Real Estate Dictionary
1027 St. Joseph Street Lancaster, PA 17603
The Real Estate Dictionary
Okay, so this isn’t a true real estate dictionary, but it’s a few terms that I’ve run across that can be confusing. I know when my husband and I purchased our first home we were very uneducated in real estate lingo. Let’s jump right in:
Agency – When you begin your real estate journey, you’ll have to sign what is called a consumer notice. This isn’t a contract or binding in any way, it just describes agency. Seller agent means that as a Realtor® I’m working exclusively for the seller and their best interest. Buyer agency is vice versa; I’m working for the buyer. Dual agency is when I work for both the buyer and seller. Finally, designated agency is when the broker assigns a specific agent to represent the buyer and another the seller.
Appraisal – An appraisal is a written valuation of your home by a license appraiser that justifies the price that the buyer is paying for it. This is used almost always when is comes to financing a home. Your lender wants proof that the home you are buying or selling is worth the price!
Broker – I’ve mentioned the broker more the once already. In a broad sense, the broker is the coach of our football team. In my case, her name is Kathy Yoder. She oversees everything I do and is the most knowledgeable person I know. Additionally, she is responsible for the actions of each player, or realtor, under her.
Closing Costs – Closing costs are exactly what you’d think, costs you pay at closing! We estimate these for you throughout the process so you’ll have an idea of what you’ll need to bring to cover all of closing expenses. For the buyer, these include things like appraisal and loan fees. Sellers incur costs like agent commissions.
CMA and Comps – A CMA is a Comparable Market Analysis, which basically means a home valuation. This is where we come in and take a look at things like square footage, upgrades, and home condition to give you an idea of what your home is worth. Please understand that this is NOT an appraisal because we are not licensed to do that, however, we do know what homes are selling for in our specific markets. Additionally, comps are the homes the have sold recently in your area that are most comparable to yours. We use these to come to a suitable market price for your home.
Commissions – As I’ve mentioned before, commissions are paid by the seller to both the agent the sells and the agent that finds a buyer for your home. In general, real estate is a commission-based business. This means we make our living by finding homes for buyers and selling homes and does not guarantee a steady paycheck.
Contingency – A contingency is something that must be satisfied before a contract can be executed. For example, you put an offer in on a house contingent that it passes an inspection.
Earnest Money Deposit – Earnest money proves to the seller that you intend to purchase their home. This is usually a check included with your offer on their home. When you get to closing, this amount is used towards your purchase of the home. If the agreement were to fall through, the seller could potentially retain this money.
Private Mortgage Insurance – This protects the lender in case there was a default on the loan. It is often required on mortgages when there is less than a 20% down payment.
Points – Simply put, a point is 1% of the mortgage amount.
PITI – PITI consists of principal, interest, tax, and insurance. Principal goes directly to the loan amount, interest is based on the rate of you loan, taxes are based on your county, municipality and school, and insurance is often the private mortgage insurance we just talked about. All of these together create your total monthly payment.
Transfer Tax – In Pennsylvania the transfer tax is 2%. Most often, the seller pays 1% and the buyer pays 1%. There are occasions, like foreclosures, when the buyer may be required to pay the full 2%.
These are just a few of the many terms you’ll encounter as you start your real estate search. If you have any questions or come across any other confusing terms please e-mail me so I can help! The whole point is to make this process as easy as possible for you. Best wishes and good luck!!
Devan Brooks – Devan.Brooks@yahoo.com