The ABCs of Buying and Selling Real Estate
MLS? Listing agent? Due diligence? Pre-qual?
Whether you’re trying to decide if homeownership is for you or are readying your home for a spring sale, it’s important to understand real estate-speak and the home buying process as a whole.
You’ll soon be stepping into an industry filled with abbreviations, terms, and phrases that you’ll want to know and understand before you schedule a showing or meet with a real estate agent to list your property.
Neighborhood pools, fitness centers, greenways, oh my! “Amenities” is a broad term used to describe enhancements, desirable features, services, and facilities available in a community or near a home.
Conducted by a professional licensed appraiser, an appraisal evaluates and compares a property to recent sales of similar properties. This expert opinion of value assists a lender in determining the amount of money they will finance in the purchase process.
A buyer’s agent is a real estate agent who represents a buyer. He or she will help you seek out and purchase a home by providing key insight into the real estate process. A buyer’s agent will schedule showings at the homes you are interested in touring, help you prepare and negotiate an offer, and manage the transaction process on your behalf.
Closing costs are the expenses and fees incurred throughout the real estate buying process. Some of these costs may include appraisal fees, attorney fees, title insurance, and taxes.
Comparative Market Analysis / Competitive Market Analysis
Often referred to as a “CMA,” an agent will conduct a comparative market analysis to determine a market range for your home. This report reviews the current real estate activity in the market, compares your home to other homes currently listed for sale as well as those that have recently sold and considers your location to provide you the necessary information to price your home competitively in the marketplace.
Real estate comps, or comparables, are recent home sales in a nearby location with similar features that an agent will review with you to establish a market range for your home. This information will assist you in determining how to proceed with pricing your home to list.
A contingency is a provision in a contract that protects the buyer and/or seller from liability if a specified circumstance occurs or fails to occur. A buyer may issue a “contingent to sell” offer on a home that enables them to close on their current home before purchasing the new one by a specific date.
A home will be listed as “contingent” on the Multiple Listing Service (MLS) once a seller has received and accepted an offer from a buyer. During this time, the buyer will be conducting due diligence to satisfy the inspection, appraisal and mortgage approvals. A buyer may choose to proceed with or terminate the contract for any reason during this timeframe.
A deed is a legal document that proves the transfer of property ownership. It is recorded in the county in which the house is located.
The lump sum of money buyers pay upfront towards the purchase of a home is called a down payment. The down payment will vary based on the loan-to-value ratio and loan type. In 2016, the National Association of Realtors® reported that the average down payment for all buyers was approximately 10 percent.
Due Diligence Period
A due diligence period is the negotiated timeframe a buyer receives to investigate the property before the final sale. During this time, a buyer will obtain a professional inspection of the home, request an appraisal, finalize loan details, and more. The buyer can decide to proceed with or terminate the contract for any reason throughout the due diligence period.
Earnest money is a deposit buyers make to show their commitment to purchase a home and confirm a contract. The earnest money will be held in an escrow account until the closing is completed.
An HOA or Home Owners Association is an organization that manages and maintains common areas, amenities and offers a variety of services like landscaping. A typical HOA fee varies by the type of property purchase—condominium, townhome, single-family home—and is paid monthly.
Performed by a trained and certified expert, a home inspection is an examination of a home’s exterior and interior structure, its major systems—electrical, plumbing, HVAC—insulation and more, to evaluate its present condition. Most often conducted during a real estate transaction at the request of a buyer, the inspection may reveal issues or needed repairs that can be brought to the seller’s attention and addressed if warranted.
A listing agreement is a contract between a property owner and the listing agent’s brokerage granting the agent the ability to market and sell the property.
Interested in selling your home? You need a listing agent. A listing agent is a real estate agent who represents a seller in the sale of his or her home. The agent navigates the selling process providing expertise from “for sale” to “sold” including prepping the property to list, marketing the property, facilitating negotiations, and managing the terms and conditions of the contract.
A listing agent will work with his or her seller to set a price for the home they will sell. Known as the listing price or asking price, this is the price that will be presented to buyers interested in your home.
An acronym for Multiple Listing Service, the MLS is a regional database real estate agents use to showcase the homes they have listed for sale. Our Coldwell Banker Howard Perry and Walston real estate agents use the Triangle MLS as well as Coldwell Banker’s highly trafficked listing compilation and more than 80 nationally syndicated listing services to spotlight their clients’ properties.
A mortgage is a loan issued to a buyer to be used for the purchase of real estate. The property purchased with the borrowed money serves as collateral for the loan. Many prospective buyers will use a mortgage calculator to determine how much they can afford or to calculate their monthly payments based on a certain loan amount.
In a hot real estate market with low inventory, it is common for a seller to receive more than one offer on his or her home. With multiple offers on the table, a seller’s listing agent will provide guidance in how to choose the best offer for the home.
If a buyer would like to purchase a home, he or she will work with the buyer’s agent to prepare a written offer. An offer will include the price a buyer is willing to pay for the home and any other conditions of the purchase. The buyer’s agent will submit the offer on the buyer’s behalf to the seller’s listing agent.
Pre-Approval / Pre-Qualification
Sellers will want to know if a buyer can afford the offer he or she presents. To grant confidence in their buying ability, buyers should go through a pre-approval or pre-qualification process with their preferred lender to determine the mortgage loan amount they can spend on a new home.
Private Mortgage Insurance
Private mortgage insurance, often called PMI, is insurance that protects a lender in the event the buyer stops making mortgage payments. It is common for a lender to require PMI if a buyer’s down payment is less than 20 percent.
Title insurance protects a buyer from the risk of any liens or claims associated with the property title once legal ownership of the property is established at the closing.