Hello everybody.
Thank you for coming to this week's video blog.
Great to see you.
California Realty Training, Robert Rico here, hoping to bring some great stuff for
you so you can take it on to your real estate career, and of course make it much more successful.
Listen, today I want to talk to you about some great key terms that I want you to be
familiar with in the world of real estate.
These terms will help you better understand what's going on out there in the real estate
world.
It's an exciting real estate world, and doggone it, you should know all about it.
The first term I want to talk to you about of course is very simple, a buyer's agent
versus a listing agent.
Is there a difference?
Absolutely.
I don't want you to think too hard on this one, because it's rather simple.
A buyer's agent of course represents who?
That's right, a buyer.
A listing agent represents who?
Let's think about this.
A listing agent represents a seller.
Now, there's a major difference there.
Now, what if you represent both in the same transaction?
Can you represent both in the same transaction?
Can you represent the buyer and the seller on the same deal?
You sure can.
That's called dual agency.
You got that?
Buyer's agent represents the buyer, listing agent represents the seller.
Dual agency represents who?
Both on the same deal.
Good.
Now, the next term I want you to understand of course is a pre-approval letter.
Now, pre-approval letter is completely different than a pre-qualified letter.
In fact, it is substantially different.
Pre-approval letter, ready?
Here it goes.
Buyer's sitting here with the lender.
Lender says, "Hey, how are you doing, Mr. Buyer?
Would you like to borrow some money?"
Buyer says, "Of course I'd like to borrow some money."
The lender then says, "Well, I'd like for you to fill out this application.
I'd like to verify your income, I'd like to verify your assets.
I'd like to verify how long you've been at your employment.
I'd like to verify everything.
I'd like to verify your FICA score.
I want to verify everything there is to know about you, Mr. Buyer."
Key word here is verify.
We want to verify everything there is to know about you, Mr. Buyer.
Bring proof that you made a million dollars last year.
Bring proof that you've been at your job for two years.
Bring proof, bring proof, bring proof.
That's called verification.
That's good.
Pre-qualified has none of that.
Pre-qualified is completely verbal.
Lender asks the buyer, "Hey buyer, how much did you make last year?"
The buyer says, "I made a million bucks."
He has yet to prove it.
Lender asks the buyer, "How long have you been at your job?"
"Well, I've been at my job five years."
He has yet to prove it.
There's a huge difference there.
Which one has more weight?
Which one has more power?
Which one has more validity?
Of course, the pre-approval letter, because the pre-approval letter, key term here, has
been verified.
All aspects have been verified.
Another key term I want you to understand of course is contingencies.
That's a huge one.
Contingencies, contingencies, and contingencies.
Contingencies work this way.
Buyer makes an offer.
Yay, I made an offer.
When he made that offer, he made that offer on an RPA, residential purchase agreement.
He made that offer, and he signs and he fills out an RPA, residential purchase agreement.
That's another term you might want to know, RPA, residential purchase agreement.
Sets out all the particulars of his offer on this RPA, the purchase price, days of escrow.
Everything there is to know that he wants to offer, he's going to put it on this RPA.
However, there's contingencies involved.
Contingency, that's a pretty darn nice word.
Contingencies.
The contingencies is a way of protecting the buyer.
It works like this.
These are only ifs, what I call only ifs.
I call these only ifs.
This is the buyer saying this, "Hey, Mr. Seller.
How you doing?
I want to make you an offer of a million dollars for your house.
I'll buy it only if I can get a loan."
That's a loan contingency.
"Hey Seller, how you doing?
I want to make an offer on your house, Mr. Seller.
Only if the house appraises for what I offer."
That's called an appraisal contingency.
"Hey Seller, how are you doing?
I want to make an offer on your house.
I want to go through this transaction with you only if I approve all the disclosures
that you gave to me, and it passes my inspection."
Now these are inspection contingencies.
These are all contingencies that protect who?
Yeah, the buyer.
These contingencies are very common, very typical in the RPA.
You don't even have to worry about it.
It's already in the RPA.
You don't have to include it in there, it's already in there.
It already exists.
You don't mess with it.
It'll exist to protect who?
That's right, the buyer.
Next one that I want you to understand is the key term appraisal.
The word appraisal.
The word appraisal is often used with the lenders.
This is what happens.
The lender says, "Hey, Mr. Buyer, how are you?
We'd like to lend you the million dollars.
You are pre-approved."
Remember that term?
"You are pre-approved for one million dollars.
Go find yourself a house for a million bucks."
Buyer says, "Hey, realtor, show me some houses for a million dollars."
Realtor does his job, and finds him a house for a million dollars.
They make an offer on the RPA, remember that?
They make an offer on the residential purchase agreement.
Make the offer, which has contingencies, remember that one?
It has contingencies.
They make the offer, and the seller accepts it for one million dollars.
The lender, who was going to provide this million dollars to buy this house, is slightly
concerned.
They want to make sure, they want to verify that this house has got value of at least
a million bucks.
What does the lender do?
They send out an appraiser.
The appraiser visits this house, and runs his comparable research to make sure that
this house is worth a million bucks.
He goes in the house, makes sure the house has no major conditions that is wrong with
the house.
If the appraisal comes in at value, then the transaction continues onward until it closes.
Appraisal, bringing value to a home as to what the offer was.
Now listen, these are just a few of the terms that you're going to see often in a real estate
career.
You'll see these daily.
You'll see these on offers, you'll see these on listing agreements, you'll see these on
RPAs, residential purchase agreements, you'll see these on everything.
It's always great to know this stuff.
Always educate yourself when it comes to terminology, because you're always going to use it on a
daily basis.
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Have a great day.