Having a basic understanding of important real estate concepts before you start the home buying or selling process will give you peace of mind and minimize your frustrations. Here are a few real estate terms you should know before you consider listing your home for sale.
Buyers Agent vs. Listing Agent– Most real estate transactions involve two agents. The agent representing the Buyer has a fiduciary responsibility to look out for the best interests of the Buyer. The Listing Agent is working for the Seller of the home and has their best interest at heart. The Seller is responsible for paying the agents commission out of the proceeds from the sale.
Comparables- Once you decide on a realtor one of the first things they provide you with is a list of comparable properties. These are recently sold properties that are similar to your home and are used to indicate a value to help you decide what price the home should be offered. In general terms, the more recent the sale and the fewer the dissimilarities, the better the comparable.
Pre Qualification Letter- Hopefully, any potential Buyers of your home will have already been pre qualified by a bank. The bank will look at their financial situation to determine the value of a loan they are willing to provide and give the Buyer a pre qualification letter. Realtors help you screen your potential Buyers by making sure they have already taken this step and can afford to purchase your home.
Inspections- Most Buyers will always have the property inspected before closing. It is an important step in discovering any defects in the property. Most inspections cost between $500-$800 depending on the size of the property and are paid for by the Buyer. A good inspector will go through the property with a fine tooth comb examining plumbing, electrical, appliances, heating. etc. It is not a bad idea as a Seller to have your home inspected to pre-empt any potential problems that you may not be aware of.
Appraisal- Not to be confused with an inspection, the appraisal is required by the lender to confirm the sales price is accurate. A licensed appraiser will estimate the home’s value as a way to protect their investment and to make sure the Buyer is not overpaying. Anyone purchasing your home that needs a mortgage will have to have it appraised.
Contingencies- A provision in a contract that requires the completion of a certain act or the happening of a particular event before the contract is binding. For example, a Seller may need to have time to locate another home to live in before closing and that would be written up as a contingency of the sale.
Offer and Contracts- An offer submitted by a Buyer demonstrates an intention to enter into a contract. It creates the power of acceptance in the other party. Once accepted it is considered a contract. Often times, the Seller will receive an offer and then submit a counter offer (typically this is over the price).
Earnest Money- The cash deposit paid by a prospective Buyer as evidence of good-faith intention to complete the transaction. The amount of earnest money rarely exceeds 10 percent of the purchase price, and its primary purpose is to serve as a source of payment of damages should the buyer default.
Title Insurance- When we think of insurance we think of protection of loss from some future event. Title insurance in effect protects the policyholder from a past event such as a forged deed. Title insurers also search the public records to make sure the home seller actually had rights to the title and that there are no liens on the home (like an unpaid contractor or unpaid taxes). The good news for Buyers is that Title Insurance in Wyoming is customarily paid by the Seller.
Check out our list of more real estate terms