REAL ESTATE 101

REALTOR® pronounced, REAL-TOR, two syllables and NOT Real-i-tor, as many people incorrectly use. A licensed Real Estate agent who also holds membership with a North American real estate tradesmen association, primarily located in USA, called, NAR, National Association of REALTORS®, and state associations such as VAR, Vermont Association of REALTORS® and similar with each state, and then local membership as well, such as Rutland County Board of REALTORS®. I think pronunciation may have taken root from another incorrectly pronounced, REAL-ITY…It is NOT Real-i-ty, but rather, Realty, Real-ty. Also not to be confused with Real-ity, meaning the true reflection of what is. The “Reality” of the word is “Realty” and “Realtor®”.

Points– Are the amount of percentage the lender charges a borrower up front to allow a customer/borrower to secure a lower interest rate for the long-term loan the borrower is trying to secure. ie: for a $100,000.00 loan amount a lender may offer a 5% interest rate for a 30 yr term loan, but if you as the customer wish to get a better rate than that, you can pre-pay to the lender 1-2-or 3 or so points to get a better interest rate. Such would be, say, for one point, you pay 1% of $100,00.00 or an additional $1,000.00, or 2 points=$2,000.00 or 3 points =$3,000.00 per $100,000.00 loan. The rate might drop from 5% to 4.75%, or to 4.5% or to 4.25% or so for each point. The lender sets their own offerings.

Fair Market Value– Is the value of property based upon what other sellers and buyers have recently paid for similar property of similar location, style, condition, size etc.

Appraisal Is the value an “approved” Bank/Lender appraiser has determined the value to be based upon facts of three similarly SOLD properties and three currently available properties. This is an amount that a Bank/Lender will lend on. Appraisals can differ from one appraiser to another, depending upon the ”Comps” they each use. Appraisals are based upon fact as stated previously but the facts used can be different and therefore a variability is possible.

Assessment Is the value a Taxing Authority places upon a taxable asset. The measuring stick is critical, as the Taxing Authority is to be fair in it’s assessments of the taxable assets within each Taxing District. It is supposed to be based upon 100% Fair Market Valuation, however, that figure changes with each sale. Like Stocks or Bonds, Fair Market Value fluctuates with every sale and purchase, from day to day and minute to minute. Yet it would be cost prohibitive to re-adjust the valuations of real estate for tax purposes since town-wide reappraisal costs significantly. The State of Vt madates a Tax Re-Appraisal when the tax assessment values get out of range of the actual sale prices by 20%.

Market Evaluation/Compettitive Market Analysis Is the service the Real Estate Agent provides to the potential Seller of Real Estate. It typically takes an hour or so of time to accomplish, depending upon the size and scope of the property being evaluated. Oftentimes this a complimentary service provided by the agent in anticipation of securing the listing. The evaluation is needed in order to determine a fairly accurate Fair Market Valuation so that once the property is listed, the property sells within a reasonable amont of time.

Escrow Is a term used to denote the time period that the customer’s deposit money would be held during the term of the Purchase and Sale Agreement. If the borrower/purchaser wishes to secure financing in order to close on the sale, it will take about 4-6 weeks typically for a borrower to secure the financing, and an additional 2 weeks or so before the sale can go to closing to allow the attorney’s time to prepare the paperwork. This time frame is known as Escrow and that the deposit money is being held temporarily by a third party until the agreement is either worked out or becomes void due to contingencies in the contract.

Listing Term– Listing terms can vary, depending upon the needs of the Seller and business decisions of the Listing Agent/Agency. The Listing Term/Length will depend upon the Price the Seller wishes to get, the current market length for the recent sold listings, the Condition the property is in, and the degree of difficulty the Seller places upon the real estate community in order to sell the property as well as the real estate office’s proprietary guidelines, as well as a Seller’s particular timing needs. The local Days On Market (DOM) also plays a major role in establishing what is a reasonable amount of time to list a property for.

Commission/ Compensation– The compensation is stated in percentage to adjust for Selling Prices. The less the seller gets, the less the real estate community gets. Likewise the more the seller gets, the more the real estate community gets and deservedly so. Flat rate compensation or commissions are possible, depending upon the situation presented, although they seem be used infrequently perhaps due to the nature of real estate offers from the public. The Listing Agent/Agency sets the rate necessary to be fairly compensated for the expense of marketing and hours and expenses invested in servicing the listing. The fee needs to be enough to cover generated expenses such as: Advertising, Brochures, Flyers, Displays, Photos, Signage, Phone Calls, Copies, Paper work, Supplies, Documents on file, Office Space, Insurance, Desks, Equipment, Technology, Keys, Lock Boxes, Software, Fuel, Heat, Lights, Postage, Dues, Association Fees, Travel Time, Showings and Hours of Service. Our office has a set fee schedule they require depending upon what type of real estate is being sold. Such as Commercial, Residential, Investment, Land, Mobile Homes or Structures on Rented Lots. Other compensation rates may be available depending upon the services desired. Please do call to learn the rates for your type of property and situation presented.

Do we earn our compensation?  Just like a pilot of a commercial aircraft, with proper training the job itself can be straightforward enough, but the value is in knowing which switches to flip and when for a safe take off and landing!

Sub-Agent/ Co-Op Agent– The Sub-Agent or Co-Op Agent, so called, is the agent who is working as the Selling Agent half of the Transaction with a Listing Agent of the Seller.In Vermont, a Sub Agent now works for the Listing Agent who works for the Seller and is now called a Broker’s Agent, as Broker’s agents work for the Broker.

Listing Agent The Listing Agent works for the Listing Broker/Agency and both work for the Seller Client or Buyer Client.

Customer– Is mostly a Purchaser or can be a Seller WITHOUT a Real Estate Agent’s Fiduciary representation, such as a For Sale By Owner, who sells to a Buyer with a Client relationship with an Agent.

Client– Is a Purchaser or Seller, WITH a Real Estate Agent’s Fiduciary representation.

Purchase & Sale Contract The Agreement between the Seller and the Buyer to sell and purchase a home between themselves.

Listing Agreement The Agreement between the Seller and the Listing Agent on behalf of the Listing Agency to market a property to sell.

Buyer Broker Agreement The Agreement between the Buyer Client and the Real Estate Agent on behalf of the Real Estate Agency working for the Buyer Client.

FSBO Is a Seller who is not represented by any agent or agency and may be a “customer” for a “Buyer Client”. It stands for “For Sale By Owner”. Oftentimes, but not always, For Sale By Owner’s typically know little about the Real Estate Market and are uneducated as to what Buyers needs are and what is necessary by Local, State or Federal Requirements. Their motive is to save the compensation that is routinely expensed in the vast majority of real estate transactions.

 

For Sale By Owner Customers Can be buyers who have no representation and often little understanding of real estate transactions and as such very often get themselves into trouble they wish they can get out of. They can also be “customers” themselves with a Buyer Broker Client to sell their property or as a buyer to purchase a property.

 

 

 

 

 

 

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Denise Byers, ABR,CRS,e-Pro,SFR,REALTOR | Rutland County, VT Homes For Sale