Jim Valentine on Real Estate
Like most industries, real estate has its own vocabulary. Some of it comes from the legal side of things since there is so much law in all aspects of real estate, but much is straight real estate lexicon. Once one understands the language of real estate, the general concept of buying and selling property isn’t so hard to understand.
The word real estate itself is kind of ambiguous to those not used to it. Its meaning is land and items permanently attached to it. It is not personal property, but sometimes personal property is sold with it, i.e. – a manufactured home not fixed to the land when you sell a lot and manufactured home together.
Most real property transactions involve an Earnest Money Deposit, EMD. An EMD is given in good faith when you make an offer. It can be anywhere from $500 to $10,000 or more and can even be “love” if the circumstances of the transaction are right. There are no EMD guidelines in Nevada, but one must be careful when considering what amount to make the EMD. If it is too little and something goes awry and the EMD is forfeited the actual damages may not be covered by the EMD. A large EMD, i.e., $100,000, in a transaction with slight damages to the seller if the buyer breaches may result in the seller not being able to keep more than actual damages if the contract isn’t written correctly. This is an area that is often overlooked.
If there is a breach and the EMD is forfeited, or if it is to be returned to the buyer in a non-breach situation, both parties must sign for it to be released. If one doesn’t, it may lead to a legal action called interpleader. In an interpleader action a third party, usually the escrow officer in real estate transactions, puts the funds with the court and lets the court decide who is the rightful owner. This is costly and time consuming.
Mortgage vs. Deed of Trust can cause confusion. They both do the same thing, secure a promissory note by your real estate, but in Nevada we don’t use mortgages, we use Deeds of Trust. A mortgage has two parties, the borrower, and the lender. A Deed of Trust has three parties, the borrower, lender, and the trustee who holds the title. Much of the conversation pertaining to real estate uses the word mortgage but understand that you won’t see a mortgage in practice in Nevada.
An Estoppel certificate is used when selling a rental property. The seller has his tenant complete the estoppel detailing what the rent is, amount of any deposits, any agreements, i.e. – first right of refusal, etc., who owns the refrigerator, etc. It is used to help the buyer with their due diligence investigation. It also protects all of the parties in the transaction against misrepresentation that could cause harm later. Seller and tenant sign it and the buyer reviews it to assure that it confirms the tenant terms and relationship as represented.
If you are in a transaction and someone says or uses a word you are unfamiliar with, be sure to ask what it means so you can understand what is going on. Just like going to the auto mechanic, they talk about things that make sense if you understand the part and its function even though you don’t know how to do the work.
You will at least understand what is happening to you and its potential effects on you in the transaction if you understand the words you are hearing. If you need a translator for a foreign language, make sure the translator understands the real estate language. We hired one once that spoke the language we needed, but didn’t understand the language we were speaking, real estate, without us defining the words for him. Take the time to understand the language. It will help you in the long run.
When it comes to choosing professionals to assist you with your Real Estate needs… Experience is Priceless! Jim Valentine, RE/MAX Realty Affiliates, BS.3481, 775-781-3704. dpwtigers@hotmail.com.