Glossary of Real Estate Terms
Agency: This framework has developed in the law to allow individuals to act through another person or representative. In real estate, it refers to working with a real estate broker to buy or sell property. Your legal agent may have unlimited or limited powers on your behalf and owes you fiduciary duties such as loyalty, accounting and disclosure. In the purchase or sale of real estate, you have several agency options.
Appraiser: The person who decides the market value of a home based on its condition and the selling prices of comparable homes recently sold in the area. The appraiser computes a fair estimate of market value to help the lender decide a reasonable loan amount.
Assessor: A public official who appraises property for tax purposes, determining the assessed value, not the tax rate.
Buyer’s Agent: A buyer may ask a real estate brokerage company to act as his or her legal agent in the process of purchasing real estate. This can be done by designating one or more sales associates as the legal agent in a written agreement with the broker or by entering into an agency agreement with the real estate broker that would provide that the broker and all sales associates affiliated with the broker would act as legal agents of the buyer. The authority of the legal agent to act on a buyer’s behalf would be limited to those powers granted in the written agreement. In the purchase of real estate, the buyer’s agent acts in the buyer’s best interest.
Buyer Working With Broker: Traditionally, buyers of residential real estate have worked with a real estate broker or a sales associate on a non-agency basis. In other words, the sales associate acts as the legal agent of the seller and not as the buyer’s legal agent. The sales associate or broker has a responsibility to deal with the buyer in a fair and honest manner, but does not have fiduciary duties to the buyer. The buyer has access to listings available to the sales associate through the multiple listing service and will receive other services from the sales associate such as financing information, determining the range of prices at which a buyer can purchase and assistance in facilitating the closing. The sales associate will try to provide the best quality services to the buyer consistent with his or her duties to the seller.
Closing: The conclusion of a real estate transaction, which includes delivery of a deed, financial adjustments, signing of notes and disbursement of funds necessary to the sale or loan.
Contingency: A condition that must be met before a contract is binding. For example, the sale of a home might be contingent on the seller’s paying for certain repairs.
Conventional Loan: A loan made with real estate as security and not involving government participation in the form of insuring (FHA) or guaranteeing (VA) the loan.
Designated Agency: This arrangement with a real estate brokerage company will result in one or more sales associates being designated as your legal agent. You can enter into this arrangement either as a seller or buyer. Other sales associates in the firm may be the legal agents of other buyers and sellers and may be the legal agent of the party who buys your property or from whom you buy property. The only individuals owing you fiduciary duties are those designated as your legal agent and not the real estate brokerage company itself or all other sales associates with that company. A real estate brokerage company will generally offer this service to provide representation for both buyers and sellers.
Dual Agency: In this situation, both the seller and buyer in a transaction are represented by the same legal agent. Thus, fiduciary duties are owed to both parties. The law states that this is not legally possible without the consent of the buyer and seller. If your consent is secured to allow this type of situation, the role of the sales associate will be somewhat limited, and the buyer and seller will act at times on their own behalf in negotiations for the sale or purchase of the property.
Earnest Money: A deposit given when making an offer on a home to demonstrate good faith. A REALTOR® or attorney usually holds the earnest money, the amount of which varies by community. If the sale goes through, this deposit will become part of the buyer’s down payment.
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