Real Estate Terms Defined: Part 1

Real Estate Terms Defined: Part 1

Every industry has its own jargon,and real estate is no exception. Living in the South Bay, we’ve all heardthe saying, “Location, location, location”, and we have a pretty good sense ofwhat that means. But what about contingency or disclosures or MLS? Real estate lingo can add layers of confusion to analready convoluted process. Having a basic understanding of importantreal estate concepts will give you peace of mind now and could save you afortune in the future.

So, we’ve compiled a list of the most commonly usedterms you’re likely to encounter. Whether you’re buyingin Manhattan Beach, sellingin Hermosa Beach, or just plain curious,the following real estate glossary is part one of a three-part handy referenceguide for anyone entering the real estate market.

“As Is”:

“Asis” indicates that the property is being offered in its present condition withno warranties or representations by the seller or real estate agent. What yousee, or don't see, is what you get. Although, most residential real estate salesin California are considered “as is”, buyers can negotiate for priceconcessions or repairs after conducting home inspections.

Broker’sOpen:

ABroker’s Open is what real estate agents participate in for the purpose ofviewing listings on the market. Think of it as an open house for realtors. Yourarea will usually have a set time each week when new listings are open toagents for preview. For Manhattan and Hermosa Beach, it is usually Fridays between 12-2 pm, while Redondo Beach usually hosts Broker’s Opens on Thursdays from 12-2 pm.

Buyer’sAgent:

Alsoknown as the selling agent, this would be the real estate agent representingthe buyer in the real estate transaction, negotiating contracts straightthrough closing.

Contingency:

A provision withinthe purchase contract stating that certain conditions must be met for the saleto proceed. Common contingency clauses include home appraisal, loan, andinspection. To find out more about contingencies, how they work, and the mostcommon ones found in California purchase agreements read Buyer’s Tip #5: Real Estate Contingencies.

Disclosures:

Themaking known of a fact that had previously been unknown; a revelation. InCalifornia, a home seller must disclose major physical defects in the housewithin his or her knowledge, such as a leaky roof or potential flooding problem.The presence of lead-based paint hazards in buildings constructed before 1978must be disclosed as well.

Escrow:

Escrow,also known as closing, usually occurs betweenthe time the seller accepts the offer and the buyer gets the keys. An unbiased third party, an escrowcompany, keeps an eye on the transaction, and employs anescrow agent.

During the sale process, the parties’ escrow agentholds all funds, instructions, and documents related to the purchase of thehome, including the earnest money, down payment, documents for the sale,documents for the loan, hazard and title insurance, and the deed from theseller. At closing, the escrow agent ensures signatures on the final paperwork,disburses the funds, and oversees the transfer of the deed.

Inspection:

An inspectionhappens when buyers pay a licensed professional inspector to visit the home andprepare a report on its condition and any needed repairs. The inspection oftenhappens as part of the inspection contingency during the due diligence period,so buyers can fully assess if they want to buy a particular home as is, ask theseller to complete or pay for certain repairs, or walk away because repairs aretoo costly to want to move forward with the sale.

Listing:

A listing isessentially a home that is for sale. The term gets its name from the fact thatthese homes are often “listed” on a website or in a publication.

MLS:

An acronym forMultiple Listing Service, the MLS is a database that allows real estate agentsand brokers to access and add information about properties for sale in an area.When a home is listed for sale, it gets logged into the local MLS by a listingagent. Buyer’s agents often check the MLS to see what’s on the market and whatsimilar homes have sold for. According to one source, there are 1400 MLS organizations in theUnited States. Over half of them are affiliated with the NationalAssociation of Realtors (NAR),and our local MLS is the California Regional Multiple Listing Service (CRMLS). When selling a home, you want to ensure thatyour agent is a subscriber to your local MLS. That way your home gets theexposure needed to drive in buyers.

Offer:

This is the initialprice offered by a prospective buyer to the seller through a purchase agreement.A seller may accept the offer, reject it, or counter with a different offer.

Open House:

An Open House is atime when sellers open their home so that numerous potential buyers canswing by and check it out—no appointment necessary. Usually held on theweekends when people are more available, they give prospective buyers a chanceto drive around a neighborhood and see firsthand what is available for purchase.

Pre-Approval:

Before looking for ahome, a buyer should obtain a pre-approval letter from a bank, which provides an estimate on howmuch the bank will lend that person. This letter is the first step in the homebuying process and will help determine what the buyer can afford. In today’s seller’smarket, it is especially important to get pre-approved before submitting anoffer on a home, as it shows the seller you are serious about the purchase andhave taken steps to commit to the buying process.

Real Estate Agent:

A foot soldier ofthe real estate business who shows houses and does most of the nitty-grittytasks associated with buying and selling property. An agent musthave a state license and be supervised by a real estate "broker".Most agents are completely dependent upon commissions from sellers for theirincome.

Real Estate Broker:

A broker is a realestate agent who has passed a state broker’s exam. These brokers can work ontheir own or hire their own agents. Just like agents, they are professionalslicensed to negotiate the purchase and sale of real estate for a commission orfee. However, a real estate broker is one step up from an agent, having moretraining and the power to supervise agents, and all agents must work under abroker in a real estate brokerage or firm.

Title:

Ownershipof real estate or personal property. With real estate, title is evidenced by adeed (or other document) recorded in the county land records office.

TitleReport:

Thewritten analysis of a real estate title search, including a propertydescription, names of titleholders and how title is held (joint tenancy, forexample), tax rate, encumbrances (mortgages, liens, deeds of trust, recordedjudgments), and real estate taxes due. A title report is needed before a lenderwill agree to finance purchase of a property. In Southern California, a titlereport is prepared by a title company.

For more Real Estate terms, please refer to this Real Estate Dictionary.