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Agency (2)

Agency

Short version is:

A relationship created when one person, the principal, delegates to another, the agent, the right to act on his or her behalf in business transactions and to exercise some degree of discretion while so acting. An Agency gives rise to a fiduciary or statutory relationship and imposes on the agent, as the representative of the principal, certain duties, obligations, and high standards of good faith and loyalty. Common and statutory law controls the rights and duties of principal and agent.

In real estate transactions, the broker who represents the seller is called the listing agent and includes the associate licensees working for the broker; the broker who works with the buyer is called a selling agent; sometimes the broker is representing both the seller and the buyer, in this case the broker and any of his associate licensees are called a dual agent.

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Dual Agency

Consensual dual agency is he practice of representing both the buyer and the seller in the same real estate transaction provided that each principal has given informed consent in writing after full disclosure of the expected role of the real estate agent.

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Appraisal (2)

Appraisal

An appraisal is usually required when real estate is sold. An appraisal is an estimate, not a determination, of value. Three approaches are used to estimate market value of a property: the direct sales comparison approach, the cost approach, and the income approach. The cost of an appraisal varies depending on the firm or company performing the appraisal and the property type. $250 to $350 is common.

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Assessed Valuation

The value of real property established for the purpose of computing real estate property taxes. Property is valued or assessed for tax purposes by county and township assessors. The land is usually appraised separately from the buildings and the building value is usually determined from a manuel or set of rules covering unit cost prices and rates of depreciation.

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Brokerage (7)

Broker

A real estate broker is an independent businessperson who sets office policies. They hire employees and salespeople, determine their compensation and supervises their activities. The broker is free to accept or reject agency relationships with principals.

Brokers represent their principals and accept the fiduciary responsibilities of exercising care, skill and integrity in carrying out their instructions. A brokers duties are generally confined to advertising property and finding a person ready, willing and able to deal on the terms stipulated by and acceptable to the principal. The broker must submit all offers.

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Broker Price Opinion

This is a broker’s written opinion of the value of a particular property, usually in the form of a competitive market analysis. It is not considered an appraisal.

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Customer

A prospective buyer of real estate. Not to be confused with a property seller, who typically is the listing broker’s client. Also the unrepresented seller of a property that is being sold to a buyer represented by a buyer’s agent.

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Open House

The common real estate practice of showing listed homes to the public during established hours.

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Principal Broker

The licensed broker directly in charge of and responsible for the real estate operations conducted by a brokerage company. Also called the designated broker, broker in charge, supervising broker.

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Selling Broker

The broker who procures the buyer. Usually refers to the cooperating broker, although in an in-house sale one broker is sometimes both the listing broker and the selling broker.

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Trust Fund Account

An account set up by a broker at a bank, into which the broker deposits all funds entrusted to the agent by the principal or others. The broker cannot use trust fund monies to offset even a valid debt owed by the client to the broker.

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Closing (7)

Arrears

At or after the end of the period for which expenses are due or levied; the opposite of in advance. Mortgage interest and real estate taxes are often paid in arrears.

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Closing Costs

Expenses of the sale that must be paid in addition to the purchase price (in the case of the buyer’s expense) or be deducted from the proceeds of the sale (in the case of the seller’s expense). Some closing costs result from legal requirements; others are a matter of local custom and practice. Sometimes the contract provides that one of the parties will pay part or all the closing costs. To avoid disputes, the contract to purchase should clearly define what items are included in “closing cost.”

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Closing Statement

A detailed cash accounting of a real estate transaction prepared by the closing agent, usually the bank, broker or attorney, showing all cash received, all charges and credits made and all cash paid out in the real estate transaction. It may also be called a settlement statement or HUD. The statement shows how all closing and adjustment costs plus prepaid and unpaid expenses are allocated between the buyer and the seller. Usually separate statements are prepared for the buyer and the seller.

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Escrow

Money and/or documents that are held by a disinterested third person until satisfaction of the terms and conditions of the escrow instructions has been achieved. Once these terms have been satisfied, delivery and transfer of the escrowed  funds and documents takes place. The escrow holder acts as a fiduciary and retains documents and entrusted assets until specified conditions are fulfilled.

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Outside of Closing

The payment of certain closing costs to someone directly, and not through the closing process, as reflected by the notation POC on the settlement statement.

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Walk-Through

The final inspection of a property right before the closing. This is to assure the buyer that specifics in the contract have been fulfilled by the sellers.

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Revenue Stamps

This is a state tax placed on transfer of real estate. The seller is liable for the tax. Tax stamps are required by law to be affixed to the deed for transference.

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Contracts (12)

Addendum

This is additional material that is attached to and part of a document or sales contract. If it is attached to a sales contract it should it should refer to the dated sales contract, be dated itself and signed by all parties.

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Arms-Length Transaction

This a transaction in which the parties are dealing from equal bargaining positions. Parties are said to deal “at arm’s length” when each stands on the strict letter of his or her rights and conducts the business in a formal manner without trusting the others control or dominant influence.

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Bilateral Contract

This a contract in which each party promises to perform an act in exchange for the other party’s promise to perform. A real estate sales contract is an example of a bilateral contract in which the buyer and seller exchange reciprocal promises to buy and sell the property.

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Contract

A legally enforceable agreement between competent parties who agree to perform or refrain from performing certain acts for a consideration. A contract is an enforceable promise. In real estate there are many different types of contracts, contracts for sale, options, mortgages, leases, contracts for deed, escrow agreements and loan commitments. The essential element in every contract is that both parties clearly understand what their agreement is.

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Home Inspection

Usually made part of contract to purchase. It is a professional inspection of a property to ascertain the condition of a property. It is normally paid for by the buyer and made a contingency to the buyer’s obligation to buy.

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Unilateral Contract

A contract in which one party makes an obligation to perform without receiving in return any promise of performance from the other party. A unilateral contract contains a promise on one side, where as a bilateral contract contains promises on two sides.

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As-Is

Words in a contract intended to signify that no guarantees whatsoever are given regarding the subject property and that it is being purchased exactly as it is found. The buyer has the responsibility to find any defects in the building or property. It does not include defects in the title or deed.

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Back-up Offer

An offer to buy submitted with the understanding that the seller has already accepted an offer; also know as a secondary offer. If the first offer becomes void after a period of time then the back-up offer will replace the first offer.

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Disclosure statement

Any statement of fact required by law. State law requires property disclosures (material facts about the property known by the seller), lead based paint (if the house was built before 1978) and agency disclosure (whom the broker represents).

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Earnest Money

The cash deposit paid by the prospective buyer of property as evidence of good faith intention to complete the transaction. The earnest money must be put into the brokers trust account after the offer to purchase has been accepted by the seller.

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Specific Performance

An action brought in a court of equity in special cases to compel a party to carry out the terms of a contract.

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“Subject to” Clause

The clause in a contract for sale setting forth any contingencies or special conditions of purchase and sale, such as an offer made and accepted subject to obtaining financing.

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Deed (2)

Covenants (running with the land)

Covenants that become part of the property rights and bind successive owners of the property. An example would be the restricting of land use for a particular purpose.

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Deed

A deed is a written document by which a property owner (grantor) conveys and transfers to a buyer (grantee) an ownership interest in a property. A deed ends the ownership of property and transfers it to someone else. A deed is recorded to protect the grantee against any claims by a third party for rights in the property. There are many types of deeds, just a few being; warranty deed, quitclaim deed, sheriffs deed.

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