Have you noticed that realtors use a lot of abbreviations and lingo that you aren’t familiar with? Here are a few terms and their meanings to help you get the gist of what we are talking about.
CMA: Comparative Market Analysis. This is a report that shows how a home you are considering compares with similar homes that have sold, are still on the market, or that have expired.
Closing Costs: There are several different “closing costs.” There is the cost to close at the title company, the appraisal, lender fees, title insurance, and other miscellaneous fees. In our market, the cost to close at the title company is typically split and the associated costs for a buyer’s loan are often paid by the buyer unless they ask the seller for assistance. Closing costs can range from
Comps: Comparable Sales. These are the sales, typically going back six months, which are most similar to the home you are considering and are used to create the CMA.
Contingency: An agreement is not fully binding until a specified condition is met. A home inspection and financing are two common contingencies. Sometimes a contingency could be a survey or maybe the buyer wants to confirm they can add a separate garage so the purchase is contingent on that approval. Too many contingencies can spook a seller, but there might be some out of the ordinary that are important to a buyer and make sense for their intended use.
Fixture: Something permanently affixed or attached to real property. For example, blinds or curtain rods are fixtures, but drapes might not be because they can be slid off the rod. Carpet, lighting, and bathroom mirrors are fixtures. It is important to know what is and isn’t included in a sale so there isn’t a dispute over what is personal property and what is a fixture.
FSBO: For Sale By Owner. Listings that will not appear in your local MLS and are advertised solely by the owner for sale without a contract with a realtor. A very large percentage of FSBO deals never make it to the closing table after accepting an offer.
HOA: Home Owners Association. Typically if there is an HOA it is a mandatory HOA meaning that there are dues required to be paid on a pre-determined schedule (monthly, quarterly, annually…) by each homeowner. Our purchase agreements provide a section asking the seller to provide any documents related to a mandatory HOA and giving the buyer time to review those documents plus ask questions.
Lockbox: This is how real estate agents or other members of the board of local realtors, like inspectors or appraisers, will access your home. Our lockboxes are controlled by an app on our phones that only board members have access to download. The lockboxes are secure, trust me, I’ve tried everything to break into one that ate a key and was stuck! I had to mail it back to the lockbox company for them to remove the key.
LTV: Loan To Value. The amount of money you borrow divided by the price you pay for your home. If your home is $100,000 and you put down $10,000 then your LTV is $90,000/$100,000 = 90%.
MLS: Multiple Listing Service. It is a local organization that collects data and information about homes listed for sale by its members. Membership is not open to the public. Realtors pay annual dues to belong. The data in the MLS can be then picked up by external real estate sites should you choose to allow your listing to be public.
PMI: Private Mortgage Insurance. If you don’t have 20% to put down on your conventional loan, then most lenders will require PMI which provides insurance safeguarding the lender in the event you default on your loan. Typically you can drop your PMI payment once you have reached that threshold of having 20% LTV. FHA loans typically require this regardless of your downpayment or LTV.
Realtor®: A real estate professional who is a member of the NAR (National Association of Realtors).
Title Insurance: An insurance policy that either protects the owner’s or lender’s interest in a property. Typically the buyer pays for the lender policy – which is only required when there is a loan. The seller typically pays for the owner’s policy to prove that Aunt Ethel is not going to come claim ownership of the property after you move in. Details in the title policy would show that the sellers do in fact own the property, if there are any judgements or liens, all easements or encumbrances that have been recorded, etc. Read your title insurance policy!
If lingo is being thrown around that you don’t understand, ask your real estate agent or lender what it means. I find buyers and sellers sometimes don’t ask the questions because they are worried about bugging us. It is our job to help keep you informed and answer your questions, so you are not bugging us. The process will be much smoother if you fully understand what is going on. Here’s to a smooth real estate transaction!