We’ve all been in a room, or on a call, and someone uses a term, or an abbreviation, with which we aren’t familiar. This blog contains five common real estate terms. Let me know how many you knew or if you learned something you didn’t!
MLS. Or now known as OneKey MLS. If you’ve bought or sold a home, this is one you know. Multiple Listing Service. Think of a big database full of the homes for sale that your agent/real estate brokers are both sharing information into, and looking at constantly, to send you the home options that fit your needs. It’s not publicly accessible, so if you don’t have an agent, you can only get certain public information from the list. (OneKey is used mainly on Long Island and Hudson Valley, while in NYC most realtors use REBNY RLS – a similar system.)
A pocket listing. This is a term you might have heard, but were not really sure what it meant. It means a home has been put on the market but not put on the MLS. The listing agent shares it with their network. Why would someone do this? Isn’t it better for more eyes to see the listing? Traditionally, yes. But, a few main reasons are for privacy (think celebrities) and testing the market (is this the time to sell/is the price right?)
A co-op. This is common in New York real estate and it simply means “cooperative.” Residents own shares in a corporation that owns an apartment building. What do they get back? A proprietary lease for an apartment in the building. It is quasi-real estate in that you apply for financing but you sign financing agreements instead of a mortgage.
Amortization. A big word with a really easy meaning. This is the process of paying off your mortgage over a period of time with scheduled payments. It’s broken down into two parts: interest and principal. The principal is the amount of money you borrowed to buy your home and interest is what is charged by the lender who gave out that money. As you know, interest is the first to get the bulk of the payments and then it starts going toward the principal.
Earnest money or a good faith deposit or “down payment.” This is the deposit a buyer pays at the time of the contract as evidence of their good faith in purchasing the property. Typically, it is between 5-10% (although it can be lower if you are doing FHA financing.)This money stays in escrow with the seller’s attorney until the deal is done. What happens to the money? There are generally 4 ways the down payment is disbursed.
1. Deal goes through, it’s applied to the purchase price and paid to the seller.
2. If your contract is contingent upon getting a mortgage, and you are denied for that mortgage, it gets returned to you.
3. If the Seller has an issue with the title and cannot transfer an insurable title at the time of closing, generally the seller has a right to cancel and return that money to you.
4. You intentionally default – in that case, your down payment is at risk as liquidated damages to the seller.
Bonus words because I mentioned them above:
Escrow – a third party that holds money or assets on behalf of two parties until specific conditions are met. Generally, on Long Island and down state NY, the seller’s attorney holds the escrow.
Due Diligence – reasonable steps taken by a person in order to satisfy a legal requirement. In real estate, this generally means having an inspection completed of the property before going to contract. It could also mean that you have researched Zoning and Building Codes to determine if the property is sufficient for what you are purchasing it. (i.e., if you want to build a house, make sure that the vacant land is large enough to build on and is zoned residential, etc.)
Next month, we will chat estate planning terms.
