When selling a home, it’s important to understand some of the key concepts and terms. Throughout the sales process, our agent(s) will be available to explain any unfamiliar terms.
Client: The person(s) or entity(ies) with whom a REALTOR® or a REALTOR®’s firm has an agency or legally recognized non-agency relationship. We must have an agency agreement to show external broker properties.
Note: In Connecticut, real estate agents can only show properties to buyers who have a written buyer agency agreement with them.
Customer: A party to a real estate transaction who receives information, services, or benefits but has no contractual relationship with the REALTOR® or the REALTOR®’s firm
Prospect: A purchaser, seller, tenant, or landlord who is not subject to a representation relationship with the REALTOR® or REALTOR®’s firm
Agent: A real estate licensee (including brokers and sales associates) acting in an agency relationship as defined by state law or regulation
Broker: A real estate licensee (including brokers and sales associates) acting as an agent or in a legally recognized non-agency capacity
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Abstract Of Title – A complete historical summary of the public records relating to the legal ownership of a particular property from the time of the first transfer to the present.
Adjustable-Rate Mortgage (ARM) – Also known as a variablerate loan, an ARM is one in which the interest rate changes over time, relative to an index like the Treasury index.
Agreement of Sale – Also known as contract of purchase, purchase agreement, or sales agreement according to location or jurisdiction. A contract in which a seller and buyer agree to transact under certain terms spelled out in writing and signed by both parties.
Amortization – The process of reducing the principal debt through a schedule of fixed payments at regular intervals of time, with an interest rate specified in a loan document.
Appraisal – Assessment of the property’s market value, typically done for the purpose of obtaining a mortgage. A professional appraiser’s estimate of the market value of a property based on local market data and the recent sale prices of similar properties.
Asking Price- The price that the seller has agreed to list their property for. The asking price is different from the selling price, which is the final price that has been agreed upon by the buyer and seller.
Assessed Value – The value placed on a home by municipal assessors for the purposes of determining property taxes.
Bridge Financing- A short-term loan designed to “bridge” the gap for homebuyers who have purchased their new home before selling their existing home. This type of financing is common in a seller’s market, allowing homebuyers to purchase without having to sell first.
Buyer’s Market- There are more homes on the market than there are buyers, giving the limited number of buyers more choice and greater negotiating power. Homes may stay on the market longer, and prices can be stable or dropping.
Closing – The final steps in the home selling process, transfer of property ownership. On the Closing Date, as specified by the sales agreement, the buyer inspects and signs all the documents relating to the transaction and the final disbursements are paid. Ownership of the property is transferred to the buyer and the keys are exchanged on the closing date outlined in the offer.
Closing Costs – The costs to complete a real estate transaction in addition to the price of the home, to include points, taxes, title insurance, appraisal fees and legal fees.
Current Market Assessment- A CMA (Current Market Assessment) is provided by your real estate agent during the listing presentation process to a prospective seller. Drawn from the local Multiple Listing Service (MLS), a CMA presents pricing and property report assists with determining the asking price for their home, using current housing market information such as recently sold, failed to sell, or are currently on the market, supply and demand, seasonality, home information like location, age, square footage and more.
Contingency – A clause in the purchase contract that describes certain conditions that must be met and agreed upon by both buyer and seller before the contract is binding.
Conditional Offer- When the sale of the home hinges on predetermined conditions, such as “conditional on financing” or “conditional on a satisfactory home inspection.” If the conditions are not met, the buyer can back out of the deal.
Contract Deposit- A percentage of the agreed-upon purchase price paid by the buyer at the time of signing the contract
Counter-offer – When the original offer to purchase a home is rejected by the seller, the seller can counteroffer with adjustments, usually to the price or terms of the purchase, such as the closing date. An offer, made in response to a previous offer, that rejects all or part of it while enabling negotiations to continue towards a mutually acceptable sales contract.
Conventional Mortgage – One that is not insured or guaranteed by the federal government.
Common Charge- Monthly maintenance fee paid by condo owners. Property taxes are not included in the common charge
Co-up Shareholder- Owner of a co-op unit, since what they are actually purchasing are shares of stock in the co-op corporation.
Curb Appeal- The appeal of a home when viewed from the curb. Curb appeal includes the home’s exterior, front yard, and anything else that’s visible from the street.
Debt-to-Income Ratio – The percentage of an individual’s monthly gross income relative to the amount of debt owed. A ratio that measures total debt burden. It is calculated by dividing gross monthly debt repayments, including mortgages, by gross monthly income.
Down Payment – The money paid by the buyer to the lender at the time of the closing. The amount is the difference between the sales price and the mortgage loan. Requirements vary by loan type. Smaller down payments, less than 20%, usually requires mortgage insurance. Earnest Money – A deposit given by the buyer to bind a purchase offer which is held in escrow. If the property sale is closed, the deposit is applied to the purchase price. If the buyer does not fulfill all contract obligations, the deposit may be forfeited.
Dual Agency- Dual agency is when one agent represents both the seller and the buyer in a single real estate transaction; consent of both parties is usually required. Dual agency practices may differ based on province, local rules and brokerage to your Real Estate transaction
Equity – The value of the property, less the loan balance and any outstanding liens or other debts against the property.
Easements – Legal right of access and use of a property by individuals or groups for specific purposes. Easements may affect property values and are sometimes part of the deed.
Escrow – Funds held by a neutral third party (the escrow agent) until certain conditions of a contract are met and the funds can be paid out. Escrow accounts are also used by loan servicers to pay property taxes and homeowner’s insurance.
What is an FHA loan and who qualifies?
An FHA loan is a mortgage backed by the Federal Housing Administration. This means if you default on mortgage payments, the FHA will help reimburse your mortgage lender. You may qualify for an FHA mortgage loan if you have a 580 credit score, 3.5% down payment, and a debt-to-income ratio of 43% or less.
Fixed-Rate Mortgage – A type of mortgage loan in which the interest rate does not change during the entire term of the loan.
Fixtures- Items that are physically attached to the home and require tools to remove. Fixtures are included as part of the purchase. Examples of fixtures include ceiling lights, cabinet hardware and appliances. If the seller plans to take any fixtures with them when they move, either remove them prior to listing the home, or be sure to specify the fixtures in the Agreement of Purchase and Sale
Financial Statement- A formal record of all your financial assets, debts, and liabilities.
Free Market Evaluation – An offer by a REALTOR®, usually presented in marketing materials, to provide a complimentary assessment of your home’s current market value.
FSBO- Acronym for “For Sale by Owner,” meaning the seller hasn’t retained the services of a real estate agent or broker to assist with the sale of their home. By virtue of the FSBO, the seller will avoid paying the real estate agent’s commission fee, which is split between the listing and buying agent
Home Value Estimator- A home value estimator is a tool, typically found online, that helps home sellers estimate the value of their property. The result is an estimate and different from a detailed property assessment provided by a realtor
Home Inspection – Professional inspection of a home, paid for by the buyer, to evaluate the quality and safety of its plumbing, heating, wiring, appliances, roof, foundation, etc. Homeowner’s Insurance – A policy that protects you and the lender from fire or flood, a liability such as visitor injury, or damage to your personal property. Lien – A claim or charge on property for payment of a debt. With a mortgage, the lender has the right to take the title to your property if you don’t make the mortgage payments.
List-To-Sale-Price Ratio- The difference between the listing price of a home and the final selling price, expressed as a percentage. If the list-to-sale-price ratio is more than 100%, the home sold over asking. If it is below 100%, the home sold under asking
Lien Search- A background check on the property and the seller to ensure there are no outstanding debts or claims upon the property
Listing Presentation – A presentation given by a REALTOR® to a prospective home seller in hopes that the seller will allow the REALTOR® to represent their interests throughout the sales process. Typically delivered in the seller’s home, the presentation includes the REALTOR’S® pricing, marketing and showing strategies, as well as a suggested asking price.
Market Value – The amount a willing buyer would pay a willing seller for a home. An appraised value is an estimate of the current fair market value.
MLS- The Multiple Listing Service, commonly referred to as MLS, is a real estate selling system operated jointly by real estate Boards and Associations across USA
Maintenance Fee- Fees paid by co-op shareholders that contribute to building operations
Mortgage Insurance – Purchased by the buyer to protect the lender in the event of default (typically for loans with less than 20% down. Available through a government agency like the Federal Housing Administration (FHA) or through private mortgage insurers (PMI).
Possession Date – The date, as specified by the sales agreement, that the buyer can move into the property. Generally, it occurs within a couple days of the Closing Date.
Pre-Approval Letter – A letter from a mortgage lender indicating that a buyer qualifies for a mortgage of a specific amount.
Principal – The amount of money borrowed from a lender to buy a home, or the amount of the loan that has not yet been repaid. Does not include the interest paid to borrow.
Purchase Offer – An offer is a legal agreement to purchase a home A detailed, written document which makes an offer to purchase a property, and which may be amended several times in the process of negotiations. An offer can be conditional on a few factors, commonly conditional on financing and a home inspection. If the conditions are not met, the buyer can cancel their offer. When signed by all parties involved in the sale, the purchase offer becomes a legally binding sales agreement.
Post-Closing- The amount of cash the buyer must have on hand after deducting the down-payment and closing costs.
Recording fee- A fee paid to the local government to officially report a sale of a home; usually paid by the buyer
Seller’s Market- In a seller’s market, there are more buyers than there are homes for sale. With fewer homes on the market and more buyers, homes sell quickly in a seller’s market. Prices of homes are likely to increase, and there are more likely to be multiple offers on a home. Multiple offers give the seller negotiating power, and conditional offers may be rejected
Staging- Preparing a home for sale to appeal to a wide range of homebuyers. The staging process often includes decluttering, depersonalizing, deep-cleaning, and minor updates such as painting and rearranging furniture.
Title – The right to, and the ownership of, property. A Title or Deed is sometimes used as proof of ownership of land. Clear title refers to a title that has no legal defects.
Title Insurance – Insurance policy that guarantees the accuracy of the title search and protects lenders and homeowners against legal problems with the title. Truth-In-Lending Act (TILA) – Federal law that requires disclosure of a truth-in-lending statement for consumer loans. The statement includes a summary of the total cost of credit.
Title Search – A historical review of all legal documents relating to ownership of a property to determine if there have been any flaws in prior transfers of ownership or if there are any claims or encumbrances on the title to the property.
Virtual Deals- The home-buying process completed by means of technology in place of face-to-face contact. Some common technology tools include 360 home tours and video showings, video conference calls, e-documents, e-signatures and e-transfers.