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 Consumer
Resources
Buying and selling a home is exciting and scary. The
complexities of forms, disclosures, agency law, offers to purchase, and the
legalities can quickly leave a consumer confused and unprepared. As you shall
see, there are many reasons to use a REALTOR
during this process.
REALTORS® are real estate professionals who belong to the National
Association Of REALTORS® and subscribe to its strict Code of Ethics.
Not all real estate brokers and agents are REALTORS®. To be sure
you’re working with one, look for the federally registered membership mark,
REALTOR®.
This section contains specific information for Home Buyers and Home Sellers.
When buying a home, you can learn from the
knowledge and skill of a REALTOR®:
- A REALTOR® helps you determine how much home you can actually
afford. Often a REALTOR® can suggest additional ways to accrue the
down payment and explain alternative financing methods.
- A REALTOR® can help you work out a realistic idea of the home
best suited to your needs- size, style, features, location, accessibility to
schools, transportation, shopping, and other personal preferences.
- A REALTOR® has access to a listing of available homes, can
evaluate them in terms of your needs and affordability, and doesn’t waste your
time on unsuitable homes.
- A REALTOR® often can suggest simple, imaginative changes that
could make a home more suitable for you and improve its utility and value.
- A REALTOR® can supply information on real estate values, taxes,
utility costs, municipal services and facilities, and may be aware of proposed
zoning changes that could affect your decision to buy.
- A REALTOR® most often is the seller’s agent but acts as a
liaison between you and the seller to present offers and counter-offers until
an agreement is reached.
- A REALTOR® can tell you if local law requires an attorney at
closing and most can provide you with a list to choose from if you don’t have
one.
- A REALTOR® usually knows the local money market and can tell
you about financing. A REALTOR® also can tell you what personal and financial
data to bring with you when you apply for a loan.
- A REALTOR® can help familiarize you with the closing process by
explaining it in advance.
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Consumer Notice
Pennsylvania Law requires real estate
brokers and salespersons to advise consumers of the business relationships
permitted by the Real Estate Licensing and Registration Act.
This
Consumer
Notice must be provided to you at the first contact where a
substantial discussion about real estate occurs.
Before you disclose any information to
a real estate salesperson, be advised that unless you sign a written agreement
providing for an agency relationship, the salesperson is not representing
you.
_________________________________
Real Estate Terms
A
Adjustable rate mortgage
A type of mortgage rate loan that allows the interest rate to change
periodically up or down, usually once or twice a year.
Agent
A person who acts, or has the power to act for another. A real estate
agent acts on behalf of the principal (the buyer or seller) and has
fiduciary responsibilities towards the principal.
Buyer's agent
An agent who represents the buyer and owes fiduciary duties to the buyer.
Seller's agent
An agent who represents the seller and owes fiduciary duties to the
seller. Usually referred to as the listing agent, this agent is authorized
by a property owner to find a buyer or a tenant for the property.
Agreement of
sale
A written agreement or contract in which the seller agrees to sell the the
buyer agrees to buy under specific terms and conditions.
Amenities
Features that enhance and add to the value or desirability of real estate.
Common amenities include a swimming pool, clubhouse and a good view.
Amortization
The reduction of a debt over time by making periodic payments (usually
monthly) a portion of which is interest and a portion of which reduces the
outstanding amount of the debt. The monthly mortgage payments remain the
same over the life of the loan, even though the proportion of principal to
interest changes over time. In the early part of the loan, principal
repayment is very small and interest repayment very high; at the end of
the loan, that relationship is reversed.
Appraisal
The act or process of estimating value; an estimate of value.
Appraiser
Someone who practices appraisal. Appraisers' work involves appraisal (see
above), review (the process of critically studying a report prepared by
another), or consulting (the process of providing information, analysis of
real estate data, and recommendations on diversifed problems in real
estate, other than estimating value).
B
Balloon mortgage
A mortgage for a fixed term shorter than necessary to fully repay the
debt. As a result, the remaining amount of principal is due at the
maturity of the loan.
Bridge loan
A loan, usually short term, that finances the portion of the purchase
price not provided by the mortgage loan and the down payment. A bridge
loan is commonly used when a purchaser has not sold his existing home
before he closes on his purchase of a new home. The bridge loan is paid
off when the old home is sold, out of the proceeds of that sale.
Broker, as in
real estate broker
A real estate professional who has acquired a higher level of training
and/or experience than a sales agent. Generally, the legal representative
or proprietor of the office.
C
Capital gain
Income that results from sale of a capital (tangible) asset.
Closing
The end of the transaction; when the seller hands over the title to the
buyer in exchange for payment.
Closing costs
Costs the buyer must pay at the time of the closing in addition to the
down payment which may include points, title charges, mortgage insurance
premium, prepayments for property taxes, and homeowners insurance. Closing
costs can be as much as three to four percent of the loan amount.
Condominium or
condo
A condominium, literally, is a home in a shared building or development.
The buyer owns title to his or her unit, shares the common areas with
other unit owners, and pays a maintenance fee to the condominium
association to pay for needed maintenance, repairs and improvements to the
property.
Contingency
A condition that must be met before a contract is binding.
Conventional
loan
A fixed-rate, fixed-term loan that is made without government insurance.
Co-operative or
co-op
In a residential co-operative, the buyer purchases shares in the co-op
corporation, made up of the residents in the co-op property. The buyer
owns the shares rather than owning real property. In exchange, ha has the
right to lease and occupy a co-op unit.
D
Deed
A legal document by which property title is transferred from one owner to
another.
Down payment
The down payment is the percentage of the purchase price that the buyer
must pay in cash and may not borrow from the lender. The downpayment
amount, in addition to the mortgage, equals the purchase price of a
property.
Dual agency
Representing both parties in a transaction. In virtually all states, it is
unethical and illegal for a broker to represent both buyer and seller in a
real estate transaction without written consent of both.
E
Earnest money
The deposit money given to the seller by the potential buyer as evidence
of good faith in purchasing real estate. The broker places the money in an
escrow/trust account until closing, when it becomes part of the down
payment.
Equity
The value of the property, less the amount of unpaid mortgages and any
outstanding liens.
Escrow
Money or other valuables given to a third party with directions to deliver
them to another party upon the fulfillment of a specific act or conditon.
Exclusive agency
listing
A written agreement giving the broker the right to market an owner's
property for a certain period of time, but also allowing the owner to sell
the property during that period without paying a commission.
Exclusive
right-to-sell
A written agreement between the agent and the owner, whereby the owner
promises to pay a fee or commission to the broker if his property is sold
during the listing period, regardless of whether the broker is responsible
for the sale.
F
Fannie Mae
Nickmname for the Federal National Mortgage Association, FNMA is a public
corporation originally established by the federal government. Fannie Mae
purchases mortgage loans from lenders, and thus, is a major source of
funds for mortgage companies.
FHA
or Federal Housing Administration
Part of the US Department of Housing and Urban Development (HUD)
--established in 1934 to encourage improvement in housing standards and
communities. The FHA insures mortgage loans. See HUD listing.
FHA mortgage
A mortgage loan insured by the Federal Housing Administration.
G
H
Home inspection
An examination of the physical structure, systems and condition
of a home.
Homeowners
insurance
Insurance that protects the homeowner from "casualty" (losses or damage to
the home or personal property) and from "liability" (damages to other
people or property). Homeowners insurance is required by the lender and is
usually included in the monthly mortgage payment.
HUD or the US
Department of Housing and Urban Development
Department of Housing and Urban Development, a government agency created
to make the American dream of home ownership a real possibility for
everyone. HUD has many programs involving homeownership assistance for
low- and moderate-income families, community planning and development,
fair housing and equal opportunity, and home improvement loans. The
Housing and Urban Development home page is a rich resource of information.
I
J
K
L
Lien
A hold or a claim on the property of another to satisfy an unpaid debt.
Listing contract
An agreement between a homeowner and a licensed real estate broker that
authorizes the broker to market the property for sale during a given time
period.
Loan origination
fee
A fee charged by the lender for evaluating, preparing and submitting a
proposed mortgage loan.
Loan-to-value
ratio
The ratio of a mortgage loan principal to the property's appraised value
or its sales price, whichever is lower. Loan-to-value ratios vary
depending upon the individual lender's policy.
Lock-in rate
A commitment made by a lender to make a mortgage loan at a specified rate,
pending loan approval, on or prior to a specified date.
M
Market value
The highest price a buyer will pay for a property and lowest price the
seller will accept.
Mortgage
A lien on real estate given by the buyer to secure repayment of money
borrowed to purchase the real estate.
Mortgage broker
An individual or company that obtains mortgages for others by finding
lending institutions, insurance companies, or private sources to lend the
money; may also handle collections and disbursements.
Mortgage
insurance
A policy that provides protection for the lender in case of default and/or
which guarantees repayment of the loan if the borrower becomes disabled or
dies.
N
NATIONAL ASSOCIATION OF REALTORS®
The NATIONAL ASSOCIATION OF REALTORS® is the largest trade association in
the country serving over 700,000 REALTORS®. The purpose of the NATIONAL
ASSOCIATION OF REALTORS® is to enhance the ability and opportunity of its
memebers to conduct business successfully and ethically, and to promote
the preservation of the right to own, transfer, and use real property.
O
Offer
A proposasl to purchase real estate at a particular price and subject to
other specified terms and conditons. Acceptance of the offer by the seller
creates a purchase contract. (Counteroffer: An offer made in response to a
different offer.)
P
Private mortgage insurance or PMI Insurance
Insurance issued to a lender to protect it against loss on a defaulted
mortgage loan. Its use is usually limited to loans with high loan-to-value
ratios (generally in excess of 80%). The borrower pays the premiums.
PITI Payment
A loan payment that combines Principal, Interest, Taxes and Insurance.
Point
An amount equal to one percent of the loan amount paid to a lender for
making the loan. A lender may charge the borrower several points in order
to provide the loan.
Principal
One of the parties to a transaction. For example, the buyer and seller are
principals in the purchase of real property.
Q
R
REALTOR®
A REALTOR® is a real estate professional who is a member of the NATIONAL
ASSOCIATION OF REALTORS® and subscribes to its strict Code of Ethics. This
distinguished professional is committed to protecting and promoting
private ownership of real property, establishing and maintaining high
professional standards of practice, and creating unity in the NATIONAL
ASSOCIATION OF REALTORS® organization and respect for the real estate
profession. When you want to buy or sell a home, call a REALTOR®.
S
T
Title
Ownership of real property. Title is transferred from one party to another
through a document called a deed.
Title insurance
Protection for lenders and homeowners against financial loss resulting
from legal defects in or other claims against the property's title.
Trust
A property interest held by one person for the benefit of another.
U
V
VA or US Department of Veterans Affairs
A federal agency designed and operated to help veterans enter the housing
market. The VA assists veterans in terms of low or no down payment,
mortgage qualification assistance and low interest rates.
VA loan
A mortgage loan guaranteed by the US Department of Veterans Affairs
against loss to the lender, and made through a private lender.
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Sellers Disclosure -
Act 84 of 1996
Act 84 of 1996 applies to the transfer of
any interest in residential real estate consisting of one to four dwelling
units. Sellers must complete the form "Sellers Property Disclosure
Statement", mandated by statute.
This form is designed to assist a buyer in evaluating a property being
considered. A seller must disclose to a buyer all known material defects
about the property being sold that are not readily observable.
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