Important Definitions to Know For Sellers
When selling a home for the first time, many sellers find themselves in over their head. The world of real estate can be confusing, and many sellers worry that they will lose money, or not get the best value for their home.
Thankfully, navigating the world of real estate can be easy, as long as you know the important terms that are common in the real estate world.
Contingency: A contingency is anything written into a contract that would allow a buyer to walk away from the sale. Most contracts state that a home must pass a home inspection in order for the contract to be considered valid. A buyer can ask for many different contingency, but a seller must weigh whether the contingency is worth it to complete the contract.
LTV: LTV simply means loan to value ratio. This ratio is how much you owe on your home in relation to the value of the home. For example, if you owe $100,000 on a $200,000 property, your LTV is 50%. This is important in contract negotiations.
Assessed Value: The assessed value of a home is the value that has been appointed to the property by a third-property appraiser. The value of the home, the land and the upgrades are all taken into account in the assessed value.
As-is: A seller can offer an “as-is” contract, meaning the seller will not repair anything in the home prior to the sale. This, like a contingency, can be written into the contract to insure the buyer does not come back with repair requests before signing the contract. “As-is” homes may be in good shape, or may be considered “fixer uppers”.
Capital Gain: Capital gain is the sum of money over the original purchase price of a property when sold. For example, if you bought a property for $50,000 and sold it for $100,000, the capital gain would be $40,000. Capital gain may be taxable depending on location.
Commission: Commission is the percentage of money paid to the selling agent for showing the home to others when the home is finally sold. A selling agent may be asked to split their commission with a buying agent; however, in many cases a buyer must pay their own commission to their agent.
MLS: The MLS, or multiple listing services, is a service that collects all homes on the market into one service. Agents can then see all information on the homes in an area through the service. All homes place on the market for sale will end up on the MLS.
BOM: BOM, or Back on Market, is simply a home that has been on the market, and removed for some time, without a sale in between. A home can be removed from the MLS for a variety of reasons only to be put back on later. The original listing, in many cases, is, however, still available to agents.