Real estate can be a confusing business. That’s why agents, Realtors, and brokers have to be certified and educated. And it’s also why most laypeople couldn’t tell you the difference between an agent, a Realtor, and broker. Let’s dive in and discuss the real estate terms we wish everyone understood.
Real Estate Agent
An agent holds a license in their state and work under a broker. An agent’s job is to sell properties to clients. Real estate agents have to pass classes and a test in order to obtain a license.
A Realtor is a type of real estate agent that claims membership in the national association of Realtors. Joining the organization means pledging to uphold the Realtor standard of ethics. While all Realtors are agents, not all agents are Realtors.
Real Estate Broker
A broker is a type of real estate professional who can work independently or hire agents to conduct sales. To become a broker, you must pass a state exam and meet the required number of sales transactions. Brokers often take on a managerial role in their agencies.
When drafting a contract, a contingency is a clause that lets the parties off the hook if a condition is not met. Usually, contingencies involve home inspection prior to a sale or securing financing. A bump clause (which you can read more about here!) is involves a contingency that lets a buyer back out if their own home doesn’t sell before closing.
An escrow account is created by the lender. The buyer pays in on a monthly basis alongside their mortgage payment. The money in an escrow account is collected for insurance and taxes to be disbursed at a later date.
A term that is instantly recognizable to any real estate professional and nothing but meaningless letters to a layperson. MLS simply stands for “Multiple Listing Service.” An MLS is a database of information about property sales, which can be used by agents for research or as data for online property sales sites. The public cannot access an MLS.
How much a person borrows to buy a property. The principal is the total sale price minus the down payment. Note that the principal does not include interest.
Equity is the difference between the home’s market value and the balance of the mortgage. If the home’s value stays steady, then the equity will steadily increase with each mortgage payment. If the home’s value increases, so does the equity. But if the value decreases, the homeowner loses equity.
No, this has nothing to do with a guy named Earnest. In real estate, earnest money is a deposit made along with an offer to show that the buyer is committed to the sale. If the sale goes through, the money becomes part of the down payment. Otherwise the money is refunded.
Comparative Market Analysis, or comps, is a report of properties that are on the market or recently sold. A real estate agent will use a CMA to determine a fair market price for a home.