Definitions for some of the most frequently used real estate terminology.

Real Estate Terms

A business with the legal potential to represent clients in the purchase and sale of property.

Brokerage (Real Estate)

Who is in a Real Estate Transaction?

Buyer's Agent

A representative of a real estate brokerage that is assisting buyers in the search for a property and negotiation of a purchase. Also called the "Selling Agent" because they are creating the sale of a property by providing a buyer.

Closing Attorney

Lender

An entity willing to provide a buyer with funds to purchase a property. Lenders come in all shapes and sizes. Typically, our preference is with dedicated mortgage lenders - businesses whose primary function is to loan funds for real estate purchases.

Listing Agent

A representative of a real estate brokerage that is assisting a seller in selling their property. Listing agents help manage showings, collect offers, and negotiate the sale of a property. Agents and brokerage fees vary depending on experience and services offered.

Realtor

A real estate salesperson or similar that has joined the National Association of Realtors (NAR). Most real estate agent have joined NAR, but not all. Members have agreed to abide by the association's Code of Ethics and answers to NAR as well as their local REALTOR Board (i.e. Cherokee Association of Realtors (CAOR), Atlanta REALTOR Association (ARA)).

Selling Agent

See "Buyer's Agent"

An additional agreement between buyer and seller altering the previously agreed contract. Commonly, an amendment will be written if buyer and seller need to negotiate after discovering a defect during an inspection, if a closing date or deadline needs to be adjusted, etc.

Amendment (Real Estate)

Contract Terminology

Binding Agreement Date

The date on which an Agreement or Contract which has been signed by all parties. This date is commonly used as a starting point for a contract's contingencies, due diligence, etc. Typically referred to as the "Binding Date."

Closing

The event that wraps up a home purchase. Buyer and seller come together to officially sign documents that allows a property to trade hands. From here, a buyer becomes the owner and is give keys to the property.

Community Association Disclosure (CAD)

Disclosure provided by the seller regarding an HOA or covenants related to a property. Tells buyer about fees related to the HOA, what an HOA provides, and whether or not the property is in good standing with the HOA.

Contingency

Something that must happen in order for a purchase to be completed. Most contingencies have an expiration consisting of a certain number of days (Example: A financing contingency that ensures buyer does not have to purchase the home if they cannot obtain a loan may only last 21 days after the Binding Agreement Date). Common contingencies include: Financing, Sale of Other Property, Appraisal, etc.

Counteroffer

After one party has submitted an Offer, if the other does not find terms acceptable, they may submit a Counteroffer, changing one or more terms of the agreement. Until all parties sign an Offer or Counteroffer, an agreement is not Binding between any party.

Due Diligence

A time that a buyer has to investigate a property. In Georgia, as long as the buyer is within Due Diligence, they may back out of a purchase on any whim and still keep their Earnest Money.

Earnest Money

Money that a buyer puts into escrow account (typically with their agent's brokerage or with the closing attorney) to hold them accountable to the contract. If a buyer breaks a contract without legal cause, their earnest money may be in jeopardy.

Exhibit (Real Estate)

An additional document added to the Purchase and Sale agreement which is then included in the transaction. The Seller's Property Disclosure, Community Association Disclosure, and Financing Contingencies are among the most common Exhibits.

Purchase and Sale Agreement

A contract typically referred to as the "Offer" for a property. Specifies a purchase price, contributions from the seller, closing date, earnest money, due diligence time period, exhibits included with the contract, special stipulations, etc.

Rent Back

Right to Request Repairs

Seller's Property Disclosure (SPD)

Special Stipulations (SS)

Termite Letter

Terms

When a seller wants to remain in the property for sale after the closing date. For instance, the seller may request post-occupancy for 2 days after closing.

In place of a due diligence period, buyers may elect for a "Right to Request Repairs." This change eliminates the buyer's ability to exit the contract on a whim and shows the seller that they are more committed to the deal. Requests must pertain to an inspection of the property.

A disclosure provided by the seller which details any issues with a property that a buyer may not plainly see when touring it. This disclosure also specifies the approximate age of HVAC systems and the roof, the existence of termite or pest bond, items the seller is planning to leave with the property, etc. If a property in investor owned or being flipped, the seller most likely will not provide an SPD.

Conditions or Terms from either party that are not common enough to include in every real estate contract. For instance, a buyer may specify that the seller should leave a specific piece of furniture or an appliance. A seller may want a stipulation saying that the buyer will pay all costs associated with closing their account with the HOA. Special Stipulations can be written into the Purchase and Sale Agreement, and Amendment, or an Exhibit.

An official letter from a termite/pest company specifying that no active termite infestations are in a property.

All parts of an agreement including prices, dates, expirations, etc.

Owner is not planning to make any corrections or repairs in the home. The state that you see it in is the state that you are going to buy it in. This statement does not prevent the buyer from making requests or asking the seller to make concessions.

As-Is

General Nomenclature

Appraisal

An official valuation of a home most often used by lenders to confirm that their investment in the loan is safe. An appraiser is almost always required when obtaining a loan on a home. A typical appraisal fee is in the range of $400-$600 and is paid for by the buyer.

Blind Offer

An offer in which the buyer has never seen the property in person.

Buyer-Brokerage Agreement

Gives a broker (or its representative) the legal right to represent a client in the purchase of property. Can be exclusive or non-exclusive.

Buyer's Market

A state of the market in which there are many more properties for sale than there are buyers looking to purchase (Supply>Demand).

Closing Costs

Costs that are associated with the purchase and sale of real estate. The majority of these costs fall upon the buyer. Buyers may conservatively estimate an additional 3% of their purchase price which will be required in cash to close above and beyond their down payment. (Example: Home Purchase is $100,000. Closing Costs may be $3000). It is very common for buyers to request that sellers contribute funds to assist them in paying closing costs.

Commissions (Real Estate)

Payments made to real estate brokerages for brokering (bringing two parties together) a real estate transaction. In real estate, commissions are always paid to an individual agent's brokerage who has created an agreement with its salespeople on how they will share that payment. Most commonly, a seller pays all commissions in a deal and the listing broker agrees to share a portion of that commission with the cooperating brokerage. (Example: a seller agrees to pay 6% commission total with the listing brokerage who agrees to share 3% with a cooperating broker. If there is no cooperating broker, the listing brokerage has the right to keep all 6% of the commission).

Covenants

A document that dictates the things an owner may and may not do at their property. Typical covenants have rules regarding types of fences, house colors, detached structures, etc. Buyers should review the covenants pertaining to their property before committing to a purchase.

Days on Market (DOM)

The number of days that a property has been listed for sale. Days that a property is Under Contract or Pending may not be included in this number.

Demand (Real Estate)

The number of buyers searching for properties to purchase. It is important to understand the relative demand of certain price range. (Example: there are usually more buyers in the $200k-$300k range than there are in the $700k-$800k range in Cherokee County)

Escrow

An account where funds are held and wait to be dispersed at a later date. Earnest Money is held in Escrow until it is dispersed at closing to contribute to closing costs or down payment or until a deal falls through and it is either returned to the buyer or given to the seller (in all or portioned per an agreement). Lenders also hold a portion of monthly payments in Escrow so that they can pay Owner's property tax on their behalf at the end of each year.

Foreclosure

When an owner fails to pay their mortgage, their lender may elect to foreclose. In Georgia, foreclosed properties typically go up for auction on the courthouse steps of the county the property is located. Auctions are conducted in cash only.

Homeowners Association (HOA)

A group that ensures covenants within a community are upheld and maintained. HOA's may levy fees against owners that break rules and covenants as permitted within the same document.

Inspection

During a due diligence period, buyers are encouraged to complete an inspection which is designed to identify any issues within a home. Inspection reports should identify small issues (i.e. burnt out light bulbs, screens that aren't on windows) as well as significant problems in a home (i.e. foundation cracks, leaks).

Listing-Brokerage Agreement

Market Value

Party

Multiple Listing Service (MLS)

Offer

Pending

Gives a broker (or its representative) the legal right to represent a client in the sale of property. Can be exclusive or non-exclusive.

The value at which a property will sell if neither the buyer nor seller are under extenuating circumstances. Buyer's markets and Seller's markets may affect market value. Supply and Demand are king.

Any person or group that is on the buying or selling side of an agreement.

An online database of properties for sale within a specific area. In our area, the First Multiple Listing Service (FMLS) and Georgia Multiple Listing Service (GAMLS) are the two most active MLS's. Public sites pull information from these services to create information available to all buyers and sellers without the help of an agent or brokerage.

A proposed contract complete with all terms related to the purchase of a property. These are typically presented via a Purchase and Sale Agreement.

A property that has Binding Agreement between buyer and seller. If a property is Pending, the seller may allow buyers to continue viewing the property, but they usually do not (legally) have the ability to accept a different agreement as they are tied to the current buyer.

Pre-Approval

Proof of Funds

Property

Public Sites (Real Estate)

Radon

Seller's Market

Short Sale

Supply

Tidewater

Under Contract

Wire Fraud

Wire Funds (Real Estate)

A letter provided by a lender or loan officer stating that a buyer is qualified to purchase a property of a certain value. Letters usually have an expiration of 60-90 days.

Provided by cash buyers to show they have the ability to complete a purchase in cash. This is in place of pre-approval letter for those obtaining a loan.

Any real estate (i.e. homes, land, commercial buildings)

Sites than anyone with an internet connection can visit to see a list of homes for sale. Today, these sites are practically as up-to-date as the official MLS's. However, they often lack some information provided in an MLS. (i.e. Zillow, Realtor.com, Trulia)

A gas that is emitted from the ground and has been found to be cause of cancer. A radon test can be conducted during an inspection to determine if radon levels are escalated and require remediation. There are methods to reduce radon in a home. Radon is odorless, colorless, and tasteless. The only way to detect radon is with a radon test.

A state of the market in which there are many more buyers than there are properties for sale (Demand>Supply).

An agreement between an owner and their lender to sell a property at a loss for the lender. Short Sale homes are commonly listed among others in the MLS but are typically identified as such, though mistakes have been made before.

The number of homes available on the market. This should be broken down by price range to better understand the condition of the market.

A situation in which a buyer is obtaining a VA Loan and the home fails to appraise at the contracted value.

See "Pending"

A rising issue in which scammers convince various parties to wire funds to the wrong entity. Incorrectly wired funds are rarely retrievable. All parties should confirm wiring instructions directly with the entity with whom they need to wire and not trust any instructions received from elsewhere. For instance, buyers almost always wire funds to the closing attorney in preparation for closing. Buyers should speak directly with the closing attorney to receive wiring instructions.

Monies sent electronically to complete a transaction usually to the Closing Attorney.