12 Real Estate Terms Every Seller Should Know Before Selling Their Home
by Kent Braaten
on Tuesday, February 25th, 2020 at 12:00pm.
Real estate is one of those industries that seemingly comes with its own language; full of unfamiliar terms and definitions that can make the process of selling your home quite stressful. But there’s no need to sweat—you’re not alone! You’re just one of thousands of confused home sellers anxiously Googling “what does contingent mean in real estate” on a Saturday night. And unless you’re experienced in real estate, no one is expecting you to know! That’s why we REALTORS® are here to guide you and educate you through the process. And that includes teaching you the terms you may encounter in the journey to selling your home, like these:
An appraisal is the process of assessing your home’s fair market value based on its condition, features, and comparison to other, similar homes that have sold in the local area. There is no exact science to an appraisal and if you ask a few different opinions, you may get some different answers. But, if it is performed by an experienced real estate agent in your local area, it should give you a pretty fair idea of how your home should be priced to sell in today’s market.
Did you know: real estate agents and real estate brokers are not the same thing? A broker is a licensed real estate agent who has passed a provincial broker’s exam and meets a minimum number of requirements, similar to a lawyer who has passed the bar versus a paralegal. They are technically the only real estate professionals who can actually list a property, so most agents will work for or under one and split commissions with them.
The “closing” of a deal is when all the necessary documents have been signed and the sale is finalized. This is when you can finally throw your hands up in the air and wave them like you just don’t care because your house is officially sold!
Closing Costs are the fees that come with the closing of your home. For sellers, this will include your REALTOR® commission fees, as well as any legal fees charged by your real estate lawyer. You usually won’t have to worry about paying any of these out of pocket, as they are typically taken directly from the sale price.
Comparative Market Analysis (CMA)
Usually a part of the appraisal process, a Comparative Market Analysis (commonly abbreviated to CMA) is comparing the home for sale with other, similar homes in the area that have sold to determine where the listing price should be. This is one of the most crucial steps in pinning down your home’s fair value because it takes into account what the buyers you are hoping to attract are willing to pay right now.
A contingent offer or “contingencies” are, simply put, conditions that the buyer (or seller, in some cases) has put into place that need to be met in order for the deal to go through. This could be as simple as making sure the buyer’s loan gets approved or that the chandelier in the dining room gets included in the deal. It’s sort of like going to buy a car, but only signing off if they’ll throw in some winter tires.
Due diligence in real estate is reasonable research the buyer and the buyer’s agent must do to make sure the real estate investment that they are making is sound. This typically includes a home inspection to ensure everything is in reasonable working order and that everything is safe. It also means verifying that all the necessary disclosures were made on the part of the seller and seller’s agent, so no surprises will come up down the road.
Equity is essentially the percentage of your home that you actually own. It is based on how much of the mortgage principal you’ve paid off. So, the more you’ve paid or the longer you’ve had the home, the more equity you’ll have. The unpaid amount is then still technically owned by the bank.
Escrow is probably one of the most common expressions real estate agents are asked to define. In simplest terms, escrow is an account where all the money involved in the deal is held by a third party while the deal is negotiated and closed. This way, if things are taking some time or they are falling through, both the buyer and seller can feel like their investment is protected.
Super simple—the “listing” is the property you are selling.
An offer is what a potential buyer will put forward to a seller as what they are willing to pay for a home. You, as the seller, then have the opportunity to accept, reject, or counter that amount to start negotiating. Sometimes an offer may include other contingencies than just the price, however, so always discuss all the details with your REALTOR® to ensure you know what you may or may not be agreeing to!
A pre-approval or pre-approved mortgage is a letter from a bank or lender showing that a buyer meets all the requirements for a mortgage of a certain amount and should pass the approval process without issue once they find the right home. This is a fantastic thing to see on an offer as a seller, as it shows that the buyer should fly through the lending process for a quick and easy sale!
Selling your home should never feel like signing off on something you don’t even understand. With just a little research beforehand and ongoing education from your experienced real estate professional, you can feel confident in your realty decisions, no licensing required!