Buyers

A Buyer who is working with an Agent has a variety of agency relationships when purchasing real estate. These include: Buyer Agency, Subagency and Dual Agency.

Buyer’s Agency

Buyer’s Agency is where the Agent solely represents the interest of the Buyer in a transaction and has a fiduciary responsibility to act in the best interest of the Buyer.

  • A Buyer Agent represents solely your interest as a purchaser.
  • A Buyer Agent will provide information concerning market value.
  • A Buyer Agent will analyze market data to help you determine an appropriate offering price.
  • A Buyer Agent will apply their negotiation skills for the Buyer’s benefit in attaining the best terms and conditions in a contract.
  • A Buyer Agent will prepare the sales documents with the Buyer’s best interest in mind.
  • A Buyer Agent’s role is to provide advice, expertise and counseling to assist you in reaching your goals.

A Buyer Agency is a written contract wherein the Buyer agrees to be exclusively represented by a specific Agent for either a predetermined period of time and/ or a predetermined property.

Seller Agency/Subagency

Seller Agency/Subagency is where the Agent solely represents the interest of the Seller. The Agent working with a Buyer in this situation acts as a Subagent for the Seller. The Agent has a fiduciary relationship with the Seller and works with the Buyer to assist the Buyer in finding a property to purchase without any fiduciary responsibility to the Buyer.

Dual Agency

Dual Agency is a relationship wherein the Agent or Agency acts as an Agent for both the Seller and the Buyer in a transaction with the written consent of both parties. This type of Agency requires confidentiality to both parties and no adverse action which is detrimental to either party.

Agents are paid a commission when they:

(1) Find a property that the Buyer wants,
(2) complete a fully executed agreement by all parties, and
(3) conclude settlement on that property.

This can involve substantial time and effort on the part of an Agent. If you have decided to work with a particular Agent, then it is important to avoid pitfalls wherein your Agent will not be able to represent your interest.

Problems do occur when a Buyer interacts with another agency or developer without the participation of their Agent. If you attend an open house without your Agent or contact another agency for information on a particular property directly – you may endanger your ability to work through your preferred Agent.

To avoid these problems:

(1) Let your Buyer Agent accompany you to any open house or ask your Buyer Agent to pre-register you for the open house with the Listing Agent. In the event that this is not possible then inform the agent holding the open house of the name of the Agent with whom you are working. This can be accomplished by having your Agent’s business card and giving one to the person conducting the open house.

(2) If you see a for sale sign or an advertisement and want information pertaining to that property – contact your Agent and have them contact the listing agent directly. Your Agent can obtain considerably more information, which in the long run will better serve your interest.

ACCELERATION CLAUSE
A condition pertaining to a mortgage which allows the lender to make the entire outstanding balance due and payable immediately. Such a condition could be a default of payment, breach of contract, etc.

ADJUSTABLE RATE MORTGAGE
A mortgage where the interest rate is subject to change periodically.

AGENCY
The legal relationship between a Seller and a Broker/Agent wherein the Broker/Agent has been engaged to sell a property OR the relationship between a Buyer and a Broker/Agent where the Broker/Agent has been engaged by the Buyer to act in their sole interest in purchasing a property.

AMORTIZATION
The portion of the mortgage payment which directly reduces the balance of the loan.

APPRAISAL
The estimation of a home’s market value by a licensed appraiser based on comparable recent sales of homes in the neighborhood. A loan underwriter compares this appraisal price to the agreed-upon purchase price to ensure that the value of the home is equal to or greater than the purchase price. Loan financing may fail if the home appraises at a price less than what the buyer and seller agreed upon. If this happens, the buyer may want to re-negotiate with the sellers to determine a lower purchase price.

ASSESSED VALUE
A county tax assessor’s value placed on the property, which is one of the factors in arriving at your annual real estate tax bill (the other factor is the millage rate).

BALLOON MORTGAGE
A mortgage that has a substantial amount of principle due at a predetermined date.

BLANKET MORTGAGE
A loan that is secured by more than one property.

CLOSING COSTS
Various expenses paid by the Buyer and/or Seller which directly pertain to the purchase or sale of real estate (i.e. commissions, title insurance, appraisals, inspections, etc.).

CONVENTIONAL MORTGAGE
A mortgage that has a fixed interest rate over the life of the loan.

EARNEST MONEY
A deposit made by the Buyer on a particular property and held by an Escrow Agent.

FHA MORTGAGE
A mortgage insured by the Federal Housing Administration.

FIXED RATE MORTGAGE
Same as a “Conventional Mortgage” described above.

FORECLOSURE
Foreclosure is a process that transfers the right of home ownership from the homeowner to the bank or lender. A home goes into foreclosure when the owner defaults on his mortgage loan payments. Once a homeowner receives a notice of default, they’ll usually have 2 – 3 months to make payments before the bank officially forecloses on the home. Foreclosure is a costly process and can have a negative impact on the homeowner’s credit score.

JUMBO MORTGAGE
A mortgage that exceeds the amount of a loan as established by Fannie Mae or Freddie Mac.

LIEN
A legal claim against the property.

LISTING CONTRACT
A legal agreement between a Seller and Broker authorizing the Broker to market the property at a predetermined price for a specific period of time.

MARKET VALUE
The highest price that a ready, willing and able Buyer will pay for a property and the lowest price that a Seller will accept – with neither party being under duress to buy or to sell.

MORTGAGE PAYMENT
A periodic payment made by the borrower to the lender that normally includes interest for the period and a predetermined amount of amortization of the loan.

ORIGINATION FEE
Normally a percentage of the loan. This is a fee charged for services by the mortgage company for handling the application and processing the loan.

PITI
The basic components of a mortgage payment (principle, interest, taxes and insurance).

POINTS
A percentage of the loan amount paid by the Buyer to the lender.

PREPAYMENT PENALTY
A fee paid by the borrower to the lender for the prepayment of the loan before the end of the mortgage period.

PRIVATE MORTGAGE INSURANCE (PMI)
For conventional loans with less than 20% down – this charge purchases insurance from a private company that will protect the lender in the event of default.

REAL ESTATE SETTLEMENT ACT (RESPA)
A Federal law that requires lenders to provide borrowers with a written estimate of closing costs.

SHORT SALE
A transaction where the sales price after expenses is less than the liens recorded against the property and the seller is unable to fund the shortage. The seller’s lender must approve the terms of the sale in order for it to close.

TITLE INSURANCE
Protection for lenders and Buyers against financial loss resulting from legal defects in the title of the property.

TITLE SEARCH
Research of the title records to ascertain any defects, encumbrances and ownership history of the property.

VA MORTGAGE
A mortgage for eligible veterans that is guaranteed by the Veterans Administration.