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16 Definitions Every New Real Estate Agent Should Know

September 12 2018

wolfnet 16 definitions real estate agent should knowYou're a new agent, and you're swamped by all of the things you need to learn. From the ins and outs of setting up your website to managing your time to stay productive, there are many skills and details that you need to know for succeeding in your first few years as an agent.

A key component to understanding the general lay of the land as an agent is to get a handle on the language real estate agents use every day. We've compiled the top 16 definitions you need to know to jumpstart your real estate vocabulary and set you on the path to being a rock star agent!

Abstract of Title

This document includes all written history related to a particular property, and may include information on liens, transfers, sales, tax liens, Home Owner Association restrictions, easements, and more. The Abstract of Title is held and maintained by local municipalities and includes financial details, notes, and information on the involved parties regarding each transaction, lien, or other circumstance. This document is extremely useful for buyers and should be a must-read for them before they buy a property.

Appraisal

An estimate of the true (or fair market) value of a property's worth. It takes into account the property and its condition, local and neighborhood data, and the larger regional housing market to represent the actual worth of a home in its current state. An appraisal is done by an appraiser, a listened or certified professional who has had training in determining home values. Appraisers can be hired by sellers to determine an accurate selling price for their home or by buyers to ensure accuracy and price in the mortgage, but in most cases appraisers are contracted by lenders.

Assessment

An assessment determines how much a homeowner will pay in property taxes for their home. It is determined by the local government and varies depending on location, but it usually includes 1) a legal description of the home and 2) separate listed values for the land and structure (assessed value). It is important to help buyers compare this to their appraisal—if the house isn't valued the same on each, something may be flawed in either document. The value of a home in a legal assessment is typically determined by a comparison of recent sales of comparable homes or calculating what it would cost to rebuild the home and adding that number to the land value to come up with a total.

Breach of Contract

Words that no agent, buyer, or seller want to hear. A breach of contract is when a seller or buyer backs out of the transaction or doesn't follow through on their part of the deal. Examples are if a buyer doesn't pay the seller on time or a seller gets a better offer and rescinds the original buyer's bid after agreeing to it. Depending on the type of breach of contract and on the parties involved, they often spur on legal action from either party. A breach of contract can also be on the agent's side—when an agent doesn't follow through on their fiduciary duties (see definition #13), they can be just as liable for issues as a buyer or seller in breach of contract.

Buyer's Agent / Seller's Agent

Congratulations, you're a real estate agent! But, what kind are you? A buyer's agent represents the buyer in the transaction, helping people find homes they want to buy. They are paid by the seller's agent or brokerage after their client purchases a property. Most agents start out as buyer's agents because they have more deals than seller's agents and it offers you the ability to learn more about what buyers want and the challenges of home buying. On the flip side, seller's agents represent home-sellers, which means being responsible for promoting their clients' property, showing their homes, and other selling-related tasks. Seller's agents usually get fewer but more lucrative clients compared to buyer's agents.

Closing Costs

After a home transaction makes is closed (closing: the period of time it takes for both parties to agree on everything, which can range drastically from a day to several weeks), buyers have to pay for several closing costs associated with getting access to their new home. There are several potential closing costs that vary depending on location, including fees related to the application, appraisal, closing, home inspection, and more. Closing costs can be avoided by the buyer if they get a no-closing-cost mortgage, because the fees are typically either incorporated into the total of the mortgage or the mortgage has a raised interest rate.

Commission

It's the money you are owed after a deal you are a part of closes, paid for by the home seller to their agent or brokerage. Most commissions are around 6 percent of the home's final sales price, split between the seller's agent and buyer's agent for a grand total of 3 percent for each side. While 6 percent is the average there is no fixed percentage, as commissions are negotiable and depend on the type of property being sold and the effort an agent will have to put into it to sell it.

Cost Sheet

This sheet is for your buyer clients, it includes a list of all of the closing costs and associated buying fees they will have to pay once they purchase the home. This sheet is given to them by their lender, and while some of the costs may be deferred to the seller, most of the costs will fall on your buyer client. On the flip side, sellers receive a seller's net sheet, which is given to them to present their assumed net proceeds from their sale after expenses.

Disclosure

Home sellers and those representing them in the transaction must disclose everything about the property—disclosing all problems with a property is a must-do for sellers. It's important for you to help your sellers know which issues they have to disclose and encourage them to disclose them. If sellers don't disclose every problem, it can come back to bite both them and their agent in the form of reputational damage, lost revenue, and even legal disputes.

Fair Market Value

The fair market value, or FMV, of a home is the calculated total worth that factors in things like appraisals, assessments, and real estate agent expertise. The fair market value should not be influenced by how much money is left on the mortgage or what the buyer wants to pay, it should be impartial. The fair market value is used when a property is transferred or for tax or insurance purposes.

Fiduciary Duties

No matter whether you're a seller's agent or a buyer's agent, you have what are called fiduciary duties to your client. These are legal requirements that you must uphold whenever you work with a client. The duties include loyalty, confidentially, disclosure, obedience, reasonable care and diligence, and accounting, as well as anything included in your client contract.

Grantee and Grantor

A grantee is the person buying a home and receiving the deed and a grantor is the home seller transferring their deed. Grantors have the power to alter a deed before (and sometimes after) it is transferred, including directives on how the property can be used, sold, or reclaimed. Deeds are legal documents, and it's important to note that title officers and real estate agents aren't lawyers, so they are prohibited from providing legal advice.

Home Equity

Home equity is the value that a home owner has paid into the mortgage. Equity can increase over time depending on the local housing market, any improvements made to the home, and if the loan balance is paid down. Helping your sellers maximize their home equity when selling by enlisting the help of a photographer to take great photos and videos of their property is a great way to get the highest value out of the transaction.

Listing

A listing is how a seller's agent promotes their client's home online, in person, or otherwise—it is the legal agreement between a home seller and whoever is representing their property that allows the brokerage, agency, or real estate agent to promote it and receive a fee or commission for their services. Using an IDX property search on your website and knowing how listings are added to the Multiple Listing Service (MLS) are both important checklist items for seller's agents. There are several types of listings, from open listings that may be handled by several brokers or agents simultaneously to exclusive authorization to sell listings, where only one agency or brokerage is given the go-ahead to list a property.

Real Estate Agents, Brokers, and REALTORS®

Real estate agents (aka you) are professionals who are licensed to negotiate and arrange the buying and/or selling of properties. A broker is a licensed real estate agent who then goes on to pass their state's brokerage exam. They can work on their own or with other real estate agents under them. An associate broker is an agent who has passed the brokerage exam but chooses to work under another broker. A REALTOR® is an agent or broker who is a member of the National Association of REALTORS® (NAR), which requires them to uphold the NAR's code of ethics and abide by their standards—real estate agents and realtors are not the same thing.

Title and Deed

The title is the legal way of saying you have ownership over a property, while the deed is a group of legal documents that transfers a title from one owner to another. To make a deed legally binding it needs to be signed by a judge or by someone at an assessor's office, and it must also be signed by both the buyer and the seller. Titles can be insured with title insurance, which can help buyers mitigate legal problems like previously unknown liens or issues. Sellers can also have title insurance to ensure that future issues with buyers are taken care of.

Real Estate Scholar Status Achieved

After diving into these 17 need-to-know real estate terms, be confident in your knowledge, and further your journey as a new agent.

To view the original article, visit the WolfNet blog.