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 heard the saying, “Location, location, location”, and we have a pretty good sense of what that means. But what about contingency or disclosures or MLS? Real estate lingo can add layers of confusion to an already convoluted process. Having a basic understanding of important real estate concepts will give you peace of mind now and could save you a fortune in the future.

So, we’ve compiled a list of the most commonly used terms 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 reference guide for anyone entering the real estate market.

“As Is”:

“As is” indicates that the property is being offered in its present condition with no warranties or representations by the seller or real estate agent. What you see, or don’t see, is what you get. Although, most residential real estate sales in California are considered “as is”, buyers can negotiate for price concessions or repairs after conducting home inspections.

Broker’s Open:

A Broker’s Open is what real estate agents participate in for the purpose of viewing listings on the market. Think of it as an open house for realtors. Your area will usually have a set time each week when new listings are open to agents 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’s Agent:

Also known as the selling agent, this would be the real estate agent representing the buyer in the real estate transaction, negotiating contracts straight through closing.

Contingency:

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

Disclosures:

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

Escrow:

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

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

Inspection:

An inspection happens when buyers pay a licensed professional inspector to visit the home and prepare a report on its condition and any needed repairs. The inspection often happens 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 the seller to complete or pay for certain repairs, or walk away because repairs are too costly to want to move forward with the sale.

Listing:

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

MLS:

An acronym for Multiple Listing Service, the MLS is a database that allows real estate agents and 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 listing agent. Buyer’s agents often check the MLS to see what’s on the market and what similar homes have sold for. According to one source, there are 1400 MLS organizations in the United States. Over half of them are affiliated with the National Association of Realtors (NAR), and our local MLS is the California Regional Multiple Listing Service (CRMLS). When selling a home, you want to ensure that your agent is a subscriber to your local MLS. That way your home gets the exposure needed to drive in buyers.

Offer:

This is the initial price 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 a time when sellers open their home so that numerous potential buyers can swing by and check it out—no appointment necessary. Usually held on the weekends when people are more available, they give prospective buyers a chance to drive around a neighborhood and see firsthand what is available for purchase.

Pre-Approval:

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

Real Estate Agent:

A foot soldier of the real estate business who shows houses and does most of the nitty-gritty tasks associated with buying and selling property. An agent must have a state license and be supervised by a real estate “broker”. Most agents are completely dependent upon commissions from sellers for their income.

Real Estate Broker:

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

Title:

Ownership of real estate or personal property. With real estate, title is evidenced by a deed (or other document) recorded in the county land records office.

Title Report:

The written analysis of a real estate title search, including a property description, names of titleholders and how title is held (joint tenancy, for example), tax rate, encumbrances (mortgages, liens, deeds of trust, recorded judgments), and real estate taxes due. A title report is needed before a lender will agree to finance purchase of a property. In Southern California, a title report is prepared by a title company.

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