There are lots of legal terms and other unfamiliar words that may pop up in a real estate transaction. Here are a few not to be afraid of:
1. Good Faith Estimate – This is a written disclaimer from your lender that explains the total cash needed to close for a specific property. It includes down-payment and closing costs. Keep in mind that it is only an estimate. Some items like taxes are prorated and will change depending on the day you close. Other items, such as insurance will change depending on which provider you choose.
2. PreApproval – Before looking at homes you will need to obtain loan pre-approval. This requires a basic application with a reputable local lender and only takes a day or two. The lender will review your application and pull your credit. If all looks good, the lender will issue a conditional approval letter. The important word here is Conditional. You don’t become fill PreQualified until you’ve submitted all the required documents to prove the claims in your application. This typically means tax returns, paycheck stubs, bank statements, and other items. A written pre-approval or pre-qual letter is an absolute necessity. In a strong market like Nashville, no seller will take your offer seriously without one.
3. Comps/CMA – A comp is a home that is “comparable” to the subject home. A CMA (Comparative Market Analysis) is a report that lines up several comparable homes to evaluate an asking price for buyers, or a CMA can suggest a listing price for a seller.
Comps are typically based on a few criteria – vicinity (same or nearby neighborhood), age +/- 15 years), style (ranch, cottage, duplex, townhome, etc), & size (+/- 20% of square footage). As a buyer, your agent should offer to “run comps” for you in the MLS. You should be able to evaluate them in a grid or spreadsheet for easy comparison.
4. MLS – Multiple Listing Service – this is where agents go to list properties for sale and offer compensation to cooperative brokers who bring their buyers. Locally our MLS is Realtracs.com – it all starts here. Agents do not manually list homes on Zillow or Trulia and another website before MLS. We list in Realtracs and the properties are then syndicated automatically to all those other sites. It can take 30 minutes or 3 days to show up on syndicate sites.
5. Agent/Realtor/Broker – These are not interchangeable terms, they are each unique terms.
In general an agent is anyone with a real estate license. It means they’ve take at least 90 hours of pre-licensing education and they’ve passed a test administered by the Tennessee Real Estate Commission (TREC). An agent must be affiliated with an office like Keller Williams, Village or Re/Max.
A Realtor is an agent who is also a member of the National Association of Realtors (NAR); it’s a trade organization. The NAR has a strict Code of Ethics that include things like duty and loyalty.
A Broker is someone that has been licensed as an agent for at least 3 years. They’ve passed a more comprehensive test from TREC and they’ve followed up with another 120 hours of continuing education. A broker’s license is required for anyone wanting to open their own firm or wanting to manage any real estate office.
(For the record, I am a certified Broker and a Realtor. I am affiliated with Keller Williams, but I do not manage others in the office.)
