This glossary provides simple definitions and examples for some of the most common terms used during the transaction process.
Addendum
An Addendum is used during a real estate transaction to modify, clarify, or nullify a portion of the terms and conditions in an agreement. For example, an Addendum might be used to provide a credit to the buyer or clarify the spelling of the seller’s name.
“Being in Escrow”
“Being in escrow” is a legal procedure that is used when a property requires a transfer of title. An escrow account is opened by the listing agent when the sellers of the property and the buyers of the property have come to an agreement on the selling price, the terms and any other contingencies that they may have and are ready to close the deal. A property can be in escrow for a long period of time or even just a few days. It depends on how complex and difficult the entire transaction is.
Buyer Inspection Waiver (BIW)
The Buyer Inspection Waiver form is signed by the buyer to state that the buyer wishes to waive their right to an inspection. Typically, this form is used to waive the pest or general home inspection. If a buyer receives past inspection reports from the seller, the buyer may not feel the need to complete their own inspections.
Cancellation of Contract (CC)
A Cancellation of Contract form is used to terminate a real estate contract. This form will typically disclose who is initiating the cancellation, the reason for canceling the transaction, and what will happen to the earnest money deposit. Cancellation forms will vary by state.
Example of a Cancellation of Contract
Contingencies
A contingency can be explained in a clause in a formal real estate contract that states there are certain conditions that must be met by either the buyer or the seller in order to continue to the next step or finalize the transaction. There are contingencies in almost every real estate contract. Contingencies exist to protect the buyer and the seller. If the contingencies are not met, there might be a breach in the contract, and the transaction could fail to close.
There are several different types of real estate contract contingencies. The first of these is a home inspection contingency. If there is a home inspection ordered and the house does not pass due to factors like termite damage or faulty wiring, the buyer has the right to exit the contract and receive any deposits or earnest money back. If the issues can be corrected, the buyer can request these repairs. If the seller does not agree, the contingency cannot be removed and the contract is voided.
Another contingency that is put into place to protect the buyer is a loan contingency. This means there is a stipulation in the contract that says a buyer will obtain a mortgage loan for a specific amount within a certain time period. Once the loan is obtained, that contingency is removed from the contract. If the buyer is not able to obtain the loan, it is possible to withdraw the contract without being penalized. This is a contingency that protects the buyer.
Contingency Removal (CR)
A Contingency Removal form is used to lift the contingency restraints so that the sale can move forward and close. Not all states require a contingency removal form. Once the buyer has signed a contingency removal form and it is received by the listing agent, then that contingency has been removed. The contingency removal form may be used one or more times during a sale, depending on how many contingencies there are and what the time periods are when the buyer needs to sign off on those contingencies.
Example of a Contingency Removal form
Counter Offer (SCO, BCO)
A counter offer is a response given to an initial offer. Typically, a counter offer states that the seller has accepted the buyer’s offer subject to one or more changes. For example, the seller may counter the purchase price, transaction deadlines or contingencies. The seller’s counter offer gives the buyer three options: accept the counter offer, reject it, or make another counter offer. There is typically no binding contract between the parties involved until one accepts the other’s offer.
Examples:
Due Diligence
Due diligence refers to a buyer’s investigation of the various aspects of a property within a specific time frame during a real estate transaction. During this time, a buyer is gathering information about the property, performing inspections, reviewing documents, procuring insurance, and walking the property. Due diligence is essentially doing your homework for the property before you actually make the purchase.
Earnest Money Deposit (EMD)
An earnest money deposit is made to a seller to show a buyer is serious about purchasing a home. It’s also known as a good faith deposit. It’s typically around 1% – 3% of the sale price and is held in an escrow account until the deal is complete. If all goes smoothly, the earnest money is applied to the buyer’s down payment or closing costs.
When a buyer and seller enter into a contract, the seller takes the home off the market while the transaction moves through the entire process to closing. If the deal falls through, the seller has to relist the home and start all over again, which could result in a big financial hit. Earnest money protects the seller if the buyer backs out.
If the deal falls through due to a failed home inspection or any other contingencies listed in the contract, the buyer gets their earnest money back. The practice of depositing earnest money can decrease the likelihood of a buyer placing offers for multiple homes, then walking away after the sellers take the homes off the market.
Final Settlement Statement (HUD-1)
The settlement statement, also referred to as the HUD-1 settlement statement, is a standard form used to show the final costs in a real estate sales transaction. The settlement statement is prepared by an impartial third party to the transaction, usually an escrow officer with the title or escrow company that performs the closing.
Example of a Settlement Statement
For Sale by Owner (FSBO)
For sale by owner or FSBO is a term that refers to a specific method of selling a property. In an FSBO listing, the owner sells the property without the use of an agent or a broker. Sellers typically choose to sell their home on their own to avoid paying the real estate agent the commission for the transaction.
For more info on FSBOs, check out this article: https://www.washingtonpost.com/realestate/selling-a-home-without-a-real-estate-agent/2019/04/19/18f95b14-5a25-11e9-842d-7d3ed7eb3957_story.html
No “G” Terms
Home Owners Insurance
Home insurance provides financial protection in the event that the homeowner’s house or its contents are damaged. It also provides protection in case the insured or his/her family are held liable for injuries to other people or damage to their possessions while they are on the property.
Home Warranty
A home warranty is a residential service contract that covers the cost of maintaining household systems or appliances for a set period.
Inspection Report
A complete, professional inspection of a property intended to check and evaluate the safety of the structure and mechanical condition. An adequate home inspection is often a condition set forth by the purchaser.
No “J” Terms
No “K” Terms
Lender
A mortgage lender is a financial institution or mortgage bank that offers and underwrites home loans. Lenders have specific borrowing guidelines to verify your creditworthiness and ability to repay a loan. They set the terms, interest rate, repayment schedule and other key aspects of your mortgage.
Listing Agent (AKA Seller’s Agent)
A listing agent is a real estate agent who represents a homeowner in the sale of their property. Listing agents help sellers price, stage, and market their property, show it off to prospective buyers, and negotiate offers. A listing agent’s duty is to look out for the seller and obtain the best possible terms for the sale of their home.
Listing Agreement
Once a seller has selected a real estate agent to market and sell their property, the seller and the agent will enter into a written and legally binding contract called a listing agreement. A listing agreement is a contract between a real estate broker and an owner of real property granting the broker the authority to act as the owner’s agent in the sale of the property. This contract stipulates all agreement terms, including the listing price, the listing time period, the broker’s commission and more. It also informs the seller of issues and legal requirements that may be involved in the process.
Before a seller enters into a listing agreement, they’ll want to thoroughly understand all the terms and each party’s respective roles — this information should be provided by their real estate agent.
Multiple Listing Service (MLS)
A multiple listing service (MLS) is a database established by cooperating real estate brokers to provide data about properties for sale. An MLS allows brokers to see one another’s listings of properties for sale with the goal of connecting homebuyers to sellers.
Natural Hazard Disclosure (NHD) Report
Natural Hazard Disclosure Report – Required in CA.
Real estate sellers are legally required to disclose if the property being sold lies within one or more state or locally mapped hazard areas. There are six required hazard disclosures:
1. A Special Flood Hazard Area
2. Dam Inundation
3. Very High Fire
4. Wildland fire
5. Earthquake Fault Zone
6. A Seismic hazard
The following supplemental hazards are commonly reported as well:
1. Radon Gas exposure
2. Airport influence area
3. Megan’s Law disclosures
4. Military ordnance
No “O” Terms
Pre-approval/Pre-qualification Letter
While there are some legal distinctions, in practice, both terms refer to a letter from a lender that says the lender is generally willing to lend money to a buyer, up to a certain amount and based on certain assumptions. Because a pre-qualification is an initial review of the buyer’s finances, they usually don’t need to supply documentation (like bank statements and pay stubs).
Example of a Pre-Approval Letter
A preapproval letter can help buyers when they make an offer on a home because it gives the seller confidence that the buyer will be able to get financing to buy the home. However, it is not a guaranteed loan offer.
For more information on pre-approval, check out this article: https://www.rocketmortgage.com/learn/mortgage-preapproval
Preliminary Report
A preliminary report is a report prepared prior to issuing a policy of title insurance that shows the ownership of a specific parcel of land and lists title defects, liens, and encumbrances which would be excluded from coverage if the requested title insurance policy were to be issued as of the date of the preliminary report. The prelim report may then be reviewed and discussed by the parties to a real estate transaction and their agents.
Thus, a preliminary report provides the opportunity to seek the removal of items referenced in the report which are objectionable to the buyer prior to purchase.
Example of a Preliminary Report
Property Appraisal
An appraisal is the estimation of a home’s current market value. A licensed appraiser completes this estimation, which is calculated by comparing the recent sales of homes in the area as to the property that is being appraised. This is required by mortgage lenders to be sure that the money they are lending to a new homeowner or a current homeowner is a fair amount for the home. The lenders want to be sure that the buyers are not overpaying for the property. This is to protect the lender. If the borrower stops making payments on the home and the lender needs to sell it, the lender wants to be sure it can recuperate the amount of owed on the loan. The value of the home will be calculated by examining the current local housing market and the comparable properties that have recently sold. It will also include the features of the home, square footage and number of bedrooms and bathrooms. The appraiser will also look at the overall condition of the home as well as the landscaping. If there is maintenance or repairs that will need to be completed, the appraiser will note these. The appraiser will then complete the appraisal report on a standard required form. The appraisal can potentially break the deal. If the selling price and the appraisal are not comparable, the lender will not approve the deal. The lender will not want to lend money for a home that is not worth the amount being loaned. As a buyer, this can be a good negotiation tool. No one wants to overpay for a home.
Purchase Agreement
A real estate purchase agreement is a binding contract between a seller and buyer for the ownership transfer of real property. The agreement outlines the terms, such as the sales price and any contingencies leading up to the closing date. It’s recommended the seller requires the buyer to make an earnest money deposit between 1% to 3% of the sales price that is non-refundable if the buyer cancels the agreement. The most common contingency is for the buyer to obtain financing from a local financial institution.
The Purchase Agreement is a multi-functional document. It serves as:
No “Q” Terms
Real Estate Disclosures
A Seller Disclosure is a document provided by a home seller to a home buyer that outlines known issues with a property and other historical details. A seller disclosure often includes details about defective appliances or systems, known repair issues or history of leaks or environmental contamination.
Examples of Disclosures:
Transfer Disclosure Statement (TDS)
Seller Property Questionnaire (SPQ)
Agent Visual Inspection Disclosure (AVID)
California Consumer Privacy Act Advisory (CCPA)
Federal Lead-Based Paint Disclosure (FLD)
Request for Repair (RR)
The Request for Repair form is a written request listing out the material defects observed during an inspection that the buyer would like the seller to repair. The buyer also has the option to request a credit from the seller or reduce the purchase price on this form.
Once the Request for Repair form has been received by the seller, the seller has three options: accept the buyer’s request, reject the buyer’s request or counter their request. The type of form used to request repairs will vary by state.
Seller Property Questionnaire (SPQ)
The Seller Property Questionnaire – Required in CA
The SPQ is required only when the TDS is also required.
The SPQ, which is broken down into 13 sections, requires disclosures for repairs and alteration details, structural changes, home systems, and appliance defects, as well as disaster relief and insurance or similar settlements made against the property. The form also requires the seller to disclose water damage or mold issues that they are aware of.
Other than that, these are some of the other disclosures that sellers need to know are present in the SPQ form:
Selling Agent (AKA Buyer’s Agent)
A selling agent is also known as a buyer’s agent and represents the interests of the property buyer in a real estate transaction. The “ing” puts this agent on the other side of the fence from the seller’s agent. The selling agent brings buyers to the table. In this respect, he or she also gets a property sold.
Technically, this agent is called the buyer’s agent before a contract is signed, and thereafter they’re designated as the selling agent.
For more information on the difference between a listing agent and a selling agent, check out this article: https://www.thebalance.com/listing-agent-vs-selling-agent-1798878
Title
Title companies offer lender insurance to protect the bank or lender. Most lenders require a title insurance policy. Title companies also offer owner insurance to the new owner. Premium rates differ among title companies, and buyers and sellers shop for the best price.
Title insurance costs are part of the closing costs when selling a house or property. During escrow, a research of the property records ensures that the seller legally owns the property and that no liens or claims against the property exist. Title insurance protects the lender and the new owner of the house against an error in the title search. Negotiations between the buyer and seller usually determine the selection of the title company.
The buyer and seller reach an agreement about who selects and pays for title insurance. In some cases, the buyer selects the title company and pays for a lender’s insurance policy. Sometimes the seller selects the title company and pays for an owner’s title insurance policy. Occasionally the buyer and seller decide on the title company and each pays for part of the policy.
Title/Escrow Company (the noun)
Escrow is a term that refers to a third party hired to handle the property transaction, the exchange of money and any related documents. The title/escrow company comes into play once both parties have reached a mutual agreement or offer. There are many things that are handled by the escrow officer. The transfer of the buyer’s loan documents and property taxes, as well as working with the lender for the buyer to be sure that the title does not have any liens on it before the transfer of ownership is completed.
Transaction Timeline
The transaction timeline outlines all of the contractual deadlines set in place by the agreed-upon purchase agreement from the date the offer was accepted to the close of escrow. A typical transaction will take approximately 30 days, but this can vary depending on what is agreed upon in the contract. For example, the transaction timeline may include deadlines for the following: earnest money deposit, seller-signed disclosures, buyer’s due diligence, contingency removals, and the close of escrow.
Example of a Transaction Timeline
Transfer Disclosure Statement (TDS)
The Transfer Disclosure Statement – Required in CA
This document is one of the seller’s disclosures that buyers receive during their contract contingency period. The TDS form must be completed in the seller’s own handwriting. An agent can help the seller understand what’s being asked, but an agent cannot complete this form for a seller under any circumstances.
The TDS form covers items on the subject property that the seller is aware of and therefore has actual knowledge of, anywhere from a leaky roof to whether any deaths occurred on the property in the last three years. The seller will need to include information about all appliances in the home, including which are included in the sale as well as whether they are operational. The seller will also need to disclose any room additions, damage, or neighborhood noise problems. The items a seller will disclose are material facts of the seller’s actual knowledge regarding the subject property.
No “U” Terms
Verification of Property Condition (VP) – Final Walk-Through Form
A Verification of Property Condition form is used to absolve a real estate agent from liability after the final walk-through, as well as prove that the buyer had an opportunity to look at the property one more time.
No “W” Terms
No “X” Terms
No “Y” Terms
No “Z” Terms
Addendum
An Addendum is used during a real estate transaction to modify, clarify, or nullify a portion of the terms and conditions in an agreement. For example, an Addendum might be used to provide a credit to the buyer or clarify the spelling of the seller’s name.
“Being in Escrow”
“Being in escrow” is a legal procedure that is used when a property requires a transfer of title. An escrow account is opened by the listing agent when the sellers of the property and the buyers of the property have come to an agreement on the selling price, the terms and any other contingencies that they may have and are ready to close the deal. A property can be in escrow for a long period of time or even just a few days. It depends on how complex and difficult the entire transaction is.
Buyer Inspection Waiver (BIW)
The Buyer Inspection Waiver form is signed by the buyer to state that the buyer wishes to waive their right to an inspection. Typically, this form is used to waive the pest or general home inspection. If a buyer receives past inspection reports from the seller, the buyer may not feel the need to complete their own inspections.
Cancellation of Contract (CC)
A Cancellation of Contract form is used to terminate a real estate contract. This form will typically disclose who is initiating the cancellation, the reason for canceling the transaction, and what will happen to the earnest money deposit. Cancellation forms will vary by state.
Example of a Cancellation of Contract
Contingencies
A contingency can be explained in a clause in a formal real estate contract that states there are certain conditions that must be met by either the buyer or the seller in order to continue to the next step or finalize the transaction. There are contingencies in almost every real estate contract. Contingencies exist to protect the buyer and the seller. If the contingencies are not met, there might be a breach in the contract, and the transaction could fail to close.
There are several different types of real estate contract contingencies. The first of these is a home inspection contingency. If there is a home inspection ordered and the house does not pass due to factors like termite damage or faulty wiring, the buyer has the right to exit the contract and receive any deposits or earnest money back. If the issues can be corrected, the buyer can request these repairs. If the seller does not agree, the contingency cannot be removed and the contract is voided.
Another contingency that is put into place to protect the buyer is a loan contingency. This means there is a stipulation in the contract that says a buyer will obtain a mortgage loan for a specific amount within a certain time period. Once the loan is obtained, that contingency is removed from the contract. If the buyer is not able to obtain the loan, it is possible to withdraw the contract without being penalized. This is a contingency that protects the buyer.
Contingency Removal (CR)
A Contingency Removal form is used to lift the contingency restraints so that the sale can move forward and close. Not all states require a contingency removal form. Once the buyer has signed a contingency removal form and it is received by the listing agent, then that contingency has been removed. The contingency removal form may be used one or more times during a sale, depending on how many contingencies there are and what the time periods are when the buyer needs to sign off on those contingencies.
Example of a Contingency Removal form
Counter Offer (SCO, BCO)
A counter offer is a response given to an initial offer. Typically, a counter offer states that the seller has accepted the buyer’s offer subject to one or more changes. For example, the seller may counter the purchase price, transaction deadlines or contingencies. The seller’s counter offer gives the buyer three options: accept the counter offer, reject it, or make another counter offer. There is typically no binding contract between the parties involved until one accepts the other’s offer.
Examples:
Due Diligence
Due diligence refers to a buyer’s investigation of the various aspects of a property within a specific time frame during a real estate transaction. During this time, a buyer is gathering information about the property, performing inspections, reviewing documents, procuring insurance, and walking the property. Due diligence is essentially doing your homework for the property before you actually make the purchase.
Earnest Money Deposit (EMD)
An earnest money deposit is made to a seller to show a buyer is serious about purchasing a home. It’s also known as a good faith deposit. It’s typically around 1% – 3% of the sale price and is held in an escrow account until the deal is complete. If all goes smoothly, the earnest money is applied to the buyer’s down payment or closing costs.
When a buyer and seller enter into a contract, the seller takes the home off the market while the transaction moves through the entire process to closing. If the deal falls through, the seller has to relist the home and start all over again, which could result in a big financial hit. Earnest money protects the seller if the buyer backs out.
If the deal falls through due to a failed home inspection or any other contingencies listed in the contract, the buyer gets their earnest money back. The practice of depositing earnest money can decrease the likelihood of a buyer placing offers for multiple homes, then walking away after the sellers take the homes off the market.
Home Owners Insurance
Home insurance provides financial protection in the event that the homeowner’s house or its contents are damaged. It also provides protection in case the insured or his/her family are held liable for injuries to other people or damage to their possessions while they are on the property.
Home Warranty
A home warranty is a residential service contract that covers the cost of maintaining household systems or appliances for a set period.
Inspection Report
A complete, professional inspection of a property intended to check and evaluate the safety of the structure and mechanical condition. An adequate home inspection is often a condition set forth by the purchaser.
Lender
A mortgage lender is a financial institution or mortgage bank that offers and underwrites home loans. Lenders have specific borrowing guidelines to verify your creditworthiness and ability to repay a loan. They set the terms, interest rate, repayment schedule and other key aspects of your mortgage.
Listing Agent (AKA Seller’s Agent)
A listing agent is a real estate agent who represents a homeowner in the sale of their property. Listing agents help sellers price, stage, and market their property, show it off to prospective buyers, and negotiate offers. A listing agent’s duty is to look out for the seller and obtain the best possible terms for the sale of their home.
Listing Agreement
Once a seller has selected a real estate agent to market and sell their property, the seller and the agent will enter into a written and legally binding contract called a listing agreement. A listing agreement is a contract between a real estate broker and an owner of real property granting the broker the authority to act as the owner’s agent in the sale of the property. This contract stipulates all agreement terms, including the listing price, the listing time period, the broker’s commission and more. It also informs the seller of issues and legal requirements that may be involved in the process.
Before a seller enters into a listing agreement, they’ll want to thoroughly understand all the terms and each party’s respective roles — this information should be provided by their real estate agent.
Multiple Listing Service (MLS)
A multiple listing service (MLS) is a database established by cooperating real estate brokers to provide data about properties for sale. An MLS allows brokers to see one another’s listings of properties for sale with the goal of connecting homebuyers to sellers.
Natural Hazard Disclosure (NHD) Report
Natural Hazard Disclosure Report – Required in CA.
Real estate sellers are legally required to disclose if the property being sold lies within one or more state or locally mapped hazard areas. There are six required hazard disclosures:
1. A Special Flood Hazard Area
2. Dam Inundation
3. Very High Fire
4. Wildland fire
5. Earthquake Fault Zone
6. A Seismic hazard
The following supplemental hazards are commonly reported as well:
1. Radon Gas exposure
2. Airport influence area
3. Megan’s Law disclosures
4. Military ordnance
Pre-approval/Pre-qualification Letter
While there are some legal distinctions, in practice, both terms refer to a letter from a lender that says the lender is generally willing to lend money to a buyer, up to a certain amount and based on certain assumptions. Because a pre-qualification is an initial review of the buyer’s finances, they usually don’t need to supply documentation (like bank statements and pay stubs).
Example of a Pre-Approval Letter
A preapproval letter can help buyers when they make an offer on a home because it gives the seller confidence that the buyer will be able to get financing to buy the home. However, it is not a guaranteed loan offer.
For more information on pre-approval, check out this article: https://www.rocketmortgage.com/learn/mortgage-preapproval
Preliminary Report
A preliminary report is a report prepared prior to issuing a policy of title insurance that shows the ownership of a specific parcel of land and lists title defects, liens, and encumbrances which would be excluded from coverage if the requested title insurance policy were to be issued as of the date of the preliminary report. The prelim report may then be reviewed and discussed by the parties to a real estate transaction and their agents.
Thus, a preliminary report provides the opportunity to seek the removal of items referenced in the report which are objectionable to the buyer prior to purchase.
Example of a Preliminary Report
Property Appraisal
An appraisal is the estimation of a home’s current market value. A licensed appraiser completes this estimation, which is calculated by comparing the recent sales of homes in the area as to the property that is being appraised. This is required by mortgage lenders to be sure that the money they are lending to a new homeowner or a current homeowner is a fair amount for the home. The lenders want to be sure that the buyers are not overpaying for the property. This is to protect the lender. If the borrower stops making payments on the home and the lender needs to sell it, the lender wants to be sure it can recuperate the amount of owed on the loan. The value of the home will be calculated by examining the current local housing market and the comparable properties that have recently sold. It will also include the features of the home, square footage and number of bedrooms and bathrooms. The appraiser will also look at the overall condition of the home as well as the landscaping. If there is maintenance or repairs that will need to be completed, the appraiser will note these. The appraiser will then complete the appraisal report on a standard required form. The appraisal can potentially break the deal. If the selling price and the appraisal are not comparable, the lender will not approve the deal. The lender will not want to lend money for a home that is not worth the amount being loaned. As a buyer, this can be a good negotiation tool. No one wants to overpay for a home.
Purchase Agreement
A real estate purchase agreement is a binding contract between a seller and buyer for the ownership transfer of real property. The agreement outlines the terms, such as the sales price and any contingencies leading up to the closing date. It’s recommended the seller requires the buyer to make an earnest money deposit between 1% to 3% of the sales price that is non-refundable if the buyer cancels the agreement. The most common contingency is for the buyer to obtain financing from a local financial institution.
The Purchase Agreement is a multi-functional document. It serves as:
Real Estate Disclosures
A Seller Disclosure is a document provided by a home seller to a home buyer that outlines known issues with a property and other historical details. A seller disclosure often includes details about defective appliances or systems, known repair issues or history of leaks or environmental contamination.
Examples of Disclosures:
Transfer Disclosure Statement (TDS)
Seller Property Questionnaire (SPQ)
Agent Visual Inspection Disclosure (AVID)
California Consumer Privacy Act Advisory (CCPA)
Federal Lead-Based Paint Disclosure (FLD)
Request for Repair (RR)
The Request for Repair form is a written request listing out the material defects observed during an inspection that the buyer would like the seller to repair. The buyer also has the option to request a credit from the seller or reduce the purchase price on this form.
Once the Request for Repair form has been received by the seller, the seller has three options: accept the buyer’s request, reject the buyer’s request or counter their request. The type of form used to request repairs will vary by state.
Title
Title companies offer lender insurance to protect the bank or lender. Most lenders require a title insurance policy. Title companies also offer owner insurance to the new owner. Premium rates differ among title companies, and buyers and sellers shop for the best price.
Title insurance costs are part of the closing costs when selling a house or property. During escrow, a research of the property records ensures that the seller legally owns the property and that no liens or claims against the property exist. Title insurance protects the lender and the new owner of the house against an error in the title search. Negotiations between the buyer and seller usually determine the selection of the title company.
The buyer and seller reach an agreement about who selects and pays for title insurance. In some cases, the buyer selects the title company and pays for a lender’s insurance policy. Sometimes the seller selects the title company and pays for an owner’s title insurance policy. Occasionally the buyer and seller decide on the title company and each pays for part of the policy.
Title/Escrow Company (the noun)
Escrow is a term that refers to a third party hired to handle the property transaction, the exchange of money and any related documents. The title/escrow company comes into play once both parties have reached a mutual agreement or offer. There are many things that are handled by the escrow officer. The transfer of the buyer’s loan documents and property taxes, as well as working with the lender for the buyer to be sure that the title does not have any liens on it before the transfer of ownership is completed.
Transaction Timeline
The transaction timeline outlines all of the contractual deadlines set in place by the agreed-upon purchase agreement from the date the offer was accepted to the close of escrow. A typical transaction will take approximately 30 days, but this can vary depending on what is agreed upon in the contract. For example, the transaction timeline may include deadlines for the following: earnest money deposit, seller-signed disclosures, buyer’s due diligence, contingency removals, and the close of escrow.
Example of a Transaction Timeline
Transfer Disclosure Statement (TDS)
The Transfer Disclosure Statement – Required in CA
This document is one of the seller’s disclosures that buyers receive during their contract contingency period. The TDS form must be completed in the seller’s own handwriting. An agent can help the seller understand what’s being asked, but an agent cannot complete this form for a seller under any circumstances.
The TDS form covers items on the subject property that the seller is aware of and therefore has actual knowledge of, anywhere from a leaky roof to whether any deaths occurred on the property in the last three years. The seller will need to include information about all appliances in the home, including which are included in the sale as well as whether they are operational. The seller will also need to disclose any room additions, damage, or neighborhood noise problems. The items a seller will disclose are material facts of the seller’s actual knowledge regarding the subject property.
Verification of Property Condition (VP) – Final Walk-Through Form
A Verification of Property Condition form is used to absolve a real estate agent from liability after the final walk-through, as well as prove that the buyer had an opportunity to look at the property one more time.