Real Estate Terminology -The terms that sometimes confuse people |


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BuySelf, Inc., Real Estate, Flat Fee MLS Listing Home Sales,Bloomington, MN

Real Estate Terminology -The terms that sometimes confuse people

I (and my team) spend lots of time helping sellers every day. So I am very familiar with explaining some of the terminology that often confuses buyers, sellers, and more often then you would think agents. I''m sure most flat fee MLS listing Brokers are. If you have terms you have found confusing please email them to me as I am sure I am just scratching the surface here.
None of the terms or concepts they represent are critical for a flat fee seller to understand. 99% of the time we are asked what they mean by our extra-conscientious sellers who really want to learn the ins and outs of the real estate world. For those sellers:
1. Selling agent. This is my least favorite term still in use. It is an old, completely outdated term for the agent helping the buyer. The old rationale was that this was the agent that brought the buyer to the transaction and sold them the home. Not to be confused with the seller's agent, who represents the seller and is also known as the listing agent.
2. Facilitator, Non-Agent, also know as a Transaction Broker. For flat fee listing sellers, there are two relationships that a buyer can have with an agent. One is a buyer agent, where a buyer agent represents and advocates on behalf of the buyer. The other is where the agent facilitates the transaction but does not advocate for one party over another, generally called a facilitator. In our experience as a flat fee MLS broker, nearly all buyers and agents select the buyer agent option. A third possibility still exists but has become unheard of in almost all areas, the seller subagent, where the agent (who you have probably never met) who is helping the buyer but represents the seller. Seller subagency rightfully became extinct in the early 1990s. There is also a fourth and fifth possibility that wouldn't apply to flat fee listings in my experience called dual agency and designated agency, where one company attempts to represent both the buyer and seller. I am not a fan of dual agency. These options depend on state law and are not available in all states.
A flat fee seller is free to choose if you want your listing to offer a commission to only buyer agents. I suggest that flat fee sellers be open to as many buyers as possible--because it maximizes the exposure of your property. Therefore, I suggest that the commission offer be made to buyer agents and facilitators. Most sellers agree that they want the buyer who will pay their price, regardless of what arrangement that buyer has with the agent helping them to buy. There is never a situation a double commission or where a commission would be paid to both a buyer facilitator and buyer agent. Only one commission will be paid to either a buyer agent or facilitator, even if the seller offers both options in the MLS.
3. Assessments. There are two kinds that come into play in real estate transactions: Property tax assessments, which are attached to the property much like property taxes themselves by a local unit of government. The classic example is that the city rebuilds the road in front of the property, and assesses all the property owners along the road for the project cost. Not to be confused with Association Assessments, where a property is a part of a private/community property association that has decided to assess all the member properties a fee to pay for some operating cost or improvement to the association property(ies). One similarity is that both kinds of assessments must be disclosed to the buyer, and often are required to be paid off by the seller before/at closing.
4. Mortgage Insurance. This is insurance required by a mortgage lender when a buyer is not putting a minimum of 5 to 20% down on the property. Do not confuse this insurance with a type of life insurance that pays off the mortgage if a person dies, which I have never seen involved in a real estate transaction. Mortgage insurance is paid by the buyer, either an upfront premium or as a part of their monthly payment.
5. Hazard Insurance, Home Owners Insurance, or Fire Insurance This is basic property and casualty homeowners insurance to provide coverage for damage to the home or buildings on the property. The hazard insurance is required by the mortgage lender to protect their mortgage investment from catastrophe--the mortgage lender knows the property owner probably wouldn't keep making mortgage payments on a home destroyed by a fire. Generally, the annual premium is collected by the mortgage company and they pay the insurance company. At closing, the mortgage company generally requires the buyer to bring proof of that the policy is in place and paid in full as a condition of closing.
6. Flood Insurance Since Hazard Insurance doesn't cover damage from flooding, the mortgage lender requires the buyer to pay for flood insurance if the property is located in a flood plain or area where flooding is considered possible. When it applies, the mortgage lender will require the seller to bring proof that the policy is in place and paid in full as a condition of closing.
7. Title Insurance Establishing ownership of real estate is easy for 99.9% of properties but there is the rare property that has a "cloud" on the title. In case of such event, the mortgage company requires the buyer to purchase a policy to cover the lender's interest in the property. Unlike the other types of insurance, title insurance generally requires one upfront premium to cover the property as long as the ownership interest lasts. The lender title insurance cost should be included in as a closing cost typically paid by the buyer on the buyers good faith estimate (GFE) of they receive from their mortgage lender.
Let me know if there are other terms you would like to have explained.