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As a newly minted real estate agent, learning certain terms quickly will ensure you’re well-armed to guide and navigate clients through the complexities of today’s market.
Here are the top 10 real estate terms new agents should learn as quickly as possible in this fast-paced market.
1. Escalation clauses
An escalation clause, oftentimes referred to as an escalator, is a clause in a real estate contract that lets homebuyers increase their offer by a pre-determined amount over other offers in case the seller receives another offer at a higher price point.
Escalation clauses are typically reserved for when a buyer is confident there will be multiple offers or if the buyer expects to pay an increased price for the property.
2. Buyer concessions
Concessions are benefits or discounted offers by the buyer to help sell a home and close a deal. Usually specified during negotiations, concessions can include covering the cost of new appliances in a home, moving expenses and any repairs needed.
Concessions can impact the selling price of a home, so oftentimes, appraisers take concessions into consideration when evaluating the home and comparable properties in the area.
3. Seller leaseback
In today’s hot housing market, many buyers are submitting very competitive offers for all cash and quick closes. However, while the agent, bank and all involved in a transaction might be able to move swiftly, it takes a lot to physically move from one house to another.
Also, sellers may need to have money in the bank to submit their offer on their new home. Each transaction has its own set of circumstances, but these are the most common reasons sellers may wish to include a period in which they lease back their home after the sale is finalized for a set period of time.
Agents need to make sure all is agreed upon upfront and included in the contract for both buyer and seller to sign.
4. Seller disclosure
One of the most important documents for owners seeking to sell their home, disclosure documents detail a property’s condition and anything that may negatively affect its value and price.
These documents are particularly important for those seeking to flip homes as these types of homebuyers often search for properties that are in poor condition to upgrade them and then sell.
5. ‘As is’ or ‘where is’
When a property is sold “as is” or “where is,” it means the sellers don’t want to perform any repairs on the home prior to closing.
There’s no guarantee from the seller that everything is in working condition, and thus, a buyer who purchases a home “as is” is responsible for fixing any problems the home may have or any repairs that may be needed.
6. Blind offer
Though not advisable, some homebuyers will purchase a property sight unseen. Known as a blind offer, these types of deals are very popular amongst buyers seeking to flip homes as a business venture.
7. Multiple listing service (or MLS)
Developed by the National Association of Realtors, the multiple listing service (also known as the MLS) is a private database that is maintained by real estate professionals to help their clients buy and sell properties.
This tool is incredibly helpful to not only foster collaboration across markets, but also in aiding brokers in finding their clients the perfect property.
8. Seller concession
Seller concessions are closing costs agreed to be paid by the seller. At times, you can ask the seller to contribute toward certain closing costs, and other times, sellers may just pay a percentage of the total.
Examples of closing costs that are typically covered by the seller include prorated property taxes, title insurance, city and county transfer taxes and any HOA fees.
9. Adjustable-rate mortgage (ARM)
An adjustable-rate mortgage is a mortgage that does not have a fixed interest rate. The rate changes throughout the lifetime of a loan based on the movements in an index rate. This type of mortgage usually offers a lower initial interest rate compared to fixed-rate loans.
10. Comparative market analysis
A comparative market analysis (CMA) is used by real estate agents to estimate the value of a property by comparing and evaluating the property to similar ones that have recently sold in the same area. CMA is one of the cornerstones to pricing a property well.
As a new agent, there’s a multitude of things to learn. From how to effectively show a property to managing clients and complex transactions, a new agent’s education is never complete.
Among the many things agents will learn during their first year in practice, real estate terminology is one of the most useful and critical. From adjustable-rate mortgages to blind offers and buyers concessions, becoming well-versed in certain key real estate terms will help make your first year in practice a success.