Understanding Real Estate Terminology For Home Buyers and Sellers
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Understanding Real Estate Terminology For Home Buyers and Sellers: There are many complicated terms and concepts when it comes to Real Estate Terminology. Selling or Buying a home is stressful enough, you don’t need the added confusion. I have listed some common Real Estate Terminology to help you understand important terms in the industry.
1. Short Sale
A short sale is a situation in which the owner selling their home owes more on the mortgage than the home is worth. If the home is not foreclosed, the bank can agree to take a lesser amount. Usually, it is cheaper for the bank to have the owners sell the home for less than what is owed on the mortgage rather than going through the foreclosure process.
At this point, the owners still own the home. The bank holding the mortgage must approve the sale, and all offers are presented to the bank to consider. This time-consuming process often takes longer than 6 months.
2. Foreclosure
Unlike a short sale, in a foreclosure the bank takes ownership of the home because the borrowers have defaulted on their mortgage. All offers are presented to the bank because the bank is selling the home, not the owners. This too can be a long process of over 6 months or so.
Usually, foreclosure homes are not in good condition because like short sales, they are often sold for a price below market value – the bank is eager to get rid of the property.
3. Deed in Lieu of Foreclosure (DILF)
This means that foreclosure is inevitable because the owners have defaulted on their mortgage. Voluntarily, they turn the house over to the bank. Taking the home this way costs the lender less money than going through a foreclosure. Borrowers avoid embarrassmet of foreclosure and can put the experience behind them. Deed in Lieu of Foreclosure benefits both the lender and the borrower.
4. Realtor
All real estate agents who are active members of The National Association of Realtors (NAR), are Realtors. Not all real estate agents are Realtors. The term Realtor can only be used by agents if they are members of the NAR. All Realtors are licensed real estate agents or brokers. There are certain guidelines and ethical practices that NAR members abide by.
5. For Sale by Owner (FSBO)
Pronounced “fizzbo”, the home owners are selling the home without the help of a real estate agent. It is a lot of work as they are responsible for advertising the home, arranging showings, hosting open houses, taking and negotiating offers, and more. It is too much obligation for the average homeowner to handle themselves, because the legalities of selling a home are extremely complicated.
6. Buyer’s Market
There are more homes than buyers. Demand is low and supply of homes is high thus giving buyers their choice of homes. Sellers are competing to get the scarce available buyers. Buyers also have negotiating power in terms of what they want to pay for the home, and sellers often get below asking price. Sellers attempt to make their home more appealing than other homes on the market.
7. Seller’s Market
In this situation, there are more buyers than there are homes for sale. With high demand and low supply, people are willing to pay more, thus giving sellers the advantage. Sometimes there are bidding wars or multiple offers and sellers usually get at least their asking price.
8. Comparative Market Analaysis (CMA)
This is a report that tells you how much your home is worth. By looking at the price of comparable homes in your area, the agent will arrive at an estimated value. Actual sale prices of similar homes is the most accurate way to determine what the home is worth.
Homes with pending sales or that are still on the market are considered but aren’t as accurate as the actual sold price showing what a buyer actually paid. To compare the homes, agents view square footage, number of bedrooms and bathrooms, acreage, school district, features and amenities, age and condition of the home. Most agents offer a free CMA to potential clients.
9. Multiple Listing Service (MLS)
Real estate agents and companies join the MLS by paying a yearly fee and once they are members they can search for homes for their buyers and list their client’s homes for sale as listings. This database of the collected homes is within a specific region or the state.
With the MLS, homes are all listed in one place. Additionally, most local MLS services submit their information to popular national sites like Realtor.com, Zillow.com and others so the information shows up on it’s affiliate sites. Anyone can search on these sites, but the MLS is only accessible to it’s members.
10. Prequalificaiton
Prequalification is weaker than a preapproval. You give all of your information to the bank regarding your bills, salary, and employment, but the bank usually doesn’t verify it yet. Based on the information you give them, they will tell you what you can afford to spend on a home. You will get a preapproval when you are ready to move forward in the process. If the information you give is accurate, your preapproval should be a similar amount to the amount quoted in prequalification.
11. Preapproval
Banks take information from your bills, salary, and employment and verify it. They also run a credit report. The bank will tell you the maximum amount of money you are allowed to spend on a home based on the result of this information. A preapproval is stronger than a prequalification. You can buy a more expensive home if you put money down, but the preapproval informs you of the maximum amount you can borrow from the bank in terms of a mortgage.
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