Whether you’re planning to buy or sell a home, it’s a good idea to familiarize yourself with basic real estate concepts and terminology. Photo: American Ratings Corporation (2015)
For the uninitiated, real estate can be like learning a new language. In this article, we cover some of the basics, from key industry terms to commonly asked questions.
Distinguishing Designations
With all the different titles in real estate, it can be hard to keep track of who’s who. Here’s a simple breakdown of the main real estate designations:
Realtor: A realtor can be an agent, broker or other real estate professional. What defines a realtor is not their designation, but their adherence to the Code of Ethics set forth by the National Association of Realtors, which you can read here.
Agent: An agent possesses a salesperson license with the California Department of Real Estate (DRE). In order to practice real estate, agents need to associate themselves with particular brokers (known as “hanging a license” in the industry).
Broker: A broker has a higher level license with the DRE (simply called a “broker license”). For this reason, he or she doesn’t have to hang their license with anyone and can practice real estate independently.
Associate broker: An associate broker possesses a broker license, but rather than practice independently, he or she chooses to hang their license with another brokerage company.
Common Questions
What’s the difference between “preapproved” and “prequalified”?
For sellers, the difference between a prequalified buyer and a preapproved buyer is an important distinction. When a buyer is preapproved, it means their eligibility for a loan has been verified by an official lender. A buyer who is prequalified, on the other hand, hasn’t gone through the official approval process but has independently proffered bank statements and other documentation. Since the latter involves a substantially greater level of risk, before accepting an offer from a prequalified buyer, it’s a good idea to bring a loan agent into the mix.
What are contingencies?
After a seller accepts an offer from a buyer, the buyer gives the seller a good faith deposit (typically 1 to 3 percent of the sale price). Following this tentative agreement, the home must meet the buyer’s contingencies before things progress to a final sale.
Contingencies fall into two types: inspection contingencies and loan contingencies. The first involves verifying the estate’s integrity via professionally conducted inspections of the foundation, plumbing and electrical systems, and other components. The second consists of financial details like locking in an interest rate, determining the monthly payment amount and getting final underwriter approval for the loan. Once satisfied with both the condition of the house and the terms of the loan, the buyer can remove both of these contingencies in writing and move forward with purchasing the estate.
Who pays for inspections?
While it’s common for buyers to pay for home inspections, most real estate professionals recommend that sellers have inspections performed pre-sale. One of the main advantages to this is it lets you know your home’s condition prior to showing it. This will allow you to disclose any issues to potential buyers upfront, which fosters greater confidence and reduces the likelihood of losing money through negotiations. Furthermore, paying for inspections enables you to control quality by choosing your own inspectors.
Why choose a Diamond Certified real estate professional?
Due to the high stakes involved in a real estate transaction, it’s crucial to have a realtor who’s reliable and will put their best effort into securing a successful result. While checking references can go a long way, choosing a Diamond Certified realtor can give you even more confidence in your choice. All Diamond Certified real estate professionals have scored Highest in Quality in customer satisfaction (a 90+ on a 100 scale) and passed a rigorous, credential-based ratings process.