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5 Misunderstood Real Estate Terms

Sonja Bush May 23, 2024

You know you want to buy a new home or sell your current one. That should be enough to get you started, right? The lingo used by many realtors* can make the whole process sound a lot more complicated than that.

Learning a few key terms will put you a step ahead of all the other buyers and sellers out there. Here are a few of the most commonly misunderstood real estate terms:

1. Good-Faith Estimate

A Good-Faith Estimate is given by the escrow officer during the sales process to predict how much money will be due when you close on the property. The exact amount can vary — hence the word “estimate” — so buyers should always save a little extra money to make sure they’re prepared for the final closing costs.

2. Pre-Approval

People often think getting pre-approved for a loan is like having money in hand. While it does open the door for you to shop, it’s not a guarantee, and things can always change during the buying process. The loan is not yours until you close. Buyers should be conservative with their credit and their time… don’t go out and buy a car before you close the deal.

3. The Comp

For sellers, the word “comp” can cause a lot of confusion. A comp is a comparable property. It’s likely around the same size and in a similar area or complex. It’s helpful when it comes to pricing your property to sell. Although you can go online to various websites and find comps, most are not in real time or super accurate. For a more holistic look at the market, real estate agents will do a CMA (Comparative Market Analysis). As a realtor, I combine my knowledge of the local market with a variety of factors of comparable properties to give you a CMA.

4. MLS

The Multiple Listing Service (MLS) was developed by realtors in the early 1900s to make the transaction process more efficient. It’s a real time collection of regional databases of homes currently for sale. Sellers’ agents post properties that are for sale, while buyers’ agents share links to these properties with their clients. Having all the listings in one place is a win-win for buyers, sellers and realtors.

5. Agent/Realtor®/Broker

They sound the same, and you’ve heard of each one… they do the same thing, right? Not so fast. A real estate agent is licensed to help people buy or sell properties. They take classes and must pass an exam in the state they work in. A Realtor® is a trademarked term for a real estate agent who belongs to the National Association of Realtors and follows its strict Code of Ethics. A broker is generally required to have more education and experience than real estate salespeople or agents. A broker can deal directly with home buyers and sellers, or they might have staff or agents working for them. I’m a broker and a realtor.

Most people hire a realtor without understanding what the job entails… It’s much more than just showing properties. Ask for testimonials from previous clients to see which real estate agent, realtor or broker is a good fit for you.

Learn more in my Ultimate Home Buyer’s Guide or Ultimate Home Seller’s Guide. If you’d like to talk, call me at (760) 914-4664.

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Upcoming Real Estate Forms Changes Part 2: Listing & Purchase Agreements The way real estate transaction are done in California is changing, and new mandatory forms will be introduced in the summer of 2024. This article will discuss the Residential Listing Agreement and Residential Purchase Agreement. For sellers, the Residential Listing Agreement has been completely revised. The form is a bit longer now, primarily because it is organized in a grid format. This grid lays out all the terms in detail, making it clearer. The main changes the Residential Listing Agreement are: • More detailed info on what the seller will pay and to whom. • There is now an Optional Concessions Section where sellers can confirm if they are willing to pay Optional Concessions. Optional Concessions can cover costs like escrow and title fees, lender fees, repairs, and broker compensation. • This information will be shared on the Multiple Listing Service (MLS). • Sellers need to make sure buyers and agents have a signed Buyer Representation and Broker Compensation Agreement before showing the property (refer to this article for information on these forms). • New guidelines on how to handle buyers who do not have their own agent. The Residential Purchase Agreement also has some updates for buyers, though there are not as many. The main changes are: • Homeowner insurance is now a separate item to consider. • If the property has three or more units, the seller has to give the buyer an additional document about wooden balconies and stairs. • It clarifies who will pay the brokers compensation. Remember, it is always important to understand any legal document before signing it. If you have questions, you can contact the Destination Real Estate team. Watch for information about upcoming free webinars to explain these changes in detail.

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