Lesson 5: Purchase and Sale Transactions Flashcards
What is a “purchase agreement”?
A purchase agreement is a legal document that outlines the terms and conditions of a real estate transaction between a buyer and a seller. It includes the purchase price, closing terms, contingencies, and other critical details.
Define “closing” in real estate.
Closing, also known as settlement, is the final step in executing a real estate transaction. It is when the title of the property is transferred from the seller to the buyer, and all financial settlements are completed.
What are “contingencies” in a real estate contract?
Contingencies are conditions listed in a real estate contract that must be met for the transaction to proceed. Common contingencies include obtaining financing, home inspections, and the sale of a current home.
Explain “title insurance”.
Title insurance protects real estate owners and lenders against any property loss or damage they might experience because of liens, encumbrances, or defects in the title to the property.
What is “escrow”?
Escrow is a financial arrangement where a third party holds and regulates payment of the funds required for two parties involved in a given transaction, helping to make transactions more secure by keeping the payment in a secure escrow account which is only released when all of the terms of an agreement are met.
Define “real estate broker”.
A real estate broker is a licensed professional who arranges the buying and selling in real estate transactions. Brokers can work as agents for buyers or sellers and are typically paid a commission for their services.
What does “due diligence” involve in real estate transactions?
Due diligence in real estate transactions involves the careful review and investigation of a property before finalizing the purchase, including reviewing financial records, checking for liens, and assessing physical conditions of the property.
Explain “market analysis” in real estate.
Market analysis in real estate is a comprehensive examination of the current market values of properties, comparable to a particular property, to determine a competitive market price.
What is a “home inspection”?
A home inspection is a detailed examination of a property’s condition, typically performed by a qualified inspector before the sale is finalized. The inspector assesses the property’s structure, systems, and physical components.
Define “listing agreement”.
A listing agreement is a contract between a property owner and a real estate broker authorizing the broker to represent the seller and find a buyer for the property under specified terms.
What is “buyer’s agent”?
A buyer’s agent is a real estate professional who represents the interests of the buyer in a real estate transaction, helping to negotiate the purchase price and terms on behalf of the buyer.
Explain “seller’s agent”.
A seller’s agent, or listing agent, is a real estate agent who represents the seller of a property and works to promote the interests of the seller, including securing a buyer and maximizing the sale price.
What is “FSBO” (For Sale By Owner)?
FSBO refers to properties that are sold directly by the owner without the representation of a real estate broker, often to avoid paying a commission.
Define “capital gains” in real estate.
Capital gains in real estate refer to the profit that an investor realizes when they sell their property for more than the purchase price. This profit is subject to capital gains tax.
What does “financing” involve in real estate transactions?
Financing in real estate transactions refers to the methods by which a buyer secures funds to purchase a property. This typically involves obtaining a mortgage or other loan types from financial institutions.
Explain “mortgage pre-approval”.
Mortgage pre-approval is a lender’s evaluation of a potential borrower’s financial status to determine how much they can borrow before they apply for a loan. This helps buyers understand what they can afford.
What is “offer to purchase”?
An offer to purchase is a document issued by a potential buyer proposing a price to buy a property. It includes conditions that must be met for the offer to become binding.
Define “real estate commission”.
Real estate commission is the fee paid to a real estate agent or broker for their services in facilitating a property sale. It is typically a percentage of the sale price.
What is “staging” in real estate?
Staging in real estate refers to the process of decorating and arranging a property to showcase its best features, enhancing its appeal to potential buyers.
Explain “land contract”.
A land contract is a seller-financed agreement where the seller retains the title to the property until the buyer completes all payment installments. It is often used when traditional financing is unavailable.
What are “adjustable-rate mortgages” (ARM)?
Adjustable-rate mortgages (ARM) are loans with interest rates that can change periodically depending on changes in a corresponding financial index that’s associated with the loan. Typically, ARMs offer lower initial rates than fixed-rate mortgages.
Define “equity”.
In real estate, equity refers to the difference between the current market value of a property and the amount the owner still owes on the mortgage. It represents the owner’s actual stake in the property.
What is “real estate appraisal”?
Real estate appraisal is the process of developing an opinion of value for real property. Appraisals are required for property transactions to ensure the selling price is fair based on market conditions and property specifics.
Explain “deed of sale”.
A deed of sale is a legal document that officially transfers ownership of real estate from the seller to the buyer. It includes details of the property and the terms of the transaction.
