The world of real estate can be overwhelming. Agents and brokers can be using terms you may have never heard before. To help make your sale or purchase more understandable, here’s a small list of terms that could be helpful to know.
MLS—Multiple Listing Service
The MLS is a database used by real estate brokers to share information about properties listed on behalf of their clients, the sellers. This is the primary method of search that agents with potential buyers will use. Membership is not available to the general public; however selected MLS data may be sold to real estate listing websites. Keep in mind, there is no one MLS covering the entire nation, its typically local or regional. If you’re a seller, you want your home listed in your local MLS.
PITI
Principle, interest, taxes and insurance (PITI) are the four components of a monthly mortgage payment. Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing the money. Taxes and insurance refer to the amounts that are paid into an escrow account each month for property taxes and mortgage and hazard insurance. The math is pretty complex, but what is important to know is that the TI, or taxes and insurance, are usually the same from month to month (they may change year over year if your tax value changes or your insurance policy changes). On the other hand, the P, or principle you pay off, will usually increase slowly, and your I, or interest, will gradually decrease over the life of the loan.
CMA -Comparative Market Analysis
A CMA is a report that shows the price of certain properties that are comparable to a subject property. These properties include those that were recently sold, are currently on the market, or were on the market but not sold within the listing period. This is how your Yellow Dog agent will help you to price your home if you’re selling, or figure out what to offer if you’re buying. As more homes similar to yours in your neighborhood sell at higher prices, your home can be worth more. Unfortunately, the inverse is also true. A rash of foreclosures by homeowners nearby in similar properties will lower the current market value of your home. A proper CMA performed by a qualified real estate professional will help you to assess the current market value of your home at the time of the CMA.
Closing Costs
Closing Costs include the entire list of expenses over and above the sale price paid by the buyer and seller when the transaction closes. These costs can include the brokerage commission, mortgage-related fees, escrow or attorney’s charges, recording fees, title insurance, etc. Your lender will give you an estimate (called a Good Faith Estimate) of the closing cost on the purchase of a particular home you selected. Usually the day before your closing you will receive a settlement statement with the actual closing costs. Home buyers can sometimes negotiate with the seller to pay a portion or a specified amount of the closing costs.
Contingency
A provision in the real estate contract that specifies the contract would cease to exist and keep it from being fully legally binding upon the occurrence of a certain event. Example’s of this can be a buyer’s contingency that their offer is only effective if his/her home sells by a certain date. Another common example is that the buyer obtain a specific loan product, interest rate, etc. or he/she can vacate the offer to purchase. As a buyer, the less contingencies you bring to the table, the better positioned you are for an attractive offer to the seller.
Title Insurance
When you buy a home you are given a title to the property. This generally means you receive full ownership. Title insurance is customarily paid by the buyer. It is an insurance policy that protects a lender’s interest from unexpected or fraudulent claims of ownership. The company that issues the title insurance will research the title and the previous owners of the property to determine that the title is “equitable” or “clear” to sell. After the sale, if it is uncovered that a lien or previously unknown issue about the title is uncovered, the title insurance will protect the buyer from a claim against him/her.