Buying a home is super stressful for the first time buyer. The amount of paperwork
involved is immense and can be quite overwhelming. A big part in getting comfortable
with purchasing your new home has to do with understanding the real estate lingo. Real
Estate agents often don’t take the time to clearly explain the common terms with the
assumption that the buyer has done some homework. However, in most cases, buyers
are caught up in the excitement of the purchase and really haven’t learned yet the ABC’s
of real estate.
Too often clients and customers trade in lingo they really don’t understand; and, while real
estate agents may be telling them the truth, the verbiage is simply going over your head
and pointing you toward transaction disaster. In hopes of helping you avoid the derailed
deal, here are five real estate terms to go over early to avoid a negative review or, even
worse, losing the home of your dreams:
1. Good Faith Estimate
In a dream world there are no surprises on the way to closing. Here on planet Earth
anything can change at any time. A frequent stress point where clients get caught in the
cross-hairs of the sometimes inevitable is the good faith estimate.
Most clients see and save toward this magic number that tells them what they’ll need to
close. However, make sure your are aware that best term to pay attention to is the last.
These “estimates” can vary drastically when it comes to closing time and you should
probably continuing saving with extra padding in mind to make sure your deal doesn’t fall
apart at the end of the road.
2. Pre-Approval
A pre-approval is just that, a pre approval. Buyers often think that their pre-approval is as
good as money in hand. And yes, it does give you permission to shop, but you need to
be aware that changes in your habits or the market can affect your ability to close.
Yes, most people (hopefully) know not to buy a car while shopping for a home, but they
may not be thinking about closing the deal fast to avoid getting caught on the downside
of lending standard or market value changes. Let’s be clear, you actually don’t have the
loan until you’ve closed, and that means both being conservative with your credit and
time.
3. The “Comp”
On the seller’s side, the most common catch phrase that trips sellers up is the almighty
“comp.” A “comp” is one comparable property; and yes, they are helpful when it comes
to pricing. Sellers need to understand the difference between the “comp” and a Compar-
ative Market Analysis (CMA). Many agents don’t take the time to explain that a CMA takes
into account a number of factors, and in the downtown market depending on sites like
Trulia, Zillow or Google as an authority for pricing advice is just not realistic.
4. MLS
In the mind of many sellers, the MLS is a magic place where properties go to get sold.
However, there is a ton more that goes into marketing a property. From flyers, to mailings,
emails and open houses. It’s a costly, timely job to market and sell a property so that
the seller gets the maximum return on their investment while understanding price points,
negotiations and staying within their market value.
5. Agent
The fact is that most people hire an agent without having a clue as to what agents actually
do. There’s a lot of conversation around whether or not agents earn their commissions.