Top 10 Real Estate Terms Every Seller Should Know
Real estate terminology can be confusing — but it doesn’t have to be. If you’re selling your home or property in the Bahamas soon, here are the top ten terms you should know to feel confident during the process.
1. Buyer’s agent vs. listing agent
Let’s start with an easy one! Typically, buyers and sellers have different real estate agents. Real estate agents who work with home or property shoppers or buyers are called buyer’s agents. Real estate agents who work with the home or property sellers are called listing agents because they list your home or property for sale.
It’s possible to have one agent representing both sides, which is called “dual agency,” but it’s not always common. Why? There is a potential conflict of interest in the case of dual agency because real estate agents should always negotiate in their client’s best interest — which is difficult to do when you’re representing both parties.
A contingency is a clause in a real estate contract that allows one or both parties to back out of the deal if certain conditions are not met. Some common contingencies include:
Appraisal contingency: allows the buyer to back out of the deal if the property appraises for less than the agreed-upon purchase price.
Home inspection contingency: allows the buyer to back out of the deal if the home inspection reveals major problems.
Mortgage contingency: allows either party out of the deal if the buyer cannot obtain financing.
Contingency clauses can be a valuable tool for both buyers and sellers, but they can also slow down your real estate transaction. By their nature, contingencies make it easier for either party to leave the deal — which can leave you back at square one. But that doesn’t mean you should turn down all offers that include a contingency. Instead, talk to your real estate agent about the offer, and they can offer expert advice based on your market and your specific situation.
3. Due diligence period
This is a specific period of time after an offer is accepted in which the buyer is to do their “due diligence” and investigate the property thoroughly. This includes the home inspections, appraisal, and the property survey undertaken usually by the seller — and it’s also a good time for buyers to start comparing homeowners insurance quotes. This period is meant to allow the buyer to find out everything they need to know about the property to make an educated decision about the purchase.
Equity is the difference between your property’s current market value and how much you still owe on the mortgage. For example, if your property is worth $500,000 and you owe $300,000, you have $200,000 in equity.
Typically, the more equity you have, the better because this is the amount of cash you’ll make from your sale (minus any transaction fees). More equity will make it easier to purchase your next home or property, or you can use it for saving, investing, retirement, education, and more.
5. Seller concession
A seller concession is something offered by the home seller to the buyer to incentivize the purchase. These can encompass a variety of closing costs typically paid by the buyer, including appraisal fees, mortgage fees, and more — but they can’t include other purchase costs like the buyer’s downpayment.
Should you make a seller concession? That depends on your market. In a seller’s market where houses move quickly and receive multiple offers, seller concessions are usually unnecessary. But in a buyer’s market where available homes outnumber buyers and take a while to sell, a seller concession is a good way to stand above the competition and attract attention. Ask your real estate agent for their advice on your specific situation.
6. Agreement For Sale
An Agreement For Sale (sometimes called a Purchase and Sale Agreement or PSA) is a document that is written after a buyer and seller have finished negotiations and agreed on the business terms. It includes details like the agreed-upon sale price, closing date, deposit money, and both parties' contingencies. This is the official or legal agreement on the terms and conditions of the real estate transaction, and when it’s signed, it moves the process forward toward closing.
7. Covenants, conditions & restrictions (CC&Rs)
CC&Rs are usually included in the conveyance of the property and are a set of rules that govern what you can do with or on your property. You may be familiar with Homeowner’s Association (HOA) rules in your or other neighborhoods, which are a type of CC&R, but they’re also common in planned communities, condominium buildings, and industrial parks.
What are the purpose of CC&Rs and what types of things can they govern? These rules can apply the following:
Building Setbacks that restrict you from building to close to your neighbor's boundary or the road
Home appearance like height restrictions on how high you can build your house or minimum size to help maintain minimum property values.
Land Use as to what the property can be developed for - single-family residential, commercial, multi-family.
Usually, the idea behind these rules is to make sure that everyone in the development lives by the same rules and regulations so that everyone lives in peace and harmony. These rules also keep an area aesthetically pleasing, safe, and improve and maintain home values. Why is it important for you, a home seller, to understand the CC&Rs in your area? Buyers typically want to know this information before making an offer, and if you live somewhere with HOA rules and fees, you’ll have to disclose those in advance.
The Multiple Listing Service (or MLS) is the database of all real estate listing information. The Bahamas has its own MLS whereas in the US there are multiple MLSs for states, regions, and even individual cities, and operate under different rules. The Bahamas MLS requires specific information to be disclosed in a listing before it can go live in the MLS database. Some basic information required by the Bahamas MLS includes the number of bedrooms and bathrooms, the square footage, the price, and the name of the listing agent — but there’s a lot more!
A rent-back is an agreement between a buyer and a seller that allows the seller to stay living in the home after the sale has closed in exchange for making rent payments. Why would a seller want a rent-back? In very competitive markets, it can be difficult to find a new home after you’ve sold the old one, or in some cases, the home is sold much faster than Seller has planned. In this case, if the buyer is able, they can offer a rent-back to the seller in a written agreement that gives the Seller more time before having to move out.
Closing is when the home or property sale has been finalized. When does this happen? A sale is considered closed when all contingencies have been met, all the paperwork has been signed, and the conveyance and all the purchase money have exchanged hands. When these steps are completed, you’ll hand over the keys; the buyer will be the new homeowner.
At that point, the seller will be on to its next big dream!