed.
What does Foreclosure mean?
Foreclosure is usually the last resort for lenders to recoup defaulted loans. It is a legal process that allows a lender to take ownership of a mortgaged property. The property is then usually sold to recoup losses.
A property would be foreclosed on when the borrower misses mortgage payments, and/or violates the terms of their mortgage loan. Initially, lenders try to work with borrowers to avoid foreclosure and only resort to it when all else fails.
There are three types of foreclosure, namely: judicial, power of sale and strict foreclosure. Public notices are typically issued for all three foreclosure types and parties involved receive notifications.
Final Thoughts on the 10 Terms Every Agent Should Know
And it’s a wrap! These 10 terms are basic but essential for carrying out real estate conversations and sounding knowledgeable. Once you know these, you’re well on your way to becoming a big-shot real estate agent.
TL;DR: These 10 terms will give you a foundation to speak "real estate" to other professionals or the public. So, if you're thinking about becoming a real estate agent, be sure to learn what these terms mean.