When you buy or sell a home for the very first time, your experience is largely dependent on the ability of your licensed representation to define real estate terms that are used often in our business and how and when they are relevant. Clientele have limited exposure to the realtorspeak and acronyms we as agents use every day, therefore it is on us to communicate the process and increase your understanding & garner your expectations before escrow even begins. The process can seem extremely overwhelming and confusing if you aren’t in receipt of the pertinent general language of the industry, a wisdom I hope to impart on you today so that you can buy or sell with confidence regardless of the teaching ability of your next realtor.
I believe it is an agent’s duty to educated their buyer or seller as to the system by which they will reach a successful close of escrow. This responsibility is more of a refined art that is too often overlooked by agents. It has been my experience that the entire escrow process is more enjoyable with less hurdles if all parties put communication and conveyance first. The less left to assume, the more effective the agent.
One way to mitigate against this is by interviewing a few knowledgeable agents and look for the one that isn’t afraid to answer questions and explains them thoroughly without judgement because you will have questions during the sale and you should. I have created this guide to answer many of those questions in advanced & empower you with the language of the real estate business. The following terms and acronyms that I’ve defined are the most commonly used and beneficial to learn:
Broker – A broker is a realtor who meets advanced licensing requirements to oversee other agents and ensures compliance and mitigates against liability.
Brokerage – The umbrella that covers individual real estate agents and their broker and is a place of business. I.e. Re/Max Gold, my brokerage.Realtor – One who performs as an agent for the sale & purchase of buildings & land; a real estate agent.
Real Property – Property definated as raw land including all grown vegetation which has been affixed to a structure immovable structure. This includes man-made buildings as well as crops. Real property is best characterized as property that doesn’t move, or that is attached to the land, This is in contrast to personal property, which can be moved or transferred physically hence why a manufactured home is personal property until it is affixed to land owned by the same person.
Escrow – A legal agreement between two parties, whereas holdings to be exchanged are held and dispersed by a neutral third party (escrow officer).
Lender – A lender in real estate is the mortgage lender or loan officer of a financial institution such as a bank or credit union who facilitates a mortgage loan so that a buyer may purchase a home.
Mortgage – from old English and French meaning ‘Death Pledge’ in that the loan “dies” when it’s repaid, curious, but it is defined as conveyance of an interest in real property as security for the repayment of money borrowed to buy the property meaning the institution you borrowed money from owns a piece of your house until the loan is repaid in full.
Underwriting – is the process of verification of a buyer’s income, assets, debt and property details in order to issue final approval on the borrower’s loan conducted by underwriters at the lending institution.
Appraisal – Ordered by the lender, an appraisal is a licensed appraiser’s assessment of ‘fair market value’ to assure the lender that the subject property is worth slightly more than the amount they are loaning on it in order to go forward with loan approval. Outside of escrow appraisals are used to determine property tax or re-finance.
Dual Agency – Occurs when one realtor represents both the buyer and the seller within a transaction. It creates an inherent possibility for the conflict of interest but is legally acceptable in Nevada whereas the agent must be transparent, clear & fair to both parties.
Title -A title is the legal right to use and develop the property how you see fit, or transfer interest that you own to others via a deed which is overseen by an escrow officer at the title company.
Deed – A legal record that secures the transfer of property ownership be it building or land. Escrow is closed when the deed to a home is recorded with the county under the new buyer’s name.
HOA – Home owners association, a body of homeowners that oversees shared community maintenance, enforces rules and regulations and tries to maintain the integrity and value of a subdivision where they exist also known as a CIC (Common interest community).
Assessment – A decision by an HOA board for a short-term increase in HOA fees to remedy an issue of common interest in a community. Ie Pool restoration, elevator repair, clubhouse construction etc.
Lien – A claim or legal right against an asset that is typically used as collateral to satisfy a debt. Liens can be identified at title and are usually discovered in the preliminary title report and paid in escrow prior to the seller receiving funds. I.e. A man doesn’t pay his mechanic for putting hydraulics in his caddy. The mechanic issues a lien on the man’s only large tangible asset, his home, and this prevents the future sale of said home until the mechanic gets paid.
CC&Rs – An original set of guidelines or rules set by the developer of a subdivision or community. They are often archaic and unenforceable requiring the city or county to interpret their modern application. You can have Covenants, codes and restrictions without an HOA but you will not have an HOA without CC&Rs.
EMD – Stands for Earnest Money Deposit, An amount of money a buyer/buyer’s agent delivers to title for holding which shows intent to follow through with the purchase. It is usually the extent of damages awarded should mediation/arbitration arise. The EMD goes towards the down payment should the sale close successfully.
O & A – Is the contract for purchase known as the Offer & Acceptance agreement, drawn up by the buyer’s agent and executed once all parties sign.
In Contract – A term used to describe a fully accepted offer & acceptance agreement whereas both parties have signed the document, also known as being in escrow or what occurred for a home to be in ‘pending’ status.
SRPD – Usually a 4-6 page disclosure known as the Sellers Real Property Disclosure. This form that is shared with the buyer shortly after opening escrow is meant for the seller to disclosure anything and everything that they know about the property and if problems did or still do exist.*
Due diligence – Cautionary steps taken by the buying party to determine if the condition of the home is suitable for their purchase. In real estate this is conducted by way of home/pest/fire/hvac/radon inspections and must be done within so many days of the offer being accepted.
NORR – After due diligence is concluded the buyer’s agent draws up an NORR (Notice of Required Repairs) for the seller to have servicemen complete prior to close of escrow, that is within a budget agreed upon in the O & A known as the repair allowance.
As-is – Should the buyer waive due diligence, meaning any & all inspections, and accept the home in its current state, that is considered an ‘as-is’ sale.
Short Sale – Occurs when a homeowner in financial distress sells their home for less than they owe on the mortgage. It must be approved by the mortgage lender as the borrowers only options since the lending institution loses money. It is one step before foreclosure.
Foreclosure – A legal process a lending institution files with the courts after 3-6 months of non-payment whereas the borrower has 30 days to respond with payment. Failure to do so results in the home being sold at auction on the ‘courthouse steps’.
ARM – Adjustable-rate mortgage. Largely responsible for the real estate crash of the early 2000s. Not advisable.
Listing Agent – A realtor who represents the seller.
Selling Agent – Also known as the buyers agent, the realtor who brings a buyer to the listing.
Pre-approved – A buyer meets surface level requirements to obtain a loan to purchase a home.
Pre-qualified – A buyer meets deeper level requirements to obtain a loan to purchase a home and is considered more secure than approval.
Pending – A home that is in contract for sale & escrow is opened.
BOMK – A home that fell out of escrow
CRS – Certified Residential Specialist, a realtor who obtained a higher level of education and standard in the real estate business than a licensed realtor alone.
CD – Known as the closing document which is signed at title when loan documents have arrived. Typically you can go on record 3 days after the CD is signed.
On Record – The best two words you can hear! This means the deed has been recorded with the county under the new homeowner’s name and escrow can officially close.
There you have it! If you can absorb most of what you’ve just read then consider yourself more knowledgeable & well-versed then 99% percent of First time home buyers and sadly the vast majority of veteran buyers and sellers also. The fact is that most people entrust their representation to fulfill their real estate goals without really digesting the content of what they sign nor fully in grasp of how the actual process works. This can be mitigated by resources like this one available with ease, as well as our body of realtors reconnecting with their fiduciary duty to their clients. With that said I will define the last term I’ll be sharing with you today:
A fiduciary duty is the obligation a party has to act in another party’s best interest.
That understood, you as a free-thinking citizen have a moral obligation to oneself and to your family to invest in real estate wisely. A feat best accomplished with self-taught knowledge where it is the author’s aim to give you the proper resources to build confidence enough to make the best decisions for the financial future of you and your family. Nevada Strong, all day long.
Disclaimer -This guide is composed by a Nevada Realtor for consumers in the Silver State. While it can be largely applicable in other states, some states exchange property very differently. For example, we do not sell property using attorneys in Nevada unless it is a probate sale or contentious and whereas dual agency is illegal in many states, it is perfectly legal and common in Nevada.
*The sellers real property disclosure should never be accepted as fact and does not preclude the buyer from the responsibility of performing their own due diligence.
Written by Devin J. Reese, REALTOR
Certified Residential Specialist
*Any unauthorized use of the content herein will be prosecuted to the fullest extent of the law.
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