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Real Estate TerminologyAcceptanceAn acceptance is a promise by the offeree to be bound by the exact terms proposed by the offeror. The acceptance must be communicated to the offeror. Addendum Additional material attached to and made part of a document. If there is space insufficient to write all the details of a transaction on the sales contract form, the parties will attach an addendum or supplement to the document. Agency 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 relationship and imposes on the agent, as the fiduciary of the principal, certain duties, obligations, and high standards of good faith and loyalty. Agent One authorized to represent and to act on behalf of another person (called the principal). Unlike an employee, who merely works for a principal, an agent works in the place of a principal. The main difference between an agent and an employee is that the agent may bind his or her principal by contract, if within the scope of authority, whereas an employee may not unless given express authorization. Appraisal An estimate of the monetary value of a property on the open market; an estimate of a property's type and condition, its utility for a given purpose or its highest and best use. Appraiser An independent person trained to provide an unbiased estimate of value, as a professional service performed for a fee. Broker One who acts as an intermediary on behalf of others for a fee or commission. Brokerage The bringing together of parties interested in making a real estate transaction. Buyer's Agent A residential real estate broker or salesperson who represents the prospective purchaser in a transaction. The buyer's agent owes the buyer/principal the common-law or statutory agency duties. Buyer's Broker A broker who represents the buyer in a fiduciary capacity. Some buyer's brokers practice single agency, in which they represent either buyers or sellers, but never both in the same transaction. Some buyer's brokers represent only buyers and refer prospective sellers to other brokers. The broker is paid by the buyer, or through the seller or listing broker at closing, provided all parties consent. Closing Costs Expenses of the sale (or loan refinancing) that must be paid in addition to the purchase price (in the case of the buyer's expenses) or be deducted from the proceeds of the sale (in the case of the seller's expenses). Some closing costs result from legal requirements; other are a matter of local custom and practice. Code Of Ethics A written system of standards of ethical conduct. Because of the nature of the relationship between a broker and a client or other persons in a real estate transaction, a high standard of ethics is needed to ensure that the broker acts in the best interests of both his or her principal and any third parties. Comparables Properties that are substantially equivalent to the subject property. Comparable Market Analysis (CMA) This is a term often used by real estate brokers in preparing a report for prospective sellers and buyers, indicating market trends in various neighborhoods, based on computer statistics generated from multiple-listing service data. Generally, these analyses are used for clients to determine a listing price for the sale of a home or for buyers to determine if a list price is reasonable for a given location Contingency A provision in a contract that requires a certain act to be done or a certain event to occur before the contract becomes binding. Contract A legally enforceable promise or set of promises that must be performed and for which, if a breach of the promise occurs, the law provides a remedy. A contract may be either unilateral, by which only one party is bound to act, or bilateral, by which all parties to the instrument are legally bound to act as prescribed. Cooperating Broker An agreement between brokers specifying the commission split should the cooperating broker sell a property listed by the listing broker Counter Offer A new offer made in response to an offer received. It has the effect of rejecting the original offer, which cannot be accepted thereafter unless revived by the offeror. Dual Agency An agency relationship in which the agent acts concurrently for both principals in a real estate transaction. Earnest Money The cash deposit (including initial and additional deposits) paid by the prospective buyer of real property as evidence of good-faith intention to complete the transaction; called bargain money, caution money, hand money, or a binder in some states. Exclusive Right To Sell Listing A written listing agreement appointing a broker the exclusive agent for the sale of property for a specified period of time. The listing broker is entitled to a commission if the property is sold by the owner, by the broker or by anyone else. The phrase "right-to-sell" really means the right to find a buyer; it does not mean that the agent has a power of attorney from the owner to sell the property. Fiduciary A relationship that implies a position of trust or confidence wherein one person is usually entrusted to hold or manage property or money for another. The term fiduciary describes the faithful relationship owed by an attorney to a client or by a broker (and salesperson) to a principal. The fiduciary owes complete allegiance to the client. Among the obligations that a fiduciary owes to his or her principal and the duties of loyalty, obedience and full disclosure; the duty to use skill, care and diligence; and the duty to account for all monies. Law of Agency A fiduciary relationship is created under the law of agency when a property owner, as the principal, executes a listing agreement or management contract authorizing a licensed real estate broker to be his or her agent. Legal Description A description of a specific parcel of real estate complete enough for an independent surveyor to locate and identify it. Listing Broker The broker in a multiple-listing situation from whose office a listing agreement is initiated, as opposed to the cooperating broker, from whose office negotiations leading up to a sale are initiated. The listing broker and the cooperating broker may be the same person. Listing Agreement A written employment agreement between a property owner and a real estate broker authorizing the broker to find a buyer or a tenant for certain real property. The most common is the exclusive-right-to-sell listing. Market Value The most probable price a property should bring in a competitive and open market under all conditions requisite to a fair sale, such such conditions include the assumption that the buyer and seller acted prudently and knowledgeably and that the price is not affected by undue stimulus. Multiple Listing Service ( MLS) A marketing organization composed of member brokers who agree to share their listing agreements with one another in the hope of procuring ready, willing and able buyers for their properties more quickly than they could on their own. Most multiple-listing services accept exclusive-right-to-sell or exclusive agency listings from their member brokers National Association of REALTORS® (NAR) Formerly known as the National Association of Real Estate Boards (NAREB), NAR is the largest and most prestigious real estate organization in the world. Its members include REALTORS® and REALTOR-ASSOCIATES® representing all branches of the real estate industry. The national organization functions through local boards and state associations. Active brokers who have been admitted to membership in state and local NAR boards are allowed to use the trademark REALTOR®. Salespeople are admitted on a REALTOR-ASSOCIATE® active status. NAR members subscribe to a strict Code of Ethics Obedience The fiduciary relationship obligates the agent to act in good faith at all times, obeying the principal's instructions in accordance with the contract. However, that obedience is not absolute. The agent may not obey instructions that are unlawful or unethical. Because illegal acts do not serve the principal's best interests, obeying such instructions violates the broker's duty of loyalty. Offer An offer is a promise made by one party, requesting something in exchange for that promise. The offer is made with the intention that the offeror will be bound to the terms if the offer is accepted. The terms of the offer must be definite and specific and must be communicated to the offeree. Offer and Acceptance Two essential components of a valid contract; a "meeting of the minds." Personal Property Things that are tangible and movable; property that is not classified as real property, such as chattels. Title to personal property is transferred by way of a bill of sale, as contrasted with a deed for real property. A tree is real property while it is rooted in the ground, but when severed it is transformed into personal property. When lumber is assembled, however, and used as material to construct a house, it once again becomes a fixture, or real property. Pre-Qualify Determine the maximum loan amount a prospective buyer qualifies for prior to showing them properties. Failing to pre-qualify may result in wasted efforts showing the prospect properties they cannot afford to purchase. Ready, willing and able buyer One who is prepared to buy property on the seller's terms and is ready to take positive steps to consummate the transaction Real Estate Brokerage A Real Estate Brokerage is a business in which real estate license-related activities are performed under the authority of a real estate broker. Real Property The earth's surface, the air above and the ground below, as well as all appurtenances to the land including buildings, structures, fixtures, fences and improvements erected upon or affixed to the same. This excludes growing crops. The term real property includes the interests, benefits and rights inherent in the ownership of real estate. REALTOR ® A registered trade name that may be used only by members of the state and local real estate boards affiliated with the National Association of REALTORS® (NAR). The term REALTOR® designates a professional who subscribes to associations of REALTORS® to govern real estate practices of members of the board. The use of the name REALTOR® and the distinctive seal in advertising is strictly governed by the rules and regulations of the national association. Seller's Agent An agent who represents the seller of real property. Seller's Real Property Disclosure Form As required by Nevada Real Estate Division Code NRS 113.130 and 113.140, a transferee (buyer) of residential real property is entitled to a statement from the transferor (seller) which provides information regarding the physical condition of the property. Single Agency The practice of representing either the buyer or the seller but never both in the same transaction. The single-agency broker may be compensated indirectly through an authorized commission split or directly by the principal who employed the agent to represent him or her. Subject Property A reference to the real property under discussion, or the real property under appraisal. "Subject To" The recognition by a buyer that a prior loan exists and not the legal obligation to fulfill its requirements. Time Is of The Essence A contract clause that emphasizes punctual performance as an essential requirement of the contract. Thus, if any party to the instrument does not perform within the specified time period (the drop-dead date), that party is in default, provided the no defaulting party has made a valid tender of performance. If no tender is made, then the clause may be waived. Title Insurance A comprehensive indemnity contract under which a title insurance company warrants to make good a loss arising through defects in title to real estate or any liens or encumbrances thereon. Unlike other types of insurance, which protect a policyholder against loss from some future occurrence (such as a fire or auto accident), title insurance in effect protects a policyholder against loss from some occurrence that has already happened, such as a forged deed somewhere in the chain of title. Title Search
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