When you’re selling a home, there are more important things to worry about than trying to decipher real estate jargon. While your realtor can help you understand any terms that are unfamiliar along the way, we’ve put together a short list of some of the most used and frequently confusing real estate terms you may encounter when selling your home:
Appraisal: Simply stated, an appraisal is a verification of value. If your home’s buyer is getting a loan, the lender will require an appraisal. A third-party licensed professional will look at the condition of your home along with its features (i.e. number of bedrooms/bathrooms, pool, two-story, upgrades, etc.), and compare your house to similar recently sold homes to determine the value. The lender will not lend more than the appraised value, so it’s important to work with your realtor to determine the best price to list your home to avoid renegotiations if the appraisal were to come back low.
Contingency: A contingency is an action or event that needs to be successfully completed for the real estate transaction to proceed. For example, a financing contingency gives the buyer the opportunity to get financing for the property, but if they are unable to do so, the transaction can be canceled with no penalty to the buyer. Some other commonly seen contingencies include an appraisal, home inspection, and sale of the buyer’s home.
Disclosures: When selling your home, you will be required to complete a thorough seller’s disclosure to pass on any information to the buyer you know about the home. Different cities and states have different disclosure requirements, but be prepared to disclose any airport noise, floods, fires, or environmental hazards. You may even be required to disclose if you think the house is haunted. The purpose of the disclosure is not to try and scare away people from buying your house, but to ensure the buyer is aware of anything that could be considered problematic. The disclosure also releases you of liability if one of the disclosed issues should become a more significant issue down the road.
Inspection Notice: After the buyer completes their home inspection, they will provide the seller with an inspection notice. There are three sections to this document—
- Section A is where the buyer notifies the seller that they completed a home inspection. They can ask the seller to make repairs on items that are not in working condition or cancel the contract if they were completely unsatisfied with the home’s condition.
- Section B is where the seller puts in writing what they agree to fix or can offer a price reduction.
- Section C allows the buyer to accept and remove the home inspection contingency or cancel the transaction.
The name and sections of this document can vary by state, but most will have a similar document.
Listing Agreement: A listing agreement is a contract between you, the home seller, and the real estate broker. It usually states that the real estate broker will find a buyer for the property and the seller will pay them a commission, and will have a contract start and end date.
Seller’s Market: You’ve likely heard this term quite a bit lately, and it might very well be one of the reasons you’re planning to sell your home. In a “seller’s market,” as you might guess, the real estate market favors sellers. As a seller, you will likely have more negotiating power than the buyer and often will receive multiple offers on your home, which can drive the purchase price up. Great news for you!
Your home is likely your largest financial asset, and selling your home can be overwhelming without the help of a trusted professional. Hiring an experienced real estate professional is one of the most important decisions you can make when it comes to what may be your largest financial transaction. Remember, even though the home selling process can move quickly, your real estate agent will help educate you and guide you through the process.