When you purchased your first home, you likely encountered many new terms. When it comes time to sell, you’ll also want to brush up on the terminology used by real estate agents, mortgage and title professionals and more.
Here, we’re sharing the ins and outs of the most frequently used selling terms, so you can confidently move forward with your home sale.
After an offer is accepted on a home, a professional conducts an appraisal which determines the property’s current value and justifies the loan of the buyer. Throughout the process, the interior and exterior of the home — including amenities, condition of the property and floor plan — will be examined by an appraiser. Their aim is to provide a value estimate for the home, free of bias.
The appraiser also looks at the recent sale prices of similar homes in the area. If the for-sale property is appraised at or above the listed sales price, the home selling process will continue toward closing. If the house doesn’t appraise, it’s possible to challenge the decision or to find other ways to move the sale forward.
Capital gains tax
The profit from a home sale is known as capital gain. In some cases, sellers must pay a capital gains tax on their profits, but this tax can be avoided if certain conditions are met. Generally, most residential sellers don't need to pay capital gains tax, but it’s best to consult an expert to understand your unique situation.
The final closing involves transferring ownership of the home through signed paperwork. There is a process involved with closing on a real estate purchase, including: loan application, title commitment, home inspection and due diligence, scheduling a closing date, appraisal process, loan approval, homeowner’s insurance, re-inspection (if necessary), walk-through, transfer of utilities and finally — closing.
Closing costs are a variety of expenses that are paid at the closing of the sale. For a seller, those costs typically range from 6 to 10% of the price of the home sale. Payments associated with closing may include taxes paid on the property transfer or fees paid to the closing company.
Sometimes, buyers ask sellers to pay for some or all of their closing costs, which reduces the amount a seller might receive from the purchase price.
Comparative market analysis (CMA)
When conducting a comparative market analysis, a trained REALTOR® will evaluate a home’s worth based on factors like its location, condition and amenities. In addition, a CMA will compare a home’s value to recently sold and listed homes nearby. It’s important to get a CMA in order to determine a competitive yet reasonable price to list your property.
Request a comparative market analysis on your home today.
Contingencies — and active contingent listing status
A property listed as contingent is under contract with a buyer, but the sale is not yet finalized. For the sale to move toward closing, contingencies need to be removed from the contract. A contingency is a condition that needs to be met or an event that must occur before the home sale can go through. Common contingencies include a professional inspection and the buyer’s ability to obtain a loan.
Days on market
This metric describes the number of days a property is on the market. Typically, this count begins when the property is listed and ends after an offer is accepted and the listing status updates to pending. Many listings are labeled as pending after the buyer removes their inspection contingency.
It is your legal obligation to disclose certain details of the property when selling a home. Some necessary disclosures include damage or issues with features of the home, including the plumbing, roofing or electric. However, a haunted house disclosure and disclosure of death on the property are typically not required in Minnesota or Wisconsin.
If you are unsure whether to disclose an aspect of the property, even if it’s just a small issue, it’s generally best to disclose it.
The value a homeowner has in their property is called home equity. To calculate equity, subtract the amount owed in mortgages or loan balances from the home’s current market value.
Increased equity indicates more assets and a higher total net worth of the homeowner. Generally, in order to build equity, loans must be paid down or the property value needs to rise (or both).
With a real estate escrow, the buyer and seller agree to having a third party hold money for a period of time after closing. Putting money in an escrow account ensures safekeeping of funds until all obligations of the home sale (such as a negotiated property repair) are met by the buyer and seller. In Minnesota and Wisconsin, escrow is only used after you have purchased your home.
For sale by owner (FSBO)
Homes put up for sale by owner (FSBO) do not involve an agent or broker during the process of selling the property. Due to the complex aspects of selling real estate and the benefits of listing with an agent — like coming out ahead on the final sales price — FSBO homes are dwindling.
iBuyers tend to be larger investment firms that make quick, automated offers on properties based on proprietary algorithms. Sellers hoping to avoid the traditional market or sell quickly may find that using an iBuyer could work to their advantage.
The majority of homebuyers request a home inspection prior to signing a purchase agreement. During the home inspection, an examiner will look at the roof, foundation, electrical system and other functional components of the property.
The inspection process ends with a report of the home’s condition, which will inform the potential buyer of defects to the property. A buyer may request for the seller to address issues uncovered in the inspection before closing.
Multiple listing service (MLS)
Real estate agents use the multiple listing service as a tool to share active property listings. When these listings are published, other real estate agents and potential buyers will be able to easily access the details on the property.
This means that when you list your home for sale with an Edina Realty agent, listing information will be available to other local agents who don’t work for Edina Realty — and to any buyer who is searching for local homes online.
Multiple offers occur when home sellers receive multiple bids on their listing. Sellers with homes in desirable areas may be able to draw in multiple offers, which can lead to selling their home at a higher price than listed.
When selling a home, buyers may want to negotiate different aspects of the sale, including price or closing date. When negotiating with potential buyers and determining the final accepted sales price for your property, your Realtor will be instrumental.
An open house allows sellers to open their home to potential buyers. During this event, buyers can view the property and ask initial questions. Sellers should showcase the home’s best features to elicit more interest from buyers.
A real estate purchase agreement is a contract containing the agreed-upon details of the sale of the home. The purchase agreement sets forth the sale price, contingencies, closing dates and all other important aspects of the deal.
Pending listing status
A pending listing status indicates that the buyer and seller have cleared up most contingencies and are heading toward the closing table. However, final aspects of the sale, like financing, title examination and a final walk-through of the property are likely still in progress.
In 2013, the Minnesota legislature passed a radon law. This law requires sellers to explicitly state if their home has been tested for radon, a toxic gas. And, sellers must provide buyers with the results of the test.
Wisconsin does not require a radon test prior to real estate transactions, but a pre-sale radon test is recommended by most experts.
A Realtor is a licensed professional who represents the interest of a seller or buyer throughout a home transaction. Unlike a non-Realtor real estate agent, a Realtor must subscribe to a strict code of ethics, including putting the needs of their client ahead of their own financial or personal interests. Becoming a certified Realtor is the highest designation in the field of real estate.
Realtors are supervised by their local association boards and represented by the National Association of REALTORS®. All Edina Realty agents are licensed Realtors.
With the help of their Realtor, sellers may choose to write a reverse contingency into the purchase agreement of their property. This clause allows sellers to make the sale contingent on them finding another home to buy. In other words, a reverse contingency grants sellers a contracted period of time to find a new home before they are legally bound to close on their current sale.
Sellers may choose to stage their home for sale by themselves or with the help of a Realtor or professional stager. Staging is the process of neutralizing a property so it appeals to the greatest number of buyers once it’s listed on the market.
To stage a property, you’ll want to remove clutter (including photos and knick-knacks), optimize the space with smart-sized furniture and use neutral — but inviting — paint colors on the main walls.
A showing refers to an individually-scheduled appointment where a potential buyer tours your property with their agent or an open house (which is open to all buyers) hosted by your real estate agent.
Square footage, and finished square footage in particular, refers to the square feet of a home that include the following features: flooring, wallcovering, ceiling and ability to be lived in 365 days of the year. In most cases, areas of your home that meet these criteria will be included in the square footage detailed in your listing. Finished square footage is a standard piece of information on MLS home listings.
The title (or ownership) of your home will be transferred to the new owner once your property sells. Once the property has been signed, the homebuyer’s title company will transfer the corresponding proceeds to you.
Tax-assessed home value
Tax-assessed home value, or estimated market value, refers to the worth of your home in the opinion of the local tax assessor. This number helps calculate property taxes and is determined by the city or county where the property is located.
This value is based on historical sales data and mass appraisal techniques, so you may want to get a second opinion before doing taxes or selling — especially if you’ve recently completed a brand-new luxury kitchen remodel. Keep in mind, tax-assessed values can be lagging indicators of your home’s current market value because assessments may only occur annually or biannually.
Transfer of utilities
After closing, it’s important for both parties to discuss the details of transferring utilities. Planning ahead with utility setup will ease the transition between the seller and buyer and will insure that you don’t incur extra costs after the property transaction.
Truth-in-Sale of Housing Evaluation (TISH)
A Truth-in-Sale of Housing Evaluation (TISH) may be required to assess potential health or safety risks in a home before selling. This report typically recommends or requires certain sellers to make home repairs prior to listing.
Depending on the city you live in, you might need to get a TISH inspection after hiring a Realtor and before posting your home on the market.
Shortly before closing, a final walk-through is held to ensure good property condition and completed repairs (if they were agreed upon). After a successful walk-through, you’re officially ready for closing!
Local governments implement zoning rules that distinguish what properties can be used for in certain areas. When selling, zoning laws may affect how a house can be marketed, including whether or not a remodeled basement can be correctly called a bedroom or if a property can be listed as single-family or multi-family home.
Ready to sell?
By now, you’re well-versed in selling terms. (Don’t worry, there won’t be a quiz!) Reach out to Edina Realty or your agent today for additional help that’s catered to your unique needs as a seller.
And, be sure to reference our comprehensive homebuyer dictionary if you’ll be moving forward with a home purchase after your sale closes.