The Real Estate Buyer's Awareness Plan

iUniverse, Inc.

Contents

Chapter One

Step One

Learn the language of real estate and the Law of Agency. The Plain English Language of Real Estate Terms

In order to feel confident throughout the process of locating and purchasing real estate, you must become familiar with the words and phrases used by most of the professionals in the business.

Don't be intimidated, it's not that difficult!

Real Estate Broker- an individual licensed by the State to represent the public in real estate transactions and who can legally accept payment for those services rendered.

Serious Buyer- that special someone who is ready, willing and able to make a real estate purchase.

Uncle Louie- usually a respected family member who has an opinion on everything and is not reluctant to make it known.

Seller- a person or entity having legal authority to transfer ownership of a property to another person or entity.

Listing Agreement- a contract between a seller and a licensed real estate broker by which the seller appoints the broker as its authorized agent to offer a property for sale to the public.

Co-brokerage- in effect when the commissions earned from the sale of a property is shared among participating brokers.

Buyer's Agent- the real estate broker who has the contract with a buyer to assist in locating a suitable property for purchase and who has agreed to represent the buyer throughout the entire transaction.

Exclusive Buyer's Agent- a buyer's agent working exclusively for the buyer/client, and only the buyer/client, throughout the entire transaction.

Seller's Agent- a real estate broker who has contracted with a seller to list and market a particular property for sale and who represents only the seller throughout the entire transaction.

Agency Disclosure- the customer must be made aware of the agency relationship with the broker before becoming a client.

Open House- an open invitation to the public to inspect a property. It's usually offered by the listing agent. However, in some instances, the invitation will be made by the FSBO seller.

For Sale By Owner (FSBO)- the seller is attempting to market the property without using the services of a licensed real estate professional.

Single Agency- the real estate broker must work for only one client throughout the entire transaction.

Dual Agency- a broker can work for both the seller and the buyer in the same transaction, after a full disclosure is made to all parties.

Designated Agency- (allowed in some states) occurs when the real estate broker appoints and designates a specific agent to represent either the seller or the buyer in the same transaction.

REALTOR®- active member of an association of professionals who is dedicated to the highest standards of conduct in serving the needs of the real estate community and is guided by a strict Code of Ethics.

Multiple Listing Services (MLS)- organizations that distribute listings information to its participating broker members.

Mortgage Broker- a person licensed by the State who acts as an agent for both the lender and the borrower in the same transaction.

Mortgage Loan- has two parts: 1) the note, which is the promise to repay a debt; and 2) the agreement, which is the document that creates the lien with the pledge of real estate as the security.

Adjustable Rate Mortgage (ARM)- whereby the interest rate on the loan amount will be adjusted in accordance with the terms and conditions of the mortgage agreement.

Points- each point is equal to one percent of the loan amount.

Veterans Administration (VA)- the Federal Government agency that guarantees loans issued to qualified veterans.

Federal Housing Administration (FHA)- the Federal Government agency that insures loans issued by approved lenders to qualified borrowers.

Appraisal- the written evaluation, prepared by a recognized licensed entity or individual, for a specific property.

Interest Rate- the charge for borrowing money usually expressed as an annual percentage rate and/or as a percentage of the loan amount.

Commissions- payments to brokers for services rendered, usually based on a percentage of the sales price. Commissions are always negotiable.

Fees- payments to professionals for services rendered, usually a fixed amount which is not based on the sales price.

Escrow- the funds are held in a trust account by a recognized agent, usually to pay taxes and insurance, or may be held as a deposit toward the purchase price of real estate.

Earnest Money- the deposit, made by a potential buyer, offered as evidence of good faith that accompanies a written offer to purchase real estate.

Equity- the value that remains in a property after all the deductions have been made for any current and /or future indebtedness.

Due Diligence- the thorough research of all relevant issues affecting the subject property, performed in a timely manner.

Fico Score (Fair Isaac and Co)- the numerical value, indicating current credit strength, assigned to a credit report.

Attorney Review Period- the time allocated for the review of the terms and conditions of a contract offer to purchase.

Comparative Market Analysis (CMA)- provides very useful information on similar properties in a given area currently on the market, recently removed, under contract, or sold.

Good Faith Estimate- a reliable estimate of the anticipated loan costs and charges due to be paid at closing.

Vicarious Liabilities- the actions or statements made by an agent that could become the responsibility of the client.

Pre-qualification- determines the Buyer's purchasing power.

Pre-approved- the confirmation by a lender of the mortgage loan amount available to a borrower on a specific loan application.

Adult Communities- housing units established and designed for a specific adult lifestyle.

Condominium Ownership- a multi-unit complex in which the apartments are individually owned, however, the common areas exist as a shared ownership.

Agency Relationships

Single Agency- in effect, when the real estate agent works for only one client in the transaction, the seller or the buyer, but not for both.

Dual Agency- in effect when the broker works for both the seller and the buyer, in the same transaction. Be aware that the broker must fully disclose this fact to each party and receive the informed written consent from both parties.

The Dual Agency Broker accepts the risk and the responsibility of walking a very fine line when attempting to "fairly and honestly" represent both parties in the same transaction. This comment is by no means a veiled attempt to suggest it can't happen. It can, it has, and it most likely will continue to happen.

In most cases the transactions were completed successfully and all parties are still very satisfied with the outcome. However, there have been some situations that did not turn out as expected. One or both of the participants feel as...