Real Estate Terms Every For Sale By Owner Seller Should Know
Many home sellers are catching on that selling For Sale By Owner (FSBO) is a smart move, but they don’t know what it involves and are afraid they won’t understand the terminology or the process of selling a home. Understanding what FSBO is, how to get help when you need it, and knowledge of some of the common real estate terms encountered in real estate transactions make selling your home FSBO easier than you think.
What is FSBO?
FSBO home sellers save a lot of money by not having to pay the seller’s real estate agent commission, usually 3% of the selling price of the home. With FSBO, the homeowner lists and markets the home without contracting with a licensed real estate agent. For this savings, the home seller does some of the work of the real estate agent. Today there are tools and services that can walk you through the process. Having a bit of knowledge and strong support will let almost any home seller successfully sell their home For Sale By Owner.
Whether you’re thinking about a traditional sale or going FSBO, having a little knowledge of real estate terminology will get you off to a good start as you work your way through the sales process.
Common Real Estate Terms Definitions
Here are some common real estate terms you will encounter:
1. Active under contact: This occurs when a seller accepts a buyer’s offer but still wants to keep their home actively listed for sale in case the current sale falls through.
2. Addendum: Sometimes a seller or buyer wants to make changes to an existing contract. The addendum designates the sections of the contract they want to modify and outlines the parameters of this modification without altering any other sections of the contract.
3. Assessed value: The dollar amount indicating the value of a home as designated by local government tax assessors for tax purposes is its assessed value. It’s not uncommon for this amount to differ from the home’s true market value.
4. Assumable mortgage: This occurs when a seller transfers their mortgage to a buyer with the approval of the lender. Essentially, the buyer assumes the original mortgage and remaining debt instead of applying for a new mortgage.
5. Closing: A closing is the final meeting of the sale transaction. At this time, the sale of the home is finalized and the property is legally transferred from the seller to the buyer. Both parties sign documents, the buyer makes the down payment, and the seller hands the keys over to the buyer. Any closing costs are also paid at this time.
6. Closing costs: Closing costs are a variety of fees that include title searches, title insurance, surveys, excise tax, loan processing costs, and appraisal fees, to name a few that might apply. These fees typically make up about 2-5% of the home’s total purchase price. Often the buyer pays the closing costs, but during negotiations, a seller may agree to pay some or all of them.
7. Equity: Equity is the portion of the home the seller actually owns if their mortgage hasn’t yet been completely fulfilled.
8. Examination of title: This is a process where a home’s title is reviewed to make certain the title has been legally passed on to each previous owner of the property and any earlier liens have been cleared.
9. Home inspection: Before a home can be sold, an inspection is typically performed (by an objective third party) to evaluate the condition of the home. The home inspection is a necessary process for the buyer and one sellers should understand because the inspector may require them to make repairs or replacements before the home can be sold.
10. Lease option: A lease option is a rental agreement where the seller agrees to rent the home with the buyer’s intention to buy at a predetermined price at some point during this rental agreement. Lease with Delayed Settlement, because it preserves the landlord-tenant relationship until the purchase is complete and allows the landlord to claim depreciation and other tax benefits, is preferable to Rent with Option to Buy (defined below).
11. MLS: Managed by real estate brokers, MLS is a service that combines hundreds of databases listing houses for sale where buyers’ agents search potential homes for their clients. MLS stands for “Multiple Listing Service” and is widely used by real estate agents. Only a broker can get a home listed on the MLS, but the MLS offers sellers a good opportunity to get more exposure to their listings.
12. Offer: An offer is the amount of money a buyer offers a seller to purchase their home. Sellers can accept, reject, or issue a counteroffer to negotiate an agreed-upon price.
13. Owner financing: This is when a seller serves as the lender for the buyer’s mortgage, bypassing traditional lenders and financial institutions.
14. Pending: Once a seller and buyer come to an agreement and contingencies of the deal are met, the transaction is considered to be in “pending” status until the closing takes place and the sale can be completed.
15. Rent with Option to Buy also known as Rent to Own allows a renter to purchase the home within an agreed upon period. Usually some portion of the rent is applied to the purchase of them home. Renters who do not qualify for a home loan may be candidates for this program, but there may be costs such as a nonrefundable deposit toward the purchase, higher-than-market rent to cover a portion going into escrow, and they may be required to pay for repair and maintenance costs. Sellers benefit from renting the home in a bad market, but for benefitting from property appreciation and tax benefits, usually Lease with Delayed Settlement (see above) is a preferable option.
16. Transfer of ownership: Transfer of ownership occurs when the home’s title and deed are legally transferred from the seller to the buyer at the closing.
Get Help from the Best For Sale By Owner Home Flat Fee MLS Listing Service
Many people successfully sell their homes without the services of a real estate agent. Selling your home For Sale By Owner takes some preparation and knowledge. Understanding the terminology associated with the home selling process ahead of time can help the FSBO home seller navigate the process better. But having a professional FSBO partner at your side, one like GoToFSBO.com, makes the process easy, providing the tools and information you need to get the job done.
GoToFSBO.com offers a comprehensive flat fee MLS listing and FSBO sales support services for home sellers in Virginia, Maryland and Washington DC. Our clients get everything they need to sell their properties without paying high seller real estate commissions. Instead, we offer low cost, flat fee services in a variety of packages depending on how much support you need, including MLS listings so your property is visible to all your potential buyers.