Real estate terms explained

For my newest piece (and first official non-report column), I chose to focus on the response to last week's reports, which made clear an interest by our area residents to understand the real estate industry better by picking up on its terminology.

Being in the industry, we as agents get comfortable with using such terms, sometimes forgetting that the everyday reader may be unclear as to the exact meaning or importance of these terms.

Here we go!

What is the Multiple Listing Service (MLS)?

The MLS is a paid professional site that licensed real estates agents use to market their homes both to the public and other agents. The individual MLS are independent from each other and cover a specific region, though there is a slight overlap in

coverage. This means that an agent from one MLS cannot access the information from another MLS unless he joins that specific service.

This highlights the importance of using an agent that is a member of your region's MLS. Overall, there are two MLS organizations that service Ocean County. The Monmouth Ocean MLS, which generally covers the region from Bayville north to the Ocean/Monmouth county border, and the Jersey Shore MLS, which covers the region Bayville south to the Ocean/Burlington county border.

Although the MLS's are independent, they do share the information of all transactions that have occurred with all local and national real estate organizations. This is where most statistical information on housing is gathered from.

What is a Consumer Information Statement (CIS)?

In the State of New Jersey, real estate agents are required to inform any new client how they intend to work with that client BEFORE they discuss any matters of real estate. A signed CIS form is proof that the clients were informed. There are four ways an agent can work with a client.

1. Sellers Agent - represents the seller and all material information supplied to the agent by the buyer will be told to the seller.

2. Buyers Agent - represents buyer and all material information supplied to the agent by the seller will be told to by the buyer

3. Disclosed Dual Agent - agent represents both parties, however, the agent may not, without express permission, disclose that the seller will accept a price less than the listed price, or that the buyer will pay a price greater than the offered price.

4. Transaction Broker - does not represent either the buyer or the seller. A transactional broker's job is to help both the buyer and the seller with the necessary paperwork and formalities involved in transferring ownership of real property. The buyer and the seller negotiate the sale without representation.

What is a Comparative Market Analysis (CMA)?

This is the process an agent uses to arrive at the price to market the home s/he plans to list.

The process is started by first getting the address of the home the agent wants to price, then getting a list of the home's main features, such as square footage, number of bedrooms and bathrooms, age, basement, etc. The agent next runs a search on the MLS to find homes that have similar features and are within close proximity to the target home, making important time adjustments for the time passed since the comparable homes were sold. This allows the agent to consider the current type of market - upward, neutral, or downward - and adjust the price based on that.

For example, a home that sold for $100,000 in a downward market that is dropping at 1% per month would be worth $3,000 less 3 months later. This is very important, as otherwise if the home is priced too high, it will not sell, causing that agent to realize the home price must be reduced, contributing to the downward trend. Unless the agent makes a substantial reduction to the price, the agent could end up" chasing the market".

What is Months of Inventory?

"Months of Inventory" is the amount of time it will take to sell the homes that are actively for sale on the market at the present rate of sales.

This figure can give a clue to what direction the market is headed. Roughly, if the market has less than six months of inventory, home prices should be rising. More than six months and home prices should be dropping.

What are active listings?

These are homes presently for sale on the MLS.

What is an expired listing?

These are homes that did not sell during the listing period. This is used by agents to gauge what the market will not pay for a home

What is under contract?

This is a home with an accepted offer that has gone though the attorney review period.

What are Days on Market (DOM)?

This is the amount of time that a home has been actively for sale on the MLS.

This information is used by an agent to gauge how close the list price is to what the market is willing to pay. The longer the house is on the market, the greater the likelihood the list price needs to be reduced.

What is the attorney review period?

A buyer or seller may choose to have an attorney study the contract. If an attorney is consulted, the attorney must complete the review of the contract within a three day period. The contract will be legally binding at the end of this three day period unless the attorney for the buyer or the seller reviews and disapproves of the contract.