Chapter 1 - Overview - Before, During, and After the Real Estate Transaction Flashcards
(48 cards)
Loan Pre-Approval Letter
Borrower has provided all documentation to the lender and the lender has run a credit report. Lender then issues a LOAN PRE-APPROVAL LETTER stating the borrower is pre-approved for a loan to purchase the property.
Solid proof of borrower’s ability to qualify for the loan
An agent must verify a buyer is ABLE to purchase a home by having the buyer complete a LOAN APPLICATION, have the lender run a CREDIT REPORT, then submit this info to an UNDERWRITER who will provide a “LOAN PREAPPROVAL LETTER” verifying the buyer can qualify for a home purchase to a certain maximum amount.
Loan Pre-qualification
Borrower has merely started the loan process and has NOT been PRE-APPROVED for a loan. // Only shows borrower contacted a lender // Not as substantial as the opposite (pre-approval letter)
Comparative Market Analysis (CMA)
Analysis performed by a real estate agent to help the seller price a property for sale.
Appraisal
A formal report on the VALUE of a parcel of real property.
Collateral
Placing something as security for a loan.
Listing Agent
aka Seller’s Agent - real estate agent representing the seller of a property
Down Payment
$$ a buyer pays out of pocket when a loan is used to purchase property
Real Estate Listing Agreement
When a listing/selling agent obtains a listing, they will ask the seller to sign a REAL ESTATE LISTING AGREEMENT along with an Agency Disclosure Form.
LISTING AGREEMENT is a contract allowing the listing/selling agent to:
- List the property for sale
- Accept an earnest money deposit from the buyer on behalf of the seller
- Receive a commission
Commission
Usually a % of the property sale price. Paid to the broker who then pays the salesperson.
What is the next step after a LISTING AGREEMENT and AGENCY DISCLOSURE FORM has been signed by both the SELLER and AGENT.
Agent cant start MARKETING the property for sale.
examples:
for sale sign, MLS, MLS lockbox, etc.
Warranty of authority
Given by the seller to the listing agent– allows the agent to place the property on the market and accept an earnest money deposit from the buyer. Usually given in the Real Estate Listing Agreement.
The agent has the authority to sell the property for the seller, find a buyer, and accept an earnest money deposit from the buyer and o behalf of the seller.
Tenants living on a property have how many days to vacate?
Tenants who have lived in a property for less than a year - 30 day notice
Tenants who lived for a year or more - 60 day notice
Selling Agent
aka Buyer’s Agent - real estate agent who is representing the BUYER
What is an offer?
Buyer makes an OFFER to the seller to purchase real property. Accomplished by completing:
- Purchase Agreement and Joint Escrow Instructions
- Agency Disclosure Form (to disclose, elect and confirm the agency relationship that exists between the buyer and RE salesperson)
Real Estate Purchase Agreement and Joint Escrow Instructions
A purchase agreement/contract that specifies the PRICE + TERMS of the property purchase
Completed when making an offer
Disclosure Regarding Agency Relationship form (Agency Disclosure Form)
Discloses “who is representing whom” in a RE transaction.
Completed along with Purchase Agreement while making an offer
When is the Agency Disclosure Form signed?
Usually signed along with the Purchase Agreement during an offer
Counter Offer
Instead of rejecting an offer, the seller makes a counter offer back to the buyer for the sale of real property.
This can go back and forth until both parties reach a mutual agreement.
After a potential buyer has presented an OFFER to the seller, what are the seller’s 3 possible responses?
- Accept the offer
- Reject the offer
- Make a counter offer back
When is a Contract (agreement) between buyer and seller formed?
When the seller ACCEPTS the buyer’s offer AND AFTER the buyer has been notified of the seller’s acceptance.
Seller will accept by signing the PURCHASE AGREEMENT –> Buyer is then notified –> a contract is now formed
If the seller rejects the offer, no contract is formed.
Counter offers will continue back and forth until both parties come to a mutual assent (agreement) regarding PRICE + TERMS of the property purchase, then a contract is formed.
What is Escrow?
The process in which MONEY or OTHER DOCUMENTS are held by a disinterested third party (stakeholder)
An Escrow Agent is used to hold the BUYER’S EARNEST MONEY DEPOSIT until the buyer inspects the property and decides to move forward with the purchase or terminate the transaction.
Earnest Money Deposit
Will be held by an Escrow Agent – is used by the seller to ensure the buyer is serious about purchasing the property.
Who does the Escrow Agent represent at the opening and after closing of escrow.
When escrow is opened and through the escrow period an Escrow Agent represents BOTH the buyer and seller.
After close of escrow (when all T+Cs have been met), escrow agent will become an INDEPENDENT agent of the buyer and INDEPENDENT agent of the seller, SEPARATELY.
What happens if a buyer and seller are in an escrow dispute and both parties demand payment of the buyer’s EARNEST MONEY DEPOSIT?
The escrow agent must receive a court order prior to disbursing funds.