Before we dive in, download our free real estate business plan template to follow along.

Step 1: Identify who you are as a real estate agent

Let’s start with your “why.” Understanding the purpose behind choosing real estate is crucial, as it forms the foundation for your business plan and guides your decision-making process. Defining your mission, vision, and values will help you stay focused and motivated as you navigate your real estate career.

Mission: Your mission statement defines your purpose for pursuing a career in real estate. It clearly states what you’re trying to do, the problem you want to solve, and the difference you want to make.

Vision: Your vision statement focuses on the outcome you want for your clients and community.

Values: Your core values are the guiding principles that shape your behavior, decisions, and interactions with clients and colleagues.

Clearly defining your mission, vision, and values lays the foundation for a strong and purposeful real estate business that enables you to positively impact your clients’ lives and your community.

Step 2: Analyze your real estate market

As a real estate professional, you must deeply understand your local market. This knowledge encompasses key metrics, including average days on market, average price points, common home styles and sizes, and demographic trends. When someone asks about the market, you should be able to recite those numbers confidently without hesitation.

To quickly become the local expert, choosing specific farm areas to focus on is crucial. Concentrate your marketing efforts and build your local knowledge in a handful of communities and neighborhoods. Some places to do research include:

• Your local MLS: Check your hot sheet daily.
• Zillow: Scan through the Premier Agents who show up in your neighborhood.
• Social media: Review who targets their posts in your area.
• Direct mail: Check your mailbox for flyers and postcards.
• Drive by: Drive through your farm areas to see who has signs in their yards.

Once you’ve identified your target areas, start conducting comparative market analyses (CMAs) to familiarize yourself with the properties and trends in those neighborhoods. That way, you’ll provide accurate insights to your clients and make informed decisions in your business.

Remember to research your competition. Understand what other agents working in the same area are doing and who they’re targeting, and identify any gaps in their services. This understanding will help you differentiate yourself from your competition and better serve your clients’ needs. In our real estate business planning template, I ask you to examine and record:

• Trends: Track key metrics, such as days on market and average sold prices, to stay informed about your specific market.
• Market opportunities: Identify situations where there are more buyers and sellers (or vice versa) in the marketplace so you can better advise your clients and find opportunities for them and your business.
• Market saturation: Identify areas where there may be an oversupply of specific property types or price points, enabling you to adjust your strategy accordingly.
• Local competition: Analyze your competitors’ strengths, weaknesses, and gaps in their services to identify opportunities for differentiation and possibilities to create a more meaningful impact.

Remember, real estate is hyper-local. While national and state news can provide some context, your primary focus should be on specific needs and trends within your target areas and the clients you want to serve. By thoroughly analyzing your local real estate market, you’ll be well-equipped to make informed decisions, provide valuable insights to your clients, and ultimately build a thriving business.

Step 3: Identify your ideal clients

When creating your real estate business plan, it’s crucial to identify your ideal client. You can’t be everything to everyone, no matter how much you think you should. And trust me, you certainly don’t want to work with every single person who needs real estate advice.

By focusing on your ideal client, you’ll create a targeted marketing message that effectively attracts the right people to your business — those you want to work with.

Think of your target market as a broad group of people who might be interested in your services, while your ideal client is a specific person you are best suited to work with within that group. To create a detailed profile of your ideal client, ask yourself questions like:

• What age range do they fall into?
• What’s their family situation?
• What’s their income level and profession?
• What are their hobbies and interests?
• What motivates them to buy or sell a home?
• What are their biggest fears or concerns about the real estate process?

Answering these questions will help you create a clear picture of your ideal client, making it easier to tailor your marketing messages and services to meet their needs. Consider using this ideal client worksheet, which guides you through creating a detailed client avatar. This will ensure you don’t miss any critical aspects of their profile, and you can refer back to it as you develop your marketing plan.

By incorporating your ideal client into your overall business plan, you’ll be better equipped to make informed decisions about your marketing efforts, service offerings, and growth strategies. This clarity will help you build stronger relationships with your clients, stand out from the competition, and ultimately achieve your real estate business goals.

Step 4: Conduct a SWOT analysis

If you want to crush it in this business, you’ve got to think like an entrepreneur. One of the best tools in your arsenal is a SWOT analysis. It sounds ominous, but don’t worry — it’s pretty simple. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. It’s all about taking a good, hard look at yourself and your business.

By conducting a SWOT analysis as part of your real estate business plan, you’ll have a clear picture of your current situation and future goals. And don’t just do it once and forget about it — review and update it regularly to stay on top of your game.

Step 5: Establish your SMART goals and sustainability targets

In real estate, you can’t just set vague targets. You need SMART goals (Specific, Measurable, Achievable, Relevant, and Time-bound) that act as the building blocks of your realtor business plan. Your SMART real estate goals should drive everything from growing your client base to reducing your carbon footprint.

The table below shows how to establish strong SMART goals, along with examples that cover both revenue targets and sustainability efforts:

Specific	Focus on a particular niche, outcome, or behavior.	10 closings by September 30, 2025 Cut office electricity use by 5% in Q3.
Measurable	Attach metrics or benchmarks that you can track weekly or monthly.	10 closings by September 30, 2025 5% year-over-year energy reduction
Achievable	Assess past performance and available tools. Set a challenging yet reachable bar.	Ten closed deals are doable in your real estate market. A 5% energy savings is realistic.
Relevant	Ensure that your goal aligns with your core business and has a long-term impact.	Drives commission revenue and grows your business Lowers overhead costs and appeals to eco-conscious clients
Time-bound	Set a clear deadline.	By December 31, 2025. By December 31, 2025, our office should have energy-efficient lighting, windows, and doors.

6. Create your financial plan

Financial planning might not be your idea of a good time, but this is where your real estate business plan comes together. Most of the heavy lifting is already complete, thanks to all the research and strategizing done earlier. Now, it’s just a matter of plugging in the numbers and ensuring everything adds up.

Once you’ve figured out your expenses, it’s time to reverse-engineer the numbers and determine how many deals you need to close each month to cover your costs. If you’re just starting out and don’t have a track record to go off of, no worries! This planning period allows you to set a budget and create a roadmap for success.

If you’re evaluating your starting assets and realizing they don’t quite match your startup costs, don’t panic. This new insight suggests that you must revisit and refine your strategy until the numbers align with your goals. It might take some trial and error, but getting your financial plan right from the start is worth it.

Pro tip: Keep your personal and business finances separate. Never dip into your personal cash for business expenses. Not only will it make tax time a nightmare, but it’s way too easy to blow your budget without even realizing it.

Step 7: Track your progress and adjust as needed

You’ve worked hard and created a killer real estate business plan and are ready to take on the world. However, remember that your business plan isn’t a one-time deal. It’s a living, breathing document that needs to evolve as your business grows and changes. That’s why tracking your progress and making adjustments along the way is so important. 

Here are a few key things to keep in mind:

• Set regular check-ins: Schedule dedicated time to review your progress and see how you’re doing against your goals, whether weekly, monthly, or quarterly.
• Keep an eye on your KPIs: Your key performance indicators (KPIs) are the metrics that matter most to your business. Metrics such as lead generation, conversion rates, and average sales price can clearly show your performance.
• Celebrate your wins: When you hit a milestone or crush a goal, take a moment to celebrate. Acknowledging your successes will keep you motivated and energized.
• Don’t be afraid to pivot: Change course if something isn’t working. Your real estate business plan should be flexible enough to accommodate new opportunities and shifting market conditions.
• Stay accountable: Find an accountability partner, join a mastermind group, or work with a coach to help you stay on track and overcome obstacles.

Remember, your real estate business plan is your roadmap to success. But even the best-laid plans need to be adjusted from time to time. By tracking your progress, staying flexible, and keeping your eye on the prize, you’ll be well on your way to building the real estate business of your dreams.

Why agents need a real estate business plan

Your real estate agent business plan is your roadmap to success. Think of it as your GPS: it maps out where you are today, where you want to go, and the steps to get there. When the market shifts or challenges arise, your business plan is the guiding star that keeps you focused.

A well-crafted business plan helps you:

• Understand your current position in the market
• Set clear and achievable goals
• Create a roadmap for success
• Track your progress and performance
• Make informed decisions and adjustments

Pro tip: Invest the time to create a solid real estate business plan to stay on track, hit your goals, and thank yourself later for avoiding aimless detours in your career. Without it, you risk losing direction and focus in your career.

FAQs

How much would it cost to start a real estate business?

How do I start a small real estate business?

Which real estate business is most profitable?

Your take

Now you’ve got the steps — no more guesswork. A solid real estate business plan isn’t extra work; it’s your edge. Take the time to map it out and make it happen. Have you created your real estate business plan? Share your experience in the comments!

The post 7 Steps to Writing a Real Estate Business Plan (+ Template) appeared first on The Close.

What Is the Role of a Home Inspector?

A home inspector meticulously examines a residence’s physical structure and systems and then offers a comprehensive report highlighting potential concerns. The inspection covers key areas, such as the condition of the home’s roof, walls, windows, doors, foundation, plumbing, electrical systems, heating and cooling systems, and insulation.

This examination is about identifying current problems and uncovering potential issues that could arise in the future. The best home inspections will include an extremely detailed report that provides a critical overview, allowing buyers to make informed purchasing decisions based on the property’s actual condition.

What to Look for When Choosing a Home Inspector

When selecting a good home inspector, you want to make sure you’re choosing a professional who not only possesses the necessary qualifications to be a home inspector but also has experience. They should embody the key qualities essential for conducting a thorough and informative inspection, like attention to detail and good communication. However, given the homebuying process sometimes moves very quickly, you also want to ensure that the home inspector can finish their report in a timely fashion.

Here are some of the most important documents and elements to look for:

Credentials & Certifications

A professional home inspector should be able to share their credentials and certifications with you. Buyers can verify these credentials to ensure compliance with national and local regulations. Investigating their professional background provides insight into their experience and specialization, particularly concerning the type of home you are considering.

Additionally, membership in reputable industry organizations, such as the American Society of Home Inspectors (ASHI) or the International Association of Certified Home Inspectors (InterNACHI), can further attest to their commitment to upholding high standards of practice.

Cost of Inspection

While the cost is an important consideration when hiring a home inspector, it should not be the deciding factor. Opting for the cheapest option might result in a less thorough inspection, potentially missing significant defects that could lead to expensive repairs.

The price of a home inspection varies based on the size and age of the home, as well as the inspector’s experience and the comprehensiveness of their report. It’s essential to view the inspection fee in the context of the overall investment in your home. Investing in a quality inspection can save you from unforeseen expenses, making it a wise aspect of homebuying. Always ensure you understand what is included in the inspection fee to assess its value accurately.

How Much Should Home Inspections Cost?

A buyer can expect to pay between $200 and $500 for a thorough home inspection, but additional services, such as pest, radon, or mold inspection, may increase the cost. The location of the property also plays a huge factor in the price. States like Washington and New Jersey may have higher average inspection prices than Nevada or Wisconsin based on the licensing requirements for inspectors.

When considering cost, also weigh the inspector’s qualifications, experience, and the thoroughness of the inspection they offer. According to Fixr.com, the home inspection cost by the size of the house is broken down by square footage:

Inspection Logistics

The logistics of the home inspection process are key to its success. The inspection should align with your homebuying timeline by offering flexibility to fit within crucial decision-making windows. A thorough inspection typically takes two to four hours, which can vary based on the property’s size, age, and condition.

An inspector who rushes through this process is likely not providing the detailed scrutiny required to identify potential issues. Scheduling should also allow for you to be present during the inspection. This provides an opportunity to ask questions and gain firsthand insights into the property’s condition.

How Long Should a Home Inspection Take?

A comprehensive home inspection should not be rushed. The duration of a home inspection generally varies depending on the size, age, and condition of the property, as well as the scope of the inspection. On average, a thorough inspection should take two to four hours for a typical single-family home. However, larger homes, older investment properties, or those with additional features, such as pools or outbuildings, may require more time, potentially extending inspection time by up to five hours or more.

Factors influencing the length of an inspection include:

• Size of home: Larger homes have more space and potentially more systems to inspect, naturally extending the duration of the inspection.
• Age of the property: Older homes may have outdated systems, potential safety issues, or wear and tear that require a closer look.
• Condition of home: Homes in poor condition with visible defects or maintenance issues may necessitate a more detailed inspection to assess the extent of the problems thoroughly.
• Additional inspections: Specialized inspections for aspects such as pests, radon, mold, or asbestos are not typically included in a standard home inspection and require additional time.

How to Find a Qualified Home Inspector

After understanding what to look for in a home inspector, buyers can begin their quest to find a reputable inspector. This process requires diligence, but there are easily accessible avenues to help you find a home inspector.

For those anticipating future real estate purchases, establishing relationships with a few trusted inspectors can prove invaluable. Building a network of reliable professionals not only streamlines the process for subsequent acquisitions but also ensures consistency in the quality of inspections.

Various resources are available to buyers for locating a new home inspector:

• Real estate agents: Agents often have a list of inspectors they have worked with in the past and can recommend based on professionalism and thoroughness. However, to avoid any conflict of interest, ensure the recommended inspector is known for impartiality.
• Mortgage lenders: Some lenders may also have experience with home inspectors whose reports they trust and can provide recommendations.
• American Society of Home Inspectors (ASHI): ASHI’s “Find an Inspector” tool allows you to search for certified inspectors in your area. Members are required to adhere to the ASHI Standards of Practice and Code of Ethics.
• InterNACHI: InterNACHI offers a directory of certified inspectors who must meet comprehensive education and training requirements.
• National Academy of Building Inspection Engineers (NABIE): If you prefer an engineer’s expertise, NABIE certifies engineers and architects in building inspection.
• Yelp and Google reviews: Online reviews can provide insights into previous clients’ experiences, offering a glimpse into the inspector’s thoroughness, professionalism, and client interaction.
• Better Business Bureau (BBB): The BBB website can be a resource for finding accredited home inspectors and seeing any complaints or accolades associated with their services.
• Local business directories: Local online or printed business directories can list home inspectors in your area, providing a starting point for further research.
• Real estate websites and forums: Websites focusing on real estate and homebuying may have forums or articles recommending specific inspectors or firms known for quality service.

10 Questions to Ask Potential Home Inspectors Before Hiring

When meeting or speaking with potential home inspectors, asking the right questions is key to ensuring you receive a thorough and effective inspection. Knowing how to choose a home inspector will make it easier when approaching home inspectors with critical questions that identify their expertise. By preparing a concise list of questions, you can effectively assess each inspector’s qualifications and select the professional best suited to your needs.

Example questions below to gauge an inspector’s expertise:

1. What does your inspection cover, and what are the limitations?
2. How long have you been a home inspector, and how many inspections have you done?
3. What kind of tools and technology do you use during inspections?
4. How long have you been practicing as a home inspector, and how many inspections have you completed?
5. How much do you charge for an inspection?
6. Do you have specialization in certain types of properties?
7. Can you provide a sample of your inspection report?
8. Are you a member of any professional home inspection organizations?
9. Can you provide references from past clients?
10. How soon after the inspection will I receive my reports?

Bottom Line

Selecting the right home inspector is a critical step in the homebuying process. An effective inspector identifies current problems while offering insights that can impact your decision-making. The process of how to choose a home inspector involves understanding the inspector’s role, assessing their credentials, and recognizing essential qualities that contribute to a thorough and impartial inspection. With the right approach, home inspection can be a valuable tool in making a confident and informed investment.

The post How to Choose a Home Inspector: A Playbook for Investors appeared first on The Close.

For a smooth sale, you will want to do all you can to minimize the impact on the tenant while maximizing your profitability during the sale. Read along, and I’ll equip you with information and strategies to help you navigate this type of sale.

Step 1: Evaluate the Lease

Identifying what type of lease you have in place is the first step in selling a house with tenants. Knowing the type of lease will help you determine your legal options. In most states, tenants have the right to stay in the home until their lease expires, no matter the type of lease. Consulting an attorney who knows your state and local laws will help guide you through this process.

The two most common types of leases are fixed-term leases and month-to-month leases. Let’s look at each more in-depth:

Fixed-term Leases

A fixed-term lease is a rental agreement with a predetermined start and end date specified by the contract. These leases can have a variety of different terms, but most commonly these leases are typically not automatically renewed. For the lease to renew past the end date, action must be taken from both the landlord and the tenant.

An early termination clause may allow the lease to be terminated by either party prior to the specified end date. This typically involves a termination fee or other type of financial considerations. If your lease has this type of provision, follow the process outlined in the lease agreement and consult an attorney before speaking to your tenants.

Month-to-month Leases

A month-to-month lease, or periodic tenancy, is a rental agreement that renews automatically every month until notice is given by either the tenant or the landlord. Each state will have its own laws in regard to the tenant rights and notice periods, but most commonly, 30 days is accepted and sufficient.

For state-specific information on tenant rights, visit the U.S. Department of Housing and Urban Development (HUD) or check your state government website. This information is typically under landlord-tenant law or tenant rights and responsibilities.

Step 2: Understand Your Options

Now that you know your lease type, it’s time to look at your options. There are several ways to sell a property with tenants. Review the options to determine which would benefit you and your tenant most.

Option 1: Offer to Sell the Property to the Tenant

Some tenants are lifetime renters, while others are looking to purchase a home at some point in the future. Offering the tenant the option to buy the house first could be a viable solution for everyone. You get to sell the house, and the tenant gets to stay put. After you have consulted with a real estate agent to determine the property’s fair market value, you can approach the tenant with your offer.

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Option 2: Negotiate Cash for Keys

If you do not have an early termination clause in your lease, you can still talk to your tenant about breaking the lease. Cash for keys is used when a landlord offers a tenant money in exchange for agreeing to break the lease and move out. Offering cash incentives for tenants to move will greatly increase your chance of them taking you up on your offer, but it can be costly. Tenants will want it to be worth their while and have all expenses covered for moving, a new security deposit, and the first month’s rent in their new home.

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Option 3: Execute the Early Termination Clause

If you have exhausted the first two options and your lease has an early termination clause, you can enforce it by providing the required notice and monetary compensation. Try to be as considerate to the tenants as possible, offering to be flexible with private showings, scheduling pre-arranged open houses, and strategically placing signage to limit unwelcome visitors.

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Option 4: Wait Until the Lease Expires

An optimal solution would be waiting until the lease expires to sell your investment property. Vacant homes are easier to show, removing the tenant as an obstacle in the sale. If you choose this option, notify the tenants that you will be selling the home at the end of the lease, and they will need to be moved out on time. Providing them with a courtesy notice will help them prepare to find a new place to live while you work on getting the property ready to sell.

While this option may not always be feasible, depending on the length of the lease term left or the circumstances in which you have to sell, it does make it easier for all parties to prepare for the sale.

Pro tip: Vacant homes can feel empty and show all their imperfections. Consider staging the home to showcase the property features and show potential buyers what it would feel like to live in the home.

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Option 5: Sell With Tenants in Place

If there are no other options, you must sell the house with tenants in place. This means that the purchaser will become the landlord and will be legally bound by the lease that is in place. Selling a house with tenants is actually appealing to an investor. They will not have to work to find someone to occupy it at closing and will reap the benefits from the sale.

On the other hand, if you cannot find an investor to purchase the home, other buyers who wish to live in the house may be reluctant to make an offer with the tenants in place. If the lease is within three months of completion, consider offering incentives to purchase the property, such as offering seller credits or a reduced price.

Pro tip: If you aren’t in a rush and are willing to act as the lender, consider offering a well-qualified tenant owner financing.

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Step 3: Consider the Pros & Cons of Selling a House With Tenants

The next step is to evaluate the pros and cons of selling a house with renters in place. Selling an occupied home can present a unique set of challenges. There are advantages, such as continued rental income for the landlord, as well as drawbacks, like scheduling obstacles. Awareness of these issues can help you make the best decision to sell the property.

Here is a breakdown of the pros and cons:

Additionally, there are a few other factors to weigh in your decision. When looking at market conditions, having a tenant may not be a huge drawback if you are in a seller’s market with higher buyer demand. On the other hand, more houses are for sale in a buyer’s market, which could limit your buyer pool. The length of the tenant’s lease also plays a part because a shorter duration of a lease may not be as deterring as a longer lease period.

Step 4: Work With the Tenants

Now it’s time to start talking to your tenants about their options. I recommend consulting an attorney or real estate agent professional to ensure you know tenant rights in your state before going into the conversation or providing notice.

When you sit down to break the news, consider these tips to have a meaningful and productive conversation:

• Be considerate: The last thing any person is expecting to hear is that they may have to move out of their home before they thought they would. Use positive language and come from a place of understanding to help encourage the tenants to cooperate.
• Communicate clearly: State exactly what you are looking to accomplish. What option did you decide to go with, and what would that look like for the tenants?
• Tell them what to expect next: Now that the tenant knows that you’re selling, tell them exactly what to expect next, from speaking with a real estate agent to getting the home ready to list.
• Offer to help find them a new home: Offering to help your tenant move on to the next phase of life can go a long way.
• Answer any questions: The tenants will likely have questions now and in the future. Be sure to answer any questions they have now and let them know they can contact you with additional questions.
• Solidify the plan: Before ending the conversation, make sure the tenants are clear on the plan, the next steps, and what you need from them.

There is always the risk of tenants getting angry and refusing to cooperate. Showing a home to a potential buyer while a tenant causes problems can be risky. Try finding ways to make the tenant less likely to sabotage your showings by offering compensation for cooperation. Offer a break on their rent or get creative with a gift card to their favorite restaurant if they have the property in show-ready condition and leave during the showing.

Step 5: Market & Sell the Property

Once you have decided if the tenant will stay during the sale, it’s time to determine the best way to market the property. Whether the tenant vacates or remains in the home, different strategies can be used to showcase the property to experienced or beginner investors and buyers who wish to be owner-occupied.

Here are some general tips to help you market your rental property for sale:

• Partner with a local real estate agent: Hiring a local real estate pro can get your property seen by more people. They can help you create an effective marketing plan to sell quickly or for the highest price.
• Strategically price the property: Consider whether you will be making repairs or selling the home as is. Price the home accordingly to remain competitive in the market.
• Highlight investment potential: Market the property to investors by offering a turnkey rental opportunity with or without tenants in place. Emphasize that the current tenants have been properly screened, take great care of the property, and are in good standing with rent payments.

Marketing the property based on whether the tenant vacates or remains in the home is different. Let’s take a more in-depth look at each of these situations.

If the Tenant Vacates

If the tenant moves out or you decide to wait until the lease expires to sell, the sale becomes more traditional. Remember, a vacant rental property translates to lost income for the landlord, so you’ll want to sell the property as quickly as possible. Create a financial breakdown that showcases the potential rental income for investor buyers. If you plan to offer a turnkey property that any buyer can enjoy, highlight any renovations completed after your tenant moved out.

If the Tenant Remains

If the tenant remains in the property during the sale, you should address any challenges upfront to encourage a smoother transaction. It is inevitable that the tenant will experience some disruption and inconvenience during this process. Try to minimize the inconvenience by being transparent, offering a helping hand, and being considerate of the tenant’s needs.

The table below outlines common pain points tenants may experience if they choose to remain in the home for the duration of the sale.

Caution: Evicting a tenant is never easy, but selling a house with tenants who don’t pay rent is worse. Delinquent tenants are not profitable, and potential investors will be detoured from making an offer on your home. Even if they do, rent must be current at closing, so you could be stuck with the bill.

Bottom Line

Selling a property with tenants requires planning, clear communication, and flexibility. When you understand your options and work with your tenants, you will be able to smoothly navigate this process and achieve a successful sale. Remember that a good tenant can be a selling point for investors looking for turnkey rental properties, but poor tenants can make or break a sale.

The post Selling a House With Tenants in 5 Steps: A How-to for Investors appeared first on The Close.

Even if you know every one of the 141 real estate terms on this list and how to use them, your clients expect you to be their interpreter. This comprehensive list of real estate definitions will help you ensure you’re communicating with clients effectively. After all, great communication leads to closed deals.

4 Key Interest Rate Questions That Could Save Your Clients Money

Table of Contents | Glossary

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1031 Exchange

This tool, also known as a like-kind exchange, allows investors to defer paying capital gains taxes on the sale of a property. The catch is that they must sell one property and buy a similar one within a set time frame. If you want to work with real estate investor clients and understand this more in-depth, read our simple yet thorough rundown on 1031 Exchange Rules.

A

Acceleration clause

Does your client have a mortgage contract with an acceleration clause? Make sure they understand that this clause allows their lender to demand immediate repayment of the loan in full if specific requirements are not met.

Active contingent

If a property has an active contingent status, it means that a buyer has submitted an offer to purchase a property, but the sale won’t be finalized until certain conditions, or contingencies, are met. A contingency might be the buyer selling their current house, requiring certain repairs to be made, or obtaining a clean termite inspection.

Active with contract

A property that’s active with contract — also known as active under contract  — is a property that has an offer with contingencies that have yet to be met. There is always a chance a sale might not go through, especially in today’s wild interest rate market.

Addendum

An addendum is simply an addition or supplement to a contract. They modify or clarify parts of an existing contract and must be agreed upon and signed by all involved parties. One of the most common addenda, and an easy example for clients to understand, is the lead paint disclosure for homes built before 1978, which alerts buyers to potential hazards.

Adjustable-rate mortgage (ARM)

An ARM is a home loan that does not have a fixed interest rate. Since an ARM’s interest rate fluctuates over time depending on various market factors, some experts believe they save borrowers money in the long run, as reported by the Business Insider. The disadvantage, of course, is that ARMs make it hard to budget since there is always the possibility (and current reality) of rates increasing.

Clients should always consult with their mortgage professional when it comes to specific questions about their mortgage, but it’s helpful to be able to explain the basics.

What About ARMs? 4 Loan Questions Worth Asking

Adjustment date

Clients with ARMs need to know their adjustment date because that’s when they may see a change to the interest rate in an adjustable-rate mortgage. The time between a change in rates is called an adjustment period, and the length of this period depends on the loan. For most ARMs, the adjustment date occurs annually.

Amenity

An amenity is a feature that enhances the overall attractiveness or functionality of a property. Some examples include swimming pools, fitness centers, covered parking, and laundry facilities. 

Amortization

Amortization is the preset schedule of mortgage loan payments — including interest — over time. Generally, the payments are scheduled monthly over a period of 15 or 30 years. 

Annual percentage rate (APR)

Clients may be confused about the difference between an interest rate on their mortgage loan and an APR. Simply put, the APR is the total amount, including interest and fees, that it costs to borrow money, all expressed as a percentage.

Appraisal

An appraisal is an estimate of how much a home is worth. If an appraiser assigns the property a lower value than the buyer has offered, the lender might not fund the entire loan amount. This can be a stressful point in the homebuying process for clients.

Fear not, there are options! Negotiation is on

e of the best tools in the arsenal of a successful real estate agent. You could work something out with the seller, ask them to bring down the price to the appraised value, or convince the buyer to put more money down to reduce the loan amount. And if the appraisal is really off the mark, you can always challenge it.

Appreciation

An appreciation is an increase in the value of a property over time. This happens because of a variety of factors, like inflation, property improvements, or local developments that make the neighborhood the new “it” spot. 

To calculate a property’s projected increase in value over time, divide the change in value by the initial cost of the property and multiply it by 100. Appreciation may not be a homebuyer’s main motivator when buying a house, but it should always be a consideration. After all, (shout it from the rooftops!) real estate is one of the safest and most profitable investments one can make.

As-is

A property being sold as-is simply means that the property is being sold in its current condition without any improvements, repairs, guarantees, or warranties before the sale. Do you have a client who binge-watches HGTV, dreaming about flipping a house? Well, a home being sold as-is may just be the fixer-upper of their dreams.

Assessed value

This is the dollar value the local government assigns to a home based on square footage, condition, and relative comps. It helps determine how much owners will pay in property taxes. It’s often presented as a percentage of the fair market value.

Assignment

This is when the seller signs over all rights and obligations related to a property to the buyer before the actual closing. This is a bit of legalese and probably not a term you’d use in casual conversations with clients.

Assumable mortgage

You don’t hear much about assumable mortgages or the assumption of mortgages anymore. If a client asks, it means the buyer will take over the seller’s existing mortgage and house-related debt instead of creating a new mortgage loan with current interest rates.

While this type of arrangement may be attractive in today’s environment of rising interest rates, you’ll want to explain to your clients that it’s very difficult to take over a mortgage. This is thanks to the Garn-St. Germain Depository Institutions Act of 1982. Basically, the law protects lenders from assumable mortgages with below-market interest rates. Most mortgages now have a “due-on-sale” clause, which requires the borrower to repay the loan in full if they sell the property.

B

Balloon mortgage

Clients who opt for a balloon mortgage will pay smaller monthly payments at first, followed by one larger-than-typical payment (the balloon) at the end of the loan. They generally come with lower interest rates and the ability to get a higher loan amount. Common in the 2000s, they aren’t as popular now. The final balloon payment can be massive; one misstep could leave the borrower upside down. 

Biweekly mortgage

Borrowers with a biweekly mortgage will submit their mortgage payments twice a month instead of once. This results in 26 payments annually, which means paying one extra month per year. This means a borrower could pay their loan off sooner than those with traditional payment schedules.

Bridge loan

A bridge loan is a short-term loan that helps a buyer cover costs in the interim between buying a new house and selling one. Got clients who found their dream home before selling their current one? A bridge loan can be a real lifesaver in this situation. 

Broker

Clients may want to know the difference between an agent and a broker. After all, part of the commission they’re paying may go to a broker. You can explain that a broker is equivalent to a manager in the real estate world: an agent with a certain level of experience who has taken the state-mandated education and examinations to meet the requirements to become a licensed real estate broker. (Of course, some states refer to a real estate agent as a “broker.”)

Buydown

A buydown is a financing technique that allows borrowers to secure a lower interest rate on their mortgage. This can involve buying discount points as a one-time fee paid at closing. A buydown can also exist when a seller makes initial payments toward the mortgage to reduce the interest rate, usually in exchange for a higher purchase price.

C

Call option

This gives a buyer an exclusive right, or option, to purchase a certain property at a set time for a specified price.

Cash-out refinance

When homeowners have equity in their homes, they can refinance their property and take the equity out as cash. It generally results in a higher interest rate or additional points, but it’s a way for homeowners to leverage their equity in a property. 

Certificate of eligibility

When working with veterans, you’ll want to prepare them for a fair amount of paperwork. The certificate of eligibility is an official form certifying that a veteran has met the terms that qualify someone for a VA loan. VA loans might have a lot of red tape, but they can be excellent, affordable options for service members and their spouses.

Certificate of reasonable value

This is a form from the Department of Veterans Affairs outlining the maximum amount that can be issued to a borrower of a VA loan. Like we said, lots of paperwork.

Chain of title

As clients get ready for closing, they’ll hear a lot about the title. The chain of title is a historical record of previous owners of a property that’s essential in establishing the legal ownership of the property. An established chain of title helps protect the buyer from future challenges to ownership. A title search helps create that chain and is usually conducted by a lawyer or title company prior to closing.

Clear title

A clear title indicates that there are no liens or encumbrances on the property (yay!). It’s also known as a just title or free-and-clear title. A title with liens or encumbrances has a cloudy title. Properties can have their titles cleared, but it can take a long time and may even require legal action.

Closing

This is a realtor’s payday! The closing date is the agreed-upon date when a property changes ownership from the seller to the buyer. Definitely worthy of a happy dance!

Closing costs

Closing costs are all of the additional fees related to the purchasing or selling of a property. They are generally between 3% and 5% of the purchase price and account for appraisals, taxes, attorney fees, and title insurance. 

Clients will need an exact accounting of the total amount owed in closing costs. They’ll also need to ensure that those funds are properly wired or deposited on the closing date.  

Remember that time when a wire transfer didn’t go through from a third party who was hiking on top of a mountain and couldn’t be reached? Prepare your clients to double, triple, quadruple-check everything related to these costs and their transfer.

Co-borrower

A co-borrower is someone who shares the responsibility of paying back a loan. Don’t you love it when the co-borrower is the client’s dad who comes along on the inspection and is suddenly an expert on chimney engineering? 

Commission

My guess is that you know exactly what a commission is and how it works — but your clients might have some questions.

A commission is the amount charged by the real estate agents who lead the transaction. It is almost always paid by the seller. Commissions are generally 6% of the purchase price of the property, and are usually split between the buyer and seller agents, and then between the agents and their brokers.

Community property

In a community property state — namely Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin — any real estate purchased during a marriage belongs equally to each spouse, 50-50.

Comparable sales

Comparable sales (also known as “comps”) are used to establish a reasonable price for a property. Comps are recently sold properties in the area that have similar features to the one being evaluated.

Of course, the ultimate pricing decision lies with the seller, but we hope they listen to you because you’ll come up with a price based on the science and art of comparative market analysis (CMA).

Comparative market analysis (CMA)

When you sit down for your listing appointment, one of the most important things you’ll have with you is your comparative market analysis. This is an estimate of a property’s worth, determined by local comparable sales, market data, sale history, and location. CMAs are a place where an agent can really show off their knowledge and professional value.

Compound interest

The concept of compound interest can perhaps best be described by Benjamin Franklin, who allegedly said, “Money makes money. And the money that money makes, makes money.” Albert Einstein supposedly called compound interest mankind’s greatest invention. 

It’s essentially the idea that if you invest your returns into more investment, that money multiplies. This works in your client’s favor if they are collecting on investments but against them when applied to debt.

Construction loan

A construction loan is a short-term loan that covers the cost of building a property until the owner can secure long-term financing.

Contingency

A property is considered contingent when the buyer has made an offer to purchase it — as long as certain conditions are met. A home inspection is the most common and well-known contingency. Contingencies can also mean repairs that need to be made or the buyer’s home selling. Whatever these contingencies are, they have to be resolved before the property can close.

Conventional mortgage

Conventional mortgages are the ones that aren’t part of a specific government program, such as Fannie Mae, Freddie Mac, USDA, or the VA. Generally, borrowers who go the conventional route are lower risk, offer a larger down payment, and don’t require mortgage insurance.

Help Clients Navigate a Volatile Mortgage Environment

Convertible adjustable-rate mortgage

It’s kind of like if a fixed-rate mortgage and an ARM had a baby. A convertible adjustable-rate mortgage is a mortgage with a much lower interest rate at the start of the loan, where the interest rate fluctuates during the life of the loan, usually every six months. 

But, unlike a traditional ARM, a borrower can switch to a fixed-rate mortgage. These mortgages were developed in the 1980s in an era of double-digit interest rates when borrowers were hopeful that the rates wouldn’t rise much more.

Cost of Funds Index (COFI)

Used to calculate variable interest in adjustable-rate mortgages, COFI is a benchmark determined by average regional interest rates incurred by financial institutions.

Customer relationship manager (CRM)

A CRM helps agents track leads in their sales funnel. Robust CRMs have email and text drip campaigns, and many even let you call prospects and track responses directly through the system. The best CRM is one you’ll use, so make sure it’s user-friendly, has all the bells and whistles you need, and helps you reach out to prospects and leads quickly and consistently.

D

Days on market (DOM)

Simply put, this measures the number of days a property is for sale, from the day it is listed on the multiple listing service (MLS) to the day a buyer and seller are under contract.

As a seller’s agent, you’re counting the days a listing is on the market. Chances are your client is, too, which is why she’s calling you before breakfast.  

Deed

The deed is a legal document recording the transaction of title (or official ownership transfer) from the seller to the buyer. It is recorded at the local county clerk’s office. It’s really just a combo of legalese and paperwork, but everyone feels better having a tangible representation of ownership.

Deed in lieu of foreclosure

This is when a homeowner turns a deed over to the mortgaging bank to avoid going into foreclosure. This allows the borrower to avoid personal liability for the remaining unpaid debt. In some cases, they may be able to continue living on the property.

Default

To default on a mortgage loan means the borrower has stopped submitting monthly payments.

Delinquency

Borrowers can go into delinquency if they have stopped paying their monthly mortgage loan payments for a certain time period. At this point, the lender has the option to start foreclosure proceedings.

Debt-to-income ratio (DTI)

As the name suggests, this is the ratio of a homebuyer’s debt to their income. This is an important calculation for lenders when considering mortgage applications and whether borrowers can afford to make payments. You can help your clients calculate their DTI by adding together all of their monthly payments and dividing the total by their gross monthly income.

Discount points

Borrowers may pay these fees at closing to secure a lower interest rate.

Down payment

A down payment is the amount of money a buyer pays for a property up front, usually a percentage of the total purchase price. A crucial question for your clients: How much can you put down? After a good look at their finances, a nice long chat with their financial advisers, and an extensive application with a mortgage lender, they might finally have an answer. 

Conventional loans often require 20% of the purchase price, while government-backed mortgages could require much less (sometimes nothing!). Loans with less than 20% down often require buyers to pay private mortgage insurance (PMI) until they reach a certain equity ratio.

Due diligence period

This period is a specified amount of time after an offer is made during which the buyer can inspect the property and review relevant documents. It’s a chance for the buyer to be sure in their decision to move forward with the purchase. It’s also a period when seller’s agents tend to bite their nails, breathe rapidly into paper bags, and — oh, yes, they will have that third margarita, thank you!

Due-on-sale clause

Also called an acceleration clause, this requires the borrower to repay the loan in full when a property (or collateral) is sold. It all goes back to that riveting Garn-St. Germain Depository Institutions Act, which was put into place to protect lenders from assumable mortgages.

E

Earnest money deposit

First-time buyers may be new to this concept, so it is worth bringing it up at the beginning of the home search process. Also known as a good faith deposit, it’s the amount of money a buyer puts in escrow to show their commitment to purchase a property. Usually, a small percentage (from less than 1% to 3%) of the purchase price, it goes toward the purchase at closing. If the sale falls through, the seller could keep some or all of the earnest money, depending on the situation.

Easement

When examining a property — to buy or sell — it’s crucial first to understand if there are any easements on the property. An easement is a legal right for a non-owner to use or cross a property for a specific purpose while the title remains with the owner. 

One example is someone using a private road to access their own land. Another one that is popular down here in Charleston is a conservation easement. This means the owner has donated a portion of the property to be protected because it has historical, cultural, or environmental significance. The owner can receive tax credits in exchange.

Eminent domain

This is the government’s right to use private land for a specific, public purpose after compensating the owner.

Encroachment

An encroachment is a violation of an owner’s property rights by building or extending onto their land without permission. For example, if you build a fence and part of it is in your neighbor’s yard, that’s encroachment.

Encumbrance

You just never want to hear that a property has an encumbrance. Never. Want to. Hear it. And if you do hear it, you need to explain it to your client. 

An encumbrance is a claim against a property, such as a mortgage, lien, or easement. These can affect the transferability of ownership.

Equal Credit Opportunity Act

This was groundbreaking legislation when it was passed in 1974. Today, it offers agents the opportunity to further the cause of equality and justice in our professional transactions. The act protects potential borrowers against creditors who would discriminate against their mortgage application based on race, color, religion, national origin, sex, marital status, age, or acceptance of public assistance.

Equity

This is the amount of property that a person (not the bank) actually owns. For example, if you put a down payment of 20% on a $200,000 home ($40,000) and get a loan for the rest, your home equity is $40,000. Your equity will increase as you pay down the loan and as your property value increases. However, it could decrease if you take out more loans against the property or if the home rapidly declines in value.

Escrow

A third party holds funds in escrow during the real estate transaction, releasing them at closing. Generally, this refers to earnest money funds. Some states have laws on the books requiring escrow account holders to pay interest on these funds, though banks are often exempt.

Examination of title

Before closing, everyone will want to make sure that the title is clear. Title companies research a property’s transfer of ownership through public records to trace its history and ensure there are no encumbrances that could affect the purchase.

Exclusive listing

When walking through a new listing agreement, it’s important to explain all of the different representation options. An exclusive listing gives one real estate agent a property listing and a certain amount of time to get the property sold. That agent is expected to find buyers and oversee the transaction during this period. This is a good topic to cover when you’re explaining commissions, percentages, and how they are split.

F

Fair Credit Reporting Act

This one doesn’t get as much attention as the Fair Housing Act, but it was a game changer for the industry. Before the Fair Credit Reporting Act, consumers were not nearly as protected, and abuse of personal data ran rampant.

Enacted in 1970, the Fair Credit Reporting Act ensures that files containing personal information gathered and held by consumer credit reporting agencies are handled fairly, accurately, and privately. It also gives consumers access to their own information.

Fair market value

The fair market value is essentially the price that the market can bear, borne out by the fact that both the buyer and seller agree upon it. Make sure your clients don’t confuse it with the appraised or assessed value!

Fannie Mae

The Federal National Mortgage Association, colloquially known as Fannie Mae, is one of the most active sources of mortgage financing in the country. It is a government-sponsored enterprise that allows medium- to low-income families and individuals to obtain affordable mortgages.

Fee simple

This is a type of common property ownership in which there are no conditions or restrictions, and the property is owned absolutely.

FHA mortgage

FHA mortgages are government-backed property loans insured by the Federal Housing Administration. They differ from conventional loans in that the down payment and credit score requirements are lower. That’s why they’re especially popular with first-time homebuyers.

Fixed-rate mortgage

With a fixed-rate mortgage, the interest rate is set and does not fluctuate during the life of the loan. This gives the borrower the stability of knowing the rate will stay the same over the course of the 15 or 30 years of the loan. If interest rates dip significantly, borrowers can refinance their loans but will have to pay closing costs.

For sale by owner (FSBO)

This is when the owner of a property publicly lists it for sale without the assistance of a licensed real estate agent. Agent slowly raises palm to forehead. Many FSBOs are hoping to save money by not paying a seller agent’s commission fee. But given the cost savings that agents typically bring to a transaction, thanks to their marketing and pricing expertise, they probably won’t. 

Foreclosure

If a property owner stops paying their mortgage payments, usually for at least 90 days, the lender can start foreclosure proceedings. This can lead to a short sale, foreclosure auction, and/or the lender taking possession of the property.

Freddie Mac

Freddie Mac is the common name for the Federal Home Loan Mortgage Corporation or FHLMC. It’s a privately traded, government-backed company that offers greater accessibility to mortgage loans and provides stability in the market.

H

Home equity conversion mortgage

A home equity conversion mortgage is a type of reverse mortgage offered by the FHA that allows the borrower to withdraw a portion of their equity in a property.

Home equity line of credit (HELOC)

This is a line of credit based on the equity one has in their property.

Home inspection

Generally, a buyer will enlist the services of a licensed home inspector after the initial offer phase. The inspector will look for major (and sometimes minor) defects in a home that could impact the value. Inspectors usually look at the foundation, roof, plumbing, electrical systems, and HVAC.

Whether it’s bats, creaky foundations, creative duct-taping, or prominently displayed naked photos of the homeowners, most agents have encountered something unexpected in this phase.

Homeowner’s association (HOA)

Buyers looking at a home in a planned community need to know what an HOA is and why it’s important. An HOA is an entity that oversees the rules and regulations related to a planned neighborhood or multifamily building. They can also offer services to homeowners, manage shared property and common areas, ensure appearances are kept up, plan activities, and protect property values. 

Homeowners generally pay HOA fees each month. If they neglect to do so, the HOA can put a lien on the property. 

Homeowners insurance

Homeowners are required by their lenders to obtain homeowners insurance, which protects both the owner and mortgage provider against calamities, natural disasters, and accidents occurring on the property. Insurance is generally folded into monthly mortgage payments. Be aware that certain areas may have special requirements, like properties in flood zones needing flood insurance.

I

IDX website

A real estate agent’s website is one of the most important marketing and lead generation tools in their arsenal, especially when they have IDX functionality. IDX, or internet data exchange, allows your website to connect to the MLS and keep up-to-date real estate listings right on your site. We have done extensive research and selected our top real estate website builders that include IDX to help agents select the best provider. Check out our roundup of the best real estate website builders.

J

Judicial foreclosure

In many states, lenders must obtain a foreclosure ruling through the courts before commencing foreclosure proceedings.

Jumbo loan

A jumbo loan is one that goes over the “conforming loan limit.” That makes it ineligible to be backed by government-sponsored programs administered by Fannie Mae, the FHA, and Freddie Mac. The limit is based on local median home values. Jumbo loans generally require stricter qualifications, higher credit scores, and higher income or cash reserves.

L

Lead generation

Agents generate leads to keep their sales funnels full and ensure a steady pipeline of prospects and leads. Lead generation activities can range from cold calling to buying leads and everything in between.

Lease option

As the market cools and rates rise, this could be an attractive option for buyers who have found their dream home but are hoping rates will come down in the near future. A lease option is also known as a rent-to-buy. A property is leased for a determined monthly amount and can be purchased at any time during the lease for a specified amount of money.

Lender

In real estate, a lender is any individual or institution that provides financing to purchase a property, with the expectation that the amount will be repaid with interest.

Lien

We bet you have a lot of clients who think they understand this concept but could maybe use a refresher. A lien against a property means there is some unpaid debt where the property was used as collateral. This could tangle up the closing process if not properly handled. Liens can come from unpaid mortgages, construction bills, and even HOA fees. A mortgage is also considered a lien.

Life cap

On an adjustable-rate mortgage, this is the maximum rate of interest that can be charged above or below the initial interest rate. Generally, the life cap of an adjustable-rate mortgage is 5% or 6%, although it could be higher. This means that even if interest rates rise more than that life cap, the borrower will not have to pay those rates.

Loan officer

A loan officer is a licensed official with a financial institution responsible for helping borrowers understand the mortgage process, choose a loan, apply for and receive it, and communicate with other transaction stakeholders. These are the people who should be answering all of your client’s mortgage-related questions.

Loan origination

This is the time period during which a financial institution reviews a borrower’s loan application. There is sometimes a loan origination fee, as the institution gathers information and data to assess the borrower’s risk.

Loan servicing

Servicing is everything involved in the administration and maintenance of a loan. It includes sending out statements, collecting, recording, and tracking payments, managing escrow funds, and following up on unpaid debts. This is important for clients to understand because the company that they ultimately pay might be different from the institution from which they originally took out the loan (the originator).

Loan-to-value (LTV)

This is the ratio between the loan amount and the property value. To find the LTV, divide the loan amount by the value. A higher LTV denotes greater risk to the lender.

Lock-in period

A borrower must wait a certain amount of time before being able to pay off a loan in full. If a borrower does pay off a loan during the lock-in period, fees are usually involved. Make sure your clients don’t confuse this with a rate lock.

M

Mortgage

A buyer who can’t pay cash for a home will take out a loan or mortgage from a financial institution, using the property itself as collateral. In exchange, the borrower will pay back the loan regularly over a scheduled period of time and with interest.

Remember, the mortgage guys are where you should be referring your clients with their specific mortgage questions.

Mortgage banker

A mortgage banker represents the financial institution issuing the loan and oversees each step of the process. Make sure your clients understand the difference between a mortgage banker and a mortgage broker.

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Mortgage broker

A mortgage broker has access to multiple financial institutions. This way, they can shop around for a mortgage with the best interest rates or deal for the borrower. 

Mortgage insurance, aka private mortgage insurance (PMI)

Mortgage insurance protects banks against payment default. Lenders often require it if the borrower is putting down less than 20% of the purchase price.

Multiple listing service (MLS)

Like Zillow, but for real estate professionals, the MLS is a network of local lists that create a database of properties for sale.

N

Negative amortization

Negative amortization can happen when a borrower doesn’t put enough in their monthly repayments to cover the interest. In this situation, the total amount owed on the loan continues to increase.

No cash-out refinance

A borrower might use a no cash-out refinance to take advantage of a lower interest rate or to shorten the term of their mortgage. The borrower isn’t taking money out based on the equity of the property as they would in a cash-out refinance. 

No-cost mortgage

In a no-cost mortgage, the lending institution pays all closing costs in exchange for the borrower paying a higher interest rate. This benefits the lender in that they can then sell the mortgage on a secondary market for more because of the higher rate. It benefits a borrower who plans on staying in a property for less than five years. They save the closing costs and aren’t saddled with a higher interest rate for 15 or 30 years.

Note rate

Also called nominal rate, this is the amount of interest set for a loan used to calculate the monthly payment on a mortgage. Clients often confuse the note rate with the annual percentage rate. However, the APR is used to compare what it would cost for a specific loan with a certain lender, adding all their particular fees in.

O

Open listing

A seller who uses an open listing doesn’t have an exclusive agreement with an agent. This means that any agent can compete to find a buyer and receive the commission. Similar to an FSBO, an open listing might save the seller some money, but we all know it comes with a lot of headaches. 

Without a real estate professional, the seller doesn’t have someone who can provide advice and help move the transaction along. Agents might also be less motivated to market the property since they are not guaranteed a commission.

Original principal balance

The original principal balance is the total amount owed on a loan before any repayment begins. This is the number clients will see before paying their first monthly payment, though it generally does not have the escrow balance applied. 

Origination fee

A borrower will pay an origination fee to the lending institution to cover the cost of processing a mortgage loan. Clients might be surprised to learn that an origination fee is typically between 0.5% and 1.5% of the total loan amount. This means an origination fee on a $250,000 loan could be as high as $3,750.

Owner financing

If a buyer secures a mortgage directly from the seller, it’s considered owner (or seller) financing. The borrower generally avoids the fees, requirements, and rates associated with conventional loans and works out a legal and binding contract with the seller. 

There are also several advantages to the seller. They can typically set their own loan terms and sell the property as-is. Also, it all usually happens much more quickly than waiting on slow-moving financial institutions. 

Of course, there is risk involved, but sellers can often retain the deed until the debt is paid off. For buyers who struggle with good credit or putting together a 20% down payment, seller financing can open a lot of doors.

P

Pay-at-closing leads

Maybe you want leads, but you don’t have the budget to splash out on buying them before closing a deal. With a pay-at-closing lead gen model, you can obtain and work leads and only pay when they close on a property. Just note that the cost is usually pretty substantial, even as much as 35% of the commission.

Pending

This definitely gets confusing for clients poking around on Zillow, Redfin, and even the MLS. What’s the difference between active, active-contingent, pending, and all the other terminology? If a sale is labeled pending, all of the contingencies on the sale have been met and it is moving toward closing. Chances are very good that this sale will close. If not, the buyer may be at risk of losing their earnest money. 

Per diem fees

The borrower pays per diem fees for every day a loan is scheduled to close but does not. To calculate the per diem, multiply the loan amount by the interest rate (as a decimal) and divide that total by 365. The fees are generally paid to the lender at closing. 

A seller could also add a per diem clause in the contract. For example, if a buyer doesn’t close on a specified date, they might be required to pay a certain amount per day to cover utilities, insurance, HOA fees, or taxes.

Principal, interest, taxes & insurance (PITI)

This figure calculates monthly housing costs by adding up principal, interest, taxes, and insurance. PITI represents the total amount owed by a borrower every month. Many recommend borrowers keep PITI to less than (or equal to) 28% of their total monthly income. This is helpful for clients to know when they are considering how much house they can afford. 

Planned unit development (PUD)

A PUD is a grouping of residential buildings. It could be made up of townhouses, condos, or single-family homes and generally includes common areas such as pools, tennis courts, playgrounds, and parking. PUDs almost always have HOAs and associated fees. 

Clients looking at PUDs must understand the covenants, rules, regulations, and costs involved. For example, a client looking for a home that could also host exercise classes for paying customers might run into trouble with a PUD’s HOA rules about running a business out of a home. And make sure they’re aware of any required dress code when holding a garage sale.

Pocket listing

A pocket listing is a property being marketed quietly, in back channels. It can benefit sellers who value privacy or want to test the waters before listing publicly. 

What should you do when a client asks for a pocket listing? Pocket listings are risky because there is a lack of transparency and visibility that limits the number of potential buyers. This also makes pocket listings controversial, to the point where the National Association of Realtors (NAR) enacted the MLS Clear Cooperation Policy. This states that agents must put a pocket listing on the MLS within one day of any kind of marketing.

Pre-approval

Again, this is all really in the purview of the mortgage experts. However, your clients need to know the difference between pre-approval and prequalification (see below). After all, having a pre-approval letter from a lender can go a long way in giving a seller confidence when looking over an offer. 

After a borrower applies for a loan, a lender will grant them pre-approval for a certain amount based on verifying all of the information gathered. However, it’s important for your clients to understand that pre-approval does not guarantee a mortgage loan.

Predictive analytics

A predictive analytics company pulls together millions (if not billions) of data points from multiple sources in order to forecast the future. In real estate, common data sources include demographics, property, event data, and behavioral trends. This forecasting can influence — and even direct — strategic decisions, but it can also help agents hyper-target their marketing and lead generation activities on the prospects most likely to buy or sell in the next year.

Prequalification

Prequalification is the very first step in the mortgage loan process. A financial institution will prequalify a borrower for an estimated amount. It’s not as thorough a process as pre-approval, so it’s important to remember that this is even less of a guarantee of a loan.

Prime interest rate

A prime interest rate is what financial institutions use as a basis to determine rates for mortgages, credit lines, and even credit cards. 

Each bank has its own prime interest rate based on the Federal Reserve’s federal funds rate. While the prime interest rate is not the best or most competitive rate, it’s the one published publicly that can be adjusted based on individual loans. This is where clients with good credit, high down payments, and low debt-to-income ratios can negotiate for better rates.

Principal

Principal is one of those words that can mean different things to different people, depending on the context. 

• In lending, principal is the total amount of money borrowed that must be paid back with interest. 
• In real estate, the principal could also refer to a party (the buyer or seller) who has authorized an agent to act on his or her behalf. 
• It could also refer to the managing broker in a brokerage or the individual who’s ultimately legally responsible for overseeing transactions.

Probate

This is the process of reviewing a deceased person’s estate and will and administering the transfer of property. Probate can take place whether or not the deceased had a will in place.

Proof of funds

Clients should be aware that proof of funds is different from pre-approval from a lending institution. Buyers with all-cash offers still need a proof of funds letter, but for the entire amount.

A proof of funds letter lays out the financial situation of the buyer, demonstrating their capacity to buy a property. It should show that the buyer has enough cash on hand to cover the down payment and closing costs. These funds must be liquid, not stocks or bonds. 

A proof of funds form can be furnished by a bank, or you can use this simple proof of funds template from realtor.com.

Purchase agreement

Once an offer is accepted and all of the parties have signed, it becomes a contract or a purchase agreement. It’s important for buyer clients to understand that if they submit an offer, it becomes a binding contract once the seller agrees and signs. 

A purchase agreement outlines the terms and conditions of a sales contract. It affirms the buyer’s intent to purchase the property and the seller’s intent to convey it to the buyer. It also outlines the general agreed-upon terms, such as the purchase price, contingencies, closing date, and earnest money details.

R

Rate lock

Imagine a client submits an offer, and then rates increase exponentially in the period between the contract being signed and the closing date. It could throw off the entire deal.

Luckily, borrowers can lock in an interest rate for a certain amount of time. This protects that rate against fluctuations in the market in the time between making an offer and the closing date. Clients should check with their mortgage specialist to see what time frames are available and the fees associated with them.

This Free Download Helps Your Clients Understand Rate Lock

Real estate agent

You know who you are! Clients might be interested to know that you have specific education requirements, are licensed by the state, and must follow certain laws. And if you’re a member of NAR, you’re bound by a very stringent code of ethics.

Real-estate owned (REO)

Properties that have been possessed by a lender after the borrower has defaulted on a loan and a short sale or auction was unsuccessful are called real estate (or bank) owned.

Real Estate Settlement Procedures Act (RESPA)

The Real Estate Settlement Procedures Act of 1974, or RESPA, is a piece of legislation that protects consumers. It requires lenders to be transparent by providing timely disclosures of the scheduling and costs of a real estate transaction. It also prohibits kickbacks and inflated fees and places some limitations on the uses of funds in escrow. 

Before RESPA, mortgage lending felt like the Wild West. Consumers could easily find themselves at the mercy of bad actors who charged exorbitant fees, required referrals, and promised one thing but delivered something very different. 

Realtor

A realtor is a real estate agent who is a dues-paying member of the National Association of Realtors. NAR members are held to a high standard of professionalism and adhere to a strict code of ethics.

Many think this term is synonymous with agent, but it’s not! All realtors are agents, but not all agents are realtors. The word “realtor” is one of the hottest real estate keywords, so if you’re looking for a topic for your next blog article, why not explore the differences between the two?

Refinance

If a borrower takes out a new loan on the same property, it’s called a refinance. The debt owed remains the same but generally under better terms, such as a lower interest rate, smaller payments, or a shorter loan term. 

Right of first refusal (ROFR)

Giving someone the right of first refusal means that they have the opportunity to submit an offer on a property before anyone else. The seller can charge whatever price they want, and the potential buyer can offer whatever they think is fair. It doesn’t mean the offer will be accepted, but it does give the potential buyer an advantage. 

Right of ingress or egress

The right of ingress is one’s right to enter their property, and egress is to exit their property. You’re likely to hear these terms mentioned when there is an easement on a property. 

S

Sale-leaseback

This occurs when a seller and a buyer close on a property, but the seller needs more time to vacate the property. The seller can then lease back their former home from the buyer and pay rent for a specified period. If time is an issue, this can be a great negotiation point between buyers and sellers.

Second mortgage

Borrowers can take out a second mortgage on a property using the property as collateral. The first mortgage remains in effect and would be the first loan to be paid off if there is any default. Generally, second mortgages have high interest rates for less money than the first mortgage.

Secured loan

A mortgage is a type of secured loan where one uses collateral — in this case, a property — to secure funds. Loans can also be secured by cars and other high-value items. 

Short sale

If a borrower is behind on payments and in a dire financial situation, a lender might allow a short sale of the property. In such a case, they generally accept less than is actually owed on the mortgage. 

Buyers are often interested in short sales because they can mean a good deal on a property. But short sales are incredibly complicated, and the process is anything but short.

Staging 

Staging is the process of furnishing a house to maximize its appeal. Seasoned agents know that staging can really help a home shine, especially if the property is vacant. Applying a neutral, trendy look can help prospective buyers visualize themselves living in the house and can even increase the sales price. 

Bringing in new design elements and storing owners’ current furniture can be pricey. However, many staging companies assure sellers that they will recoup those costs in the sale of the home. If staging is not an option, consider tactful ways of suggesting that the owners declutter. Or just follow this list of clever staging tips!

T

Termite report/inspection/letter/bond

Imagine your clients purchase a home and, as they walk through the kitchen, their feet go through the floorboards because termites have been snacking on the wood. Termites can cause catastrophic damage. That’s why many lenders require proof that a property has been inspected for termites and termite damage. 

Banks may also require that the home be under a continuous termite bond. This shows that the home is regularly inspected and treated for termites by a professional pest control company. If termites are found, there are plenty of options for remediation.

Title

A title is one’s legal right to a property, to use it however one wants, and to transfer it how and when, and to whomever one wants. It is different from a deed, which legally shows who is the property owner.

Title insurance

Suppose you’re a buyer who purchases a property after conducting a title search, believing the title to be clean. Two weeks later, a fourth cousin, twice removed, of a little old lady who owned the house 74 years ago shows up on the porch saying you’re living in his inheritance. Title insurance has got you covered — it protects a property owner and a lender against claims on a property title.

Title search

When purchasing a property, most buyers will hire a lawyer or title company to comb through public records to follow the transfer of the title across the decades. This ensures the title is clean and free of liens or encumbrances. Individuals can conduct their own searches, but that’s not usually recommended. Generally, title insurance companies accept 30 years of record, which is good news for owners of historic homes. 

Transfer of ownership

This is a fancy way of explaining the conveyance of the deed and title from the seller to the buyer at closing.

Transfer tax

A transfer tax is essentially a fee charged by the state, county, or municipality to handle transferring the title. Clients will expect you to know the rates and if there are any applicable exceptions, as will the writers of your state’s real estate licensing exam. 

Almost everywhere, the seller pays the transfer tax. The fee is based on the value of the home and can be calculated in increments or as a percentage. For example, in South Carolina, the combined state and local fee is $1.85 per every $500 increment of the total sale price.

U

Under contract

If a buyer and seller have agreed on a price and terms and signed a contract, then the property is under contract. However, all contingencies have not yet been met, and the closing has not taken place. Once the contingencies are met, the property is considered pending, and the sale will most likely go through.

Again, this is a time of great uncertainty, and while an agent can control a lot, you can’t control everything. Stay diligent, stay vigilant, stay calm. And make sure you take your phone off silent.

Upside-down mortgage

Also known as an underwater mortgage, this occurs when a homeowner’s outstanding loan balance is greater than the current value of their home.

USDA loan

USDA loans are backed by the Department of Agriculture and tend to have lower mortgage insurance requirements than other government-backed loans. They also don’t require a down payment. The catch is that the property must be in suburban or rural areas to qualify.

Free Download: Loan Questions That Could Save Your Clients Money

V

VA mortgage

A VA mortgage is managed by the Veteran Benefits Administration and offers a guarantee for some or all of a mortgage issued by a private financial lender. This guarantee allows servicemen and women, veterans, and surviving spouses access to better loan terms. Those who qualify can learn more and apply for a VA mortgage loan here.

Variance

Think of a variance as a friendly exception granted by the local authorities. It’s a special permission to use or modify a property in a way that doesn’t align with current zoning laws, allowing a homeowner to make unique changes to a property.

Z 

Zero lot line

A zero-lot-line home is one that is built right up to the edge of its property line. 

Zoning ordinance

This is a local law that outlines how a property should be used in a specific area. There are zones designated for residential communities, commercial properties, and industrial purposes — you get it!

Bringing It All Together

You made it through all 141 real estate terms! Ensuring that you know and can explain these definitions will go a long way in helping your clients and becoming a successful real estate agent. No matter where you are in your real estate career, we hope this list of crucial real estate terms and definitions was helpful, a good refresher, and maybe even enlightening. How about that Garn-St. Germain Depository Institutions Act? Great anecdote for cocktail parties!

Did we miss any of your favorite terms? Have any definitions to add? Be sure to leave a comment below!

The post 141 Real Estate Terms and Definitions to Know in 2025 appeared first on The Close.

Key Takeaways:

1031 exchange requires investors to exchange proceeds from the sale of an investment property into a like-kind property or properties to defer the capital gains tax. 

Relinquished and replacement properties should only be used for business or investment purposes, not personal use like a primary or secondary residence. 

1031 exchange requires two major mandatories: identification of replacement property within 45 days of closing and the new purchase completed within 180 days. 

The final property that is resold will require taxes on any gains.

A qualified intermediary must handle the transaction, and the investor cannot take possession of the sale proceeds directly. 

1031 exchange can be done more than once, which permits continued deferral tax on subsequent transactions. 

What Is a 1031 Exchange?

So, let’s break down the definition of a 1031 exchange. It takes place under Section 1031 of the Internal Revenue Code. It allows investors to postpone or defer the payment of capital gains taxes when one investment property is sold and another property of equal or greater value is purchased. The properties involved must be held for business or investment purposes and be “like-kind.”

The term “like-kind” is one of the rules for the 1031 exchange, which may sound like a restrictive requirement, but it is pretty broad regarding real estate. Almost any real property held for investment purposes will qualify as like-kind. You can exchange commercial property for a residential rental or raw land for a shopping center. The key is that both properties are intended for investment or productive use in a business.

You’ll find this tax strategy is beneficial for real estate investors who want to avoid huge tax liabilities and have more capital to reinvest in new properties. A 1031 exchange has a tight schedule, so you must act precisely according to the rules provided by the IRS to avoid paying the capital gains tax.

How 1031 Exchanges Work + Examples

A 1031 exchange is a multi-step process with strict adherence to numerous IRS guidelines to keep the tax-deferred status. Every step of the process is crucial, and any missed deadline or mismanaged transaction will create grounds for disqualification. Hence, the investor will end up paying capital gains taxes on any realized gain from the sale. Understanding how each phase works is important, from selling the initial property to acquiring the replacement property. 

Below is a breakdown of what is a 1031 exchange in real estate and how it unfolds:

• Step 1: Sell the relinquished property. The 1031 exchange process starts with the sale of the investment property. The proceeds from the sale do not come directly into your hands, as required by law, so they have to be forwarded to a qualified Intermediary. You must refrain from handling the money at any point or risk jeopardizing the exchange.
• Step 2: Identify replacement property. You have 45 days following the sale to identify a replacement property. These 45 days are referred to as the identification period. The IRS allows you to identify up to three properties, regardless of value, or any number of properties whose value does not exceed 200% of the value of the relinquished property.
• Step 3: Reinvestment in replacement property. This is the third vital step. The new property must be purchased within 180 days, starting from the date of sale of the old property. The actual purchase must close, and all proceeds from the sale must be reinvested.

1031 In-depth Timeline

The 1031 exchange is a process wholly governed by an IRS timeline. Failure to meet the deadlines of each step involved in the exchange will void it and immediately create a tax liability. There are significant stages in a 1031 exchange timeline, from the sale of the original property to the replacement property acquisition. A successful exchange can be achieved by adequately comprehending and adhering to each step in the process. A general outlook at the 1031 exchange rule dictating a specific purchase and investment timeline:

• Day 0: The original property sells, and proceeds go to the qualified intermediary.
• Day 1-45: This is the period in which the investor has to identify a replacement property. Identify up to three properties or more than three, with an aggregate value not exceeding 200% of the relinquished property value. This is also known as the identification period.
• Days 1-180: Beginning from the date of sale, the investor has 180 days to close on the new property. The exchange is considered a failure if it does not happen in this window.

Pros & Cons of 1031 Exchange

Like any investment strategy, the 1031 exchange rules have advantages and disadvantages. Though the ability to defer capital gains taxes is highly attractive to real estate investors, it is also a very regulated process that comes with tight guidelines and timelines. Here are some key pros and cons of using a 1031 exchange:

FAQs

How soon can you occupy a 1031 exchange property?

What are the disadvantages of a 1031 exchange?

What is the average return from a 1031 exchange?

Bringing It All Together

Leveraging the 1031 exchange is a great tool real estate investors use to defer taxes and build their portfolios by reinvesting in like-kind properties. The process, however, is quite complicated, with a lot of strict rules and deadlines involved. But, for an investor who can follow the 1031 exchange rule, large tax deferrals are the most substantial advantage and will provide success in the long term.

Have you ever done a 1031 exchange? If so, let us know about your experience!

The post The Complete Guide to 1031 Exchange Rules appeared first on The Close.

Is this what you want your buyer agent business to sound like? I can help with that—keep reading! 

What Is a Buyer’s Agent & Their Responsibilities 

Defining a buyer agent is simple: they work with home buyers to find and purchase a home. However, buyer agents have much more to their roles than just that simple definition. Their primary responsibilities include:

• Prepping the client before searching for a property by giving information about the buying process, financing options, and market conditions 
• Organizing property showings with seller agents and bringing clients to see those properties
• Writing, delivering, negotiating, and finalizing contracts for the buyer during the purchase and closing on a home
• Maintaining relationships with all buyer clients to work with them or referrals in the future

Differences Between Buyer & Seller Agents

While buyer and seller agents may work on the same transaction and have a lot of the same skills, their fiduciary responsibilities lie on either side of the transaction. A buyer agent is, you guessed it, representing the buyer and their best interests; the seller agent’s loyalty is with the seller. Seller agents also do a few extra items associated with listing and marketing properties to prepare them for sale:

• Listing presentation, comparative market analysis, and contracts to secure listing
• Preparation of the property, photographs, and home staging
• Marketing and advertising on listing websites, organizing showings and open houses
• Negotiating and finalizing contracts for the seller during the purchase and closing on a home
• Maintaining relationships with all seller clients to work with them or referrals in the future

Typically, it’s more challenging to become a seller agent, also known as a listing agent, because that requires a consistent string of sellers who want to list their properties with you. This usually involves more experience and knowledge of the market but is definitely an avenue to take if being a buyer’s agent isn’t your cup of tea. 

How Much Do Buyer’s Agents Earn? 

According to ZipRecruiter, the average buyer agent earns about $94,000 annually, with the high end being $151,000 and the low end being $35,500. Of course, this depends on your local market, general market conditions, and hours worked.

However, it’s important to note that for years, buyer’s agents have been paid by the sellers. This means the home buyer was not responsible for paying any agent commission separate from the transaction. In recent news, this has changed, and sellers in many areas can choose whether or not they want to cover the buyer’s agent commission. 

While this is a case-by-case basis, buyer’s agents should be aware that they will have to discuss the commission structure with the seller’s agent and may also have to discuss it with their buyer clients. Buyer agents must also get a buyer-broker agreement signed to show themselves as the buyer’s representative. Learn more about this process in our buyer-broker agreement guide.

Benefits of Becoming a Buyer’s Agent

Specializing as a buyer’s agent has plenty of advantages and is a great way to build a successful and rewarding career in real estate. If you’re considering carving out a niche in your market as a buyer’s agent, let’s look at some benefits of choosing this path.

• Long-term client potential: When you help buyers with their purchases, you show them how valuable you are and become the person they turn to for all their real estate needs throughout life.
• Negotiation experience: Negotiating is a common and vital practice in real estate. Submitting offers for and negotiating on behalf of buyers is a great way to improve upon this skill. 
• Client education: Being a buyer’s agent allows you to educate people on the homebuying process. It can be a rewarding experience to guide people on the path to homeownership. 
• Potential for easier lead conversion: Starting as a realtor, many ask, “What is a buyers agent?” This is a common path for many real estate agents since finding potential buyers can be easier than securing a listing. It’s a great way to build your business and establish yourself in the industry. 

Many real estate professionals start as buyer’s agents because it can be easier to break into. Some transition to listings, while others prefer to continue working with buyers. Any seasoned buyer’s agent knows that you are not just showing homes. You’re building deeper relationships with your clients and, at times, acting as a wise counselor (dare we say, a therapist) to guide them through a crucial life moment.

Buyer Agent Skills Needed to Succeed 

Your activities as a real estate buyer’s agent are relatively straightforward. You help clients narrow down what they’re looking for, identify properties that match their criteria, write, submit, and negotiate the offer, and manage the transaction to the closing table. Some of the skills needed to excel as a real estate buyer’s agent may even overlap with those of a seller’s agent. Here are some of the more important skills you may tap into as a buyer agent.

•  Networking capability
• Research and market knowledge
• Communication skills
• Basic technology understanding
• Patience
• Negotiation skills
• Problem-solving
• Time management
• Motivation
• Customer service
• Empathy
• Active listening
• Transaction management
• Confidence
• Attention to detail
• Advertising and marketing

One of the best parts of the real estate industry is the variety. Check out our article about the different types of agents for more details on the various roles you may encounter and the different skills required while working in the real estate industry. 

Tips to Excel as a Real Estate Buyer’s Agent

The most successful real estate buyer’s agents are really good at working with people and truly love helping others. They also know how to immerse themselves in the community and help educate consumers on becoming homeowners. Follow these five tips, and you will be on your way to becoming the best real estate buyer’s agent in your market. 

Tip 1: Hone in on Your Market Knowledge 

To get your clients into their dream homes, you must be armed with information about new and available listings. When you have a pulse on the market, you have a better chance of seeing properties as they become available, allowing your clients to be first in and have less competition. Knowing the market also allows you to understand if homes are overpriced and helps strengthen your negotiating skills.

• What to do: Use the MLS daily. Check inventory in the areas your clients are looking in and look at expired listings. Set up auto-searches for your clients and the same searches for yourself. If it’s a tough market, set the search to run in “real-time” so your clients see new listings as soon as they hit the market. And don’t forget to build relationships with the listing agents in your area. They may just have some off-market property options for your clients.

Tip 2: Think of Yourself as a Coach

Whether your client is a first-timer or a seasoned investor, you’re the real estate pro who brings the knowledge and experience to the table. When you signed on, you committed to providing trustworthy guidance to your clients, which includes the idea of “reasonable care.” Your clients rely on you to have their best interests at heart and steer them in the right direction.

A coaching mindset is vital for working with newbies. You can really shine as a specialist when working with first-time buyers who may be nervous, confused, and overwhelmed. Think of yourself as that coach, and you’ll get them to the closing finish line. Create a checklist for first-time buyers (or use ours by clicking here!)

• What to do: Host homebuyer seminars or workshops to provide information about how to become a homeowner. In addition, always be sure to meet with your buyers before getting started to review their needs and set up their search properly. Don’t forget to regularly check in throughout the process to answer any questions that may arise.

Tip 3: Immerse Yourself in the Community

Know your community backward and forward to help your clients find that perfect home. If you have a pulse on the various neighborhoods and development plans, you might be able to help a client score a great house in an up-and-coming area. Knowing the local restaurants, festivals, coffee shops, traffic patterns, and school districts makes you an excellent resource for your clients.

Pro Tip: Knowing your community and local market also helps when your clients negotiate prices. You know the comps, and you might even know the negotiation style of the listing agent. Your expertise and confidence can help your client get their dream home at the right price. All of this serves your real estate buyer clients and helps you become the real estate agent in town everyone looks to when buying a home.

Tip 4: Communicate Well & Often

Consider your communication methods carefully. Your buyer client will have questions throughout the process, so it’s important to determine if they prefer email, text, or good old phone calls. Explain how you work regarding communication and clearly lay out your business hours. And don’t forget to keep in touch even after the deal is done. You’ll want to be there to help with any future real estate needs.

• What to do: You need a good customer relationship manager (CRM) to manage client communication effectively. LionDesk is an excellent option that organizes contacts, helps you strategize communication, sets up automated emails, and even allows you to send texts and voicemail messages through the platform.

Tip 5: Continue to Be a Resource

One of the greatest ways to support your clients is by offering valuable information before, during, and after their transaction. Even after they’ve purchased their home, maintaining the relationship will help them feel at ease seeking your real estate advice.

• What to do: Put your clients in your regular outreach rotation. Send handwritten notes, give a pop-by gift, or just call to check in regularly. It’s also a good idea to keep your clients up-to-date about the value of their home. Sharing area comps and information about their community will help you become a trusted resource for years to come.

Best Practices for Working as a Buyer’s Agent

By incorporating these buyer’s agent best practices into your approach, you’ll have the opportunity to show off your ability to support buyers on what could be the biggest purchase of their life. Take these best practices and create your own systems for your business as a great way to distinguish yourself from other agents.

• Follow-up with leads promptly
• Use a CRM to organize your leads
• Set up auto searches on the MLS
• Use a homebuyer checklist
• Personalize your communication
• Set up drip campaigns
• Educate your clients throughout the process
• Practice patience
• Use active listening to connect with clients
• Tap into your customer service skills
• Practice time management
• Use past testimonials to build trust
• Have confidence in your skills
• Stay involved in your community

FAQs

Is a buyer's agent the same as a realtor?

What is a local buyers agent?

Do I have to pay a buyer’s agent?

Bringing It All Together

This guide should help you better answer the question, “What is a buyer’s agent?” and know that it’s not just for those starting out in real estate. It’s a rewarding niche that allows you to build your business, serve clients, and make a real difference in people’s lives. With these tips, you’ll stand out as your community’s go-to buyer’s agent. 

Do you have experience as a real estate buyer’s agent? What about advice for those wanting to specialize? Leave us a comment or question below!

The post Become a Top Real Estate Buyer’s Agent: Key Role & Responsibilities appeared first on The Close.

Tip 1: Offer to Help

When knocking on doors in the real estate business, avoid coming on too strong with people you don’t know. Most homeowners don’t respond well to a hard sell unless you have an excellent reputation in their neighborhood. Instead, start a friendly conversation by asking if they could use any help or advice with real estate matters. This approach helps you build a good relationship and trust with potential sellers. Listen carefully and offer helpful information without being pushy to form genuine connections within the community.

Tip 2: Don’t Forget to Bring Your Door Hangers

Door hangers are a great way to leave a lasting impression, offering a solid return on investment (ROI) for print marketing. By leaving behind marketing materials with your picture, logo, and contact information on a doorknob, homeowners are more likely to remember you when you return. Follow up in a few days with either a friendly call, postcards, or by sending a neighborhood market analysis through the mail.

Get gorgeous, custom-designed door hangers, social media templates, business card templates, and more from Agent Crate. Agent Crate offers 1000-plus customizable templates to create beautiful leave-behinds in minutes.

Tip 3: Don’t Try to Close the Deal on Their Doorstep

When you’re out knocking on doors to generate real estate leads, focus on building genuine connections. If you hit it off with someone, consider taking the next step by calling them, including them in a direct mail or drip campaign, or asking for their cell phone number to text at a more convenient time. Avoid diving into a hard sales pitch if a homeowner is considering selling. Instead, take it slow by suggesting a phone call, meeting, or inviting them to an open house. But if you meet someone ready to sell, don’t hold back—go ahead and set up that listing presentation appointment without hesitation!

Tip 4: Give a Small Compliment

Remember to turn on your charm! A heartfelt compliment can instantly create a bond and open doors to meaningful connections. When you’re out door knocking for real estate, find something that genuinely impresses you about the homeowner. It could be their meticulously manicured lawn or their inviting front door decor. Make it all about them—engage them in conversation, ask questions, and genuinely listen to what they say. The ultimate aim is to lay the foundation for a solid and lasting rapport.

Tip 5: Offer Value to Homeowners

Another hard-and-fast rule of lead generation is offering something your leads want. This can be as abstract as a conversation or advice or as concrete as a well-researched comparative market analysis (CMA) or market report. You’re doing it wrong if you feel you have nothing to offer. Access to the MLS lets you see if any properties in the neighborhood are expired listings or FSBOs. Packaging that data in creative and valuable ways is just a matter of packaging. 

Tip 6: Dress for Success & Comfort

When it comes to dressing for success, it’s all about professionalism and confidence. Think of your outfits as a way to show off your maturity, creativity, and success. Stick to classic, neutral pieces; remember that you don’t have to spend a fortune to look great. Your outfit should reflect your brand, so consider wearing your logo or brokerage name to make a strong impression. And hey, looking professional doesn’t mean being boring—dress to impress, especially when you’re out door knocking. 

Tip 7: Make Fun Pop-by Gifts

When you visit homeowners, remember to bring a little something like a pop-by gift to make sure they remember you. It could be candy, flower seeds, or any other small gift with your contact info. Feel free to include a card with a cheesy joke to make them smile!

Tip 8: Learn the Best Days & Times to Door Knock in Your Area

If you plan to do door knocking for lead generation, Saturdays between 10 a.m. and 5 p.m. are a great time to catch most people at home. Weekdays between 8 a.m. and 11:30 a.m. are prime times. Just be mindful of people’s time and respect their religious and cultural practices. When planning your door knocking schedule, it’s vital to be flexible and open-minded, considering both weekends and weekdays.

Tip 9: Invite Them to the First Open House at a New Listing

I’m always curious about how my neighbors live, aren’t you? Before the first open house, do some circle prospecting around a new listing. It’s a great way to impress the homeowners and get to know the neighbors. When you have an open house, hand out personal invitations to the neighbors to show them you’re the neighborhood expert. Check out our Open House Ideas guide if you need ideas to generate leads at your next open house.

Tip 10: Don’t Try to Knock Too Many Doors in One Day

Feeling all worn out at noon doesn’t mean you’ve been working hard; it just means you’re stressed, tired, and probably grumpy. And that’s not the vibe you want when knocking on doors. Nobody wants to chat with a stressed-out stranger on their doorstep, right? So, to avoid burning out, knock on about 20 doors before you head to the office or start your open house this weekend.

Tip 11: Track Your Progress

Remember to monitor your outdoor knocking. Keep a tally of the doors you’ve knocked on, the ones where you didn’t have any luck, and the potential candidates for a direct mail campaign. You can use a notepad app to jot down all this info. It’s also important to evaluate your progress and make any necessary changes to improve your approach.

If your customer relationship manager (CRM) has a mobile app, like LionDesk, you can use it to keep track of every conversation while you’re out and about. Add new contacts, take notes, and save data immediately. You can even try LionDesk for 14 days without giving your credit card number.

Tip 12: Ask Open-ended Questions

The key to not being boring is showing potential clients that you care about them and want to work with them. When you knock on doors, asking open-ended questions and listening to what people say is essential. Their input is crucial because it helps you offer the best service for their needs. Sometimes, people are busy, and you might catch them at the wrong time, so it’s crucial to be ready to handle any objections they might have.

Ask LPMAMA open-ended questions like the following:

• “Are you or anyone you know interested in buying a home in your neighborhood?”
• “What do you look for in a potential property?”
• “What’s important to you in a neighborhood?”
• “What would your ideal home look like?”
• “What are your biggest priorities when buying a home?”
• “Tell me about your experience with real estate so far?”

Tip 13: Knock With a Partner

When you’re door knocking, make sure to have a partner with you for safety. This goes for any neighborhood. You never know who will answer the door, so it’s wise to have someone looking out for you from across the street. Plus, it’s nice to have some company, too.

Tip 14: Don’t Be Afraid of Luxury Neighborhoods

In wealthy neighborhoods, people may hesitate to approach potential luxury clients since they assume they have no chance. However, taking a chance might lead to unexpected opportunities. The other good part of knocking on rich people’s doors is that they’re more likely to be entrepreneurs—and maybe also more likely to be self-made entrepreneurs who appreciate a good hustle! Maybe some eccentric billionaire will take a shine to you and give you ten listings to sell this year. Hey, you never know until you try, right?

Tip 15: Participate in Community’s Good Deeds

If you want to connect with the locals, think about doing something cool and helpful for the community. An easy neighborhood cleanup or setting up a clothing drive can get you noticed by everyone and start conversations. This is a great way to overcome any fears of knocking on doors because it removes all the pressure and gives you a reason to be at their door other than to sell something.

The Best Door Knocking Scripts for 2024

Effective door knocking scripts are essential for any successful salesperson. In 2024, the key to mastering door-to-door sales lies in using the best scripts that resonate with potential customers. The right script can make all the difference, from building rapport to effectively communicating your message.

Script 1: If I Brought a Buyer Door Knocking Script

This door knocking script is a classic. The basic idea is to uncover a homeowner’s interest in selling. It’s straightforward and short, so it’s an easy conversation starter.

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Agent: I love your house. It’s beautiful. If there is any possibility of bringing a buyer your way, would you be interested in selling your home?

Script 2: Recent Listing Door Knocking Script 

Trying to create a value proposition to justify knocking on a stranger’s door on a Saturday morning isn’t easy. The best offer you have as an agent is a track record of success selling homes in their neighborhood. So, if you have a recent listing that received multiple offers, print it out, black out the personal information, and put together a minipresentation you can use as a talking point. Now that you have a reason to be there, here is a door knocking real estate script you can use.

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Agent: Hi, I’m {your name} and I am the listing agent for the property down the street. We received multiple offers on that home, and, of course, we can only accept one. The home sold well above asking price, and these oth

Script 3: Your Neighbor Just Sold Door Knocking Script

The most successful agents leverage the sale of a listing to gain more listings immediately after closing. Use this highly effective conversation starter real estate door knocking script to take advantage of your recent success with people who own homes around your listing.

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Agent: Hi, I’m {your name}. Your neighbor just sold their home for {sold price}. What did you think of that price?

Wait for their response. 

Agent: Did you get a chance to see it at the open house?

Wait for their response. 

Agent: Well, there are still buyers interested in your neighborhood. For the right price, would you consider selling your home?

Script 4: Housing Update Report Door Knocking Script 

Believe it or not, many homeowners are interested in the housing market, even if they’re not considering selling their homes. When you arrive on their doorstep with pertinent market information that affects the value of their home, most people will pay attention. Here’s a simple and easy-to-use script alongside the latest market data.

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Agent: Hi, I’m {your name} with {your brokerage}, and I’m stopping by with a housing update on {your farm area} to keep you informed about what’s going on with the current housing market. I was curious to see if you have any questions about the market or if you’re considering moving anytime soon.

Script 5: Home Valuation Door Knocking Script

Like the housing market update, homeowners are always curious about their home’s appreciation. Share a recent sale in the neighborhood to pique their interest in getting a home valuation from you.

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Agent: Hi, my name is {your name} from {your brokerage}. I promise I won’t take much of your time—but did you realize that a home just a few houses down just sold for over asking price? I don’t know if you have any interest, but I‘m an expert in {neighborhood name} if you’d like a free valuation of your home.

Benefits of Door Knocking 

Door knocking for real estate lead generation offers several benefits:

• Personal connection: It allows you to personally connect with potential clients, enabling you to build trust and rapport more effectively than digital communication.
• Targeted approach: Door knocking aids you in targeting specific neighborhoods or areas where you want to focus your real estate business.
• Immediate feedback: It provides a unique opportunity to get immediate feedback from homeowners, allowing you to better understand their needs and preferences.
• Higher response rates: Door knocking can yield a 20% response rate, which is relatively high compared with other lead generation methods. 

Is Door Knocking Still Effective in 2024?

If you ask some agents, they may say technology or social media is a much better way to generate leads. But the truth is, there’s room for both online lead generation and door knocking. According to World Metrics, 82% of real estate agents who door-knock see an increase in their business, and 60% of real estate agents who door-knock see an increase in referrals. Additionally, realtors who regularly door-knock make an average of $50,000 more annually than those who do not.

Nowadays, every agent seems obsessed with perfecting custom audiences for Facebook ads or trying (and failing) to go viral on Instagram or TikTok. Instead, they could hone the one skill they need to last in this industry: the ability to make a personal connection with another human being.

Bringing It All Together

As your colleagues increasingly rely on technology, it’s time to consider a different approach. Step outside, knock on some doors, and establish those personal connections that can truly distinguish you in the real estate industry. Your unique personal connections can set you apart and make you feel valued and important. 

Do you think door knocking will become a thing of the past or experience a resurgence in 2024 and beyond? Let us know in the comment section.

The post Door Knocking for Real Estate: 15 Tips & Scripts appeared first on The Close.

By taking the time to ask the right questions, I started building genuine connections right from the start. That’s why I’ve put together this buyer questionnaire, designed to help you get to the heart of what your clients are looking for. You can download it as a fillable real estate buyer questionnaire PDF below and start turning those first meetings into lasting relationships.

What Is a Real Estate Buyer Questionnaire?

A real estate buyer questionnaire is like a conversation starter that helps you get to know your clients when working as a buyer’s agent. It’s all about understanding their needs and preferences and what they truly want in a home. By gathering this information early—things like budget, location, and lifestyle—you tailor your search to find exactly what they want, making the whole process smoother and more personal.

But it’s not just about being efficient; it’s also about building trust to get that buyer broker agreement signed. When clients see that you’re genuinely interested in what matters to them, they’re more likely to open up and share. This trust sets the stage for a stronger, more collaborative relationship, making it easier to guide them toward finding a home they’ll love.

Why You Shouldn’t Skip the Buyer Questionnaire

While many newer agents think they can just wing it and learn what their buyers need on a phone call, most top producers use targeted home buyer consultation questions on their questionnaire. Here’s why:

• Get all the important details: After talking with prospects, you may realize you’d forgotten to ask them a key question. Agents are natural conversationalists—this makes for great connections, but using our buyer questionnaire will keep you on track to ensure you’re asking all the right questions.
• Showcase your authority and professionalism: Our buyer questionnaire conveys your knowledge and will ensure you’ve covered all the bases with your buyer. Even if this is your first client, your prep work will make the purchase process look easy!
• Prepare yourself and the client: A well-written home buyer questionnaire and checklist makes the buyer think a little harder about what they really want and opens the door for you to ask more personal questions once the basics are covered.
• Know client priorities: A buyer questionnaire gives you a clear understanding of your client’s priorities, allowing you to draft competitive offers that stand out in a bidding war, increasing the chances of winning in a multiple-offer situation.
• Leg up with sellers: Leverage your buyer questionnaire to identify buyer priorities and write an offer that aligns with the seller’s needs. This approach can make your financed offer stand out, even against cash offers.

Pro Tip: Give your clients a copy of their completed buyer questionnaire to help them write a compelling love letter to the seller. Highlighting the specific features they love about the home and how it aligns with their priorities can create a personal connection and make their offer more memorable.

Must-Ask Questions for Your Real Estate Buyer Questionnaire

Buyer questionnaires are meant to help you get to know your clients and find out what they need. To help you see how effective these can be, let’s look at some real-life examples to help you build your own buyer questionnaire. 

Copy and paste these questions into your own document and format it for buyer leads and buyer clients to fill out. You can even create your own buyer questionnaire template to format for any type of client—or make your life easy and download ours above! 

Section 1: Getting to Know You Questions

This questionnaire is all about breaking the ice and setting the stage for a productive relationship. It includes questions like the following:

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• What’s the best way to reach you?
• Are you currently working with another real estate agent?
• What is your motivation for buying a new home?
• What are your top three must-haves in a new home?
• What does your dream home look like?

Agents who use this type of questionnaire often find that it quickly establishes a personal connection, making clients feel heard and understood right from the start.

Section 2: Lifestyle Questions

A home is more than just a place to live—it’s where your clients’ lives unfold. The lifestyle questionnaire portion goes beyond the basics to discover how a home will fit into their day-to-day life. Questions might include the following:

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• What does your daily routine look like?
• How do you spend your weekends?
• Describe your ideal neighborhood.
• Is there a specific part of the city/area that you prefer?
• Do you have pets?

Section 3: Budget & Expectations Questions

Money matters, and being upfront about budget and financial expectations is crucial. These questions focus on the financial aspect of buying a home, ensuring no surprises down the road. Key questions include the following:

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• Do you need to sell a property before you can purchase another?
• Do you need assistance in locating financing?
• Have you been prequalified, preapproved, or informed of your maximum purchase amount?
  • If yes, what amount have you been prequalified/preapproved for?
  • If yes, will your financial company issue a prequalified/preapproval letter stating this amount?
  • If yes, please include lender’s name & contact info
• What monthly payment range would you aim for?
• Will you require down payment assistance?

Section 4: Home Features Questions

For many buyers, the details matter. These questions zero in on the specific elements of a home that are most important to your clients. This approach ensures that you’re not just finding a house but the right house with all the features they need. Key questions in this questionnaire include the following:

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• What style of home would you prefer? (duplex, townhome, condo, single-family, near any places of interest?)
• Are stairs acceptable?
• Is a master bathroom important to you?
  • If yes, what type would you prefer?
• What square footage do you prefer?
• Do you want a basement?
  • If yes, which style?
• What other home features are important to you?
  • Air conditioning?
  • Open floor plan?
  • An office or study?
  • Formal dining room?
  • Patio/deck?
  • Sprinkler system?
• Do you want a garage?
  • If yes, how many garage spaces? If yes, do you want a heated garage?
• What size lot would you prefer?
  • Is mature landscaping important to you?
• Are there any other specific features you’d like to be factored into your property search?

Agents who incorporate this approach often find that clients are more satisfied and more excited about the properties they’re shown. By focusing on the specific features that matter most, you can present homes that feel tailor-made for them.

Pro Tip: When searching for a home, remind your clients of the 80/20 rule: if a property meets 80% of their must-haves, it’s worth serious consideration. No home will check every box, but focusing on the majority of key needs can prevent them from missing out on a great opportunity.

Tips to Get the Most Out of Your Buyer Questionnaire

Now that you’re sold on the value of a good questionnaire, here is how you can make the most of it:

• Tip 1: Pitch the Questionnaire’s Value Explain how the questionnaire will help you understand their needs and find homes they’ll love. A friendly message before meeting with them can encourage them to take the questionnaire seriously and set the right tone for your relationship.
• Tip 2: Make It a Conversation, Not an Interrogation When going through the questionnaire with your clients, keep it conversational. Instead of just running down the list of questions, discuss their answers and dive deeper into what they really mean. This approach gathers more detailed information and makes your clients feel heard and understood.
• Tip 3: Customize the Questionnaire for Each Client Tailor the questionnaire to fit the unique needs of each client. For example, include different questions for first-time homebuyers versus seasoned investors. Adding personalization of the questionnaire to your buyer consultation checklist shows your clients that you’re genuinely focused on their individual needs.
• Tip 4: Use Responses to Tailor Showings Leverage the detailed answers from the questionnaire to prepare showings that align with your buyer’s preferences and timeline. Knowing specifics—like whether they’re preapproved or have particular must-haves—allows you to curate a list of properties that fit perfectly.
• Tip 5: Revisit and Update as Needed As your clients see more properties, their preferences might change. Revisit the questionnaire and make updates based on their feedback. This keeps you on the same page and shows that you’re responsive to their changing needs.
• Tip 6: Handle Sensitive Questions In-person Save delicate questions about finances, income, or family details for an in-person conversation. Clients are often more comfortable sharing this information face-to-face, which helps build trust and makes them feel like more than just a transaction.
• Tip 7: Establish Your Expertise Showcase your authority by researching your buyer’s current home or neighborhood and offering insights they might not have considered. Whether it’s about local amenities, environmental factors, or market trends, your knowledge can help build trust and reassure them that they’re in good hands.
• Tip 8: Make Buyers Feel Comfortable Create a judgment-free environment when discussing their timeline, living situation, or specific home features. Being open-minded and supportive ensures a positive interaction and leaves a lasting impression.
• Tip 9: Align With Their Vision Get on the same page by having buyers show you the homes they’ve been exploring online. Understanding their thought process allows you to tailor your strategy to meet their needs and expectations while only submitting offers on properties they are really interested in buying.
• Tip 10: Integrate Information Into Your CRM After collecting the questionnaire responses and tailoring the search to their requirements, input the data into your CRM to track your buyer’s preferences effectively. This enables you to set up automated follow-ups, like drip email campaigns with properties that match their criteria.

If you’re not already using a Customer Relationship Management system, take a look at LionDesk. It is a popular low-cost real estate CRM with a 14-day free trial. It includes an AI-driven lead nurturing feature called Gabby, which automatically follows up with your leads in natural language.

Bringing It All Together

Using a well-put-together real estate buyer questionnaire is like having a roadmap for your client relationships. It helps you get to the heart of what your buyers truly want, builds trust from the start, and guides you in finding the perfect home for them. Remember, it’s not just about asking questions—it’s about really listening and showing your clients that you’re there to help them every step of the way.

What do you think about our buyer questionnaire? Are there any questions you ask in yours that you think we should add to it? Let us know in the comment section below.

The post Real Estate Buyer Questionnaire to Build Rapport & Trust (+ PDF) appeared first on The Close.

Bonus: Download The Close’s Buyer Presentation Template

What Is a Buyer Presentation?

You’ll need to seal the deal with that prospect once you’ve generated a buyer lead through your real estate prospecting efforts. A buyer presentation is a short, semiformal presentation that lays out the professional relationship between buyer’s agents and leads. It is typically given after the initial conversations with potential buyers. It’s a way to showcase your expertise and marketing strategies, convey clear and realistic expectations, explain the homebuying process, and ask questions.

What to Include in a Real Estate Buyer Presentation

In a real estate buyer presentation, it’s essential to include information that thoroughly showcases your expertise and the available property listings. Some key elements to include are as follows:

• Personal introduction: Provide a brief introduction about yourself, your experience in the real estate industry, and any notable achievements that highlight your expertise and neighborhood knowledge.
• Buyer’s needs: Summarize their wants, needs, and dreams for their new home to show that you’ve listened.
• Buying process overview: Break down the buying process into clear, easy-to-understand steps.
• Market overview: Provide a snapshot of the current market conditions, trends, and what they mean for the buyer.
• Financial overview: Discuss financing options, preapproval, and estimated closing costs to prepare them financially. 
• Property selections: Present a curated list of properties that match their criteria, highlighting unique selling points.
• Testimonials: Share stories and testimonials from your past clients to show your track record of success and build trust.
• Next steps: Clearly outline the actions needed to move forward.

Steps for Creating a Buyer Presentation

Crafting an effective buyer presentation involves specific steps. These include researching your audience, tailoring your approach, and following up appropriately. Below is an overview of the essential steps for creating a buyer presentation that grabs attention and delivers results.

Step 1: Pick an Interactive Template

Interactive templates fully immerse your clients in the experience during a real estate buyer presentation. These templates enhance the visual appeal of your presentations and make them more engaging and memorable for your clients. Use a template that allows your buyers to explore stunning property photos, view 3D floor plans, and take a virtual neighborhood tour. These features transform the presentation into an exciting journey rather than a static display.

Canva is a popular, easy-to-use, and versatile graphic design tool. It is the preferred design tool for real estate agents who need to quickly create professional marketing materials. Canva offers templates, editing tools, and sharing options for custom property flyers and branded social media posts.

Step 2: Understand & Uncover Your Buyer’s Needs

To understand the buyer’s needs and wants, you must learn about their life and what they like. Instead of asking about basic things like where they want to live and how much money they have, ask them questions via an online form about their current living situation, reasons for moving, previous experiences with buying a home, and what they’re looking for in an agent.  

Then, when you meet them, give them a map and ask them to show you where they want to live and where they don’t want to live. They can also write the most important things they want in a home and the things they don’t want. This method personalizes the discussion, making potential buyers active participants in the search process.

Step 3: Clearly Explain the Homebuying Process

It is essential to guide homebuyers through the intricate homebuying process clearly and concisely. By doing so, you will minimize their anxiety and establish trust. 

Here are important steps on the homebuying process timeline:

• Financing: Evaluate financial readiness and credit score.
• Budget: Determine their budget and decide how much your clients can afford to spend on a house.
• Financing options: Research and explore different financing options, such as conventional, FHA, VA, and USDA loans.
• Mortgage: Get preapproval for a mortgage.
• Home search: Selecting properties that meet the buyers’ criteria and arranging viewings.
• Make an offer: Discuss factors like the current market, the home’s value, and how to negotiate effectively.
• Inspections and appraisals: Check that the home is in good condition and worth the investment.
• Closing: Walk them through what to expect at closing, from signing paperwork to receiving the keys.

Step 4: Include a Market Analysis

To help buyers make smart decisions, provide comprehensive market information, including home price trends, property variety in different neighborhoods, average time on the market, and insight into negotiation and purchasing under current market conditions. Ensure you have all the information you need to feel confident about your investment in this market.

Step 5: Showcase Properties

It’s essential to do more than recite the home features when presenting properties. Instead, bring each home to life by creating stories that link the property to the buyer’s lifestyle. To make it engaging and visually appealing, use the following:

• Consider engaging scenarios to make the property features more relatable. For example, you could say, “Imagine hosting Thanksgiving and birthday dinner in this spacious living and dining room,” or “Envision relaxing on the weekend in this bright and tranquil garden patio.” These little narratives can help potential buyers visualize themselves living in the space.
• To appeal to the senses, add vivid sensory descriptions, such as the fireplace’s warmth and the nearby park’s peaceful sounds.
• Use high-resolution images, interactive virtual tours, and authentic testimonials from previous clients to enhance credibility and evoke emotion.

Step 6: Present Different Financing Options

Remember to provide transparent information about the financial aspects of buying a property. This includes explaining the down payments, closing costs, and ongoing expenses like property taxes, insurance, and maintenance. Remember that you are not a mortgage professional, so generalize financing and provide contact information for mortgage professionals.

Step 7: Present Sample Buyer’s Representation Agreement

As you wrap up your presentation, touch on the buyer’s representation agreement. In real estate, things can be full of surprises, and without this agreement, there’s a chance of investing a lot of time in clients only to see them switch to another agent at the eleventh hour. It’s crucial to showcase a sample agreement and guide them through key sections, like exclusive representation, your role as their agent, and how you will receive compensation.

Step 8: Show a Clear Next Step

It’s important to end your real estate buyers presentation by clearly outlining the next steps. Instead of just saying “thank you,” let them know what to expect next. This could include setting up property tours or diving into offer strategies. Provide a clear timeline to maintain momentum. Answer any questions and demonstrate that you are prepared to assist them throughout their homebuying journey. This approach keeps things organized and shows your dedication to helping them find the perfect place.

Tips for Delivering a Buyer Presentation 

Now that you know how to create a buyer presentation and have a template ready to go, let’s review the tips for delivering your presentation in a way that builds a foundation for a solid buyer-agent relationship.

• Role-play your presentation with another agent. The more you practice, the easier the presentation will be to deliver, even if you have some nerves.
• Deliver your presentation in person (if possible). Avoid giving your presentation virtually because building rapport is much easier in person. Plus, that firm handshake, warm smile, and confident eye contact will go a long way in convincing your leads that you’re the agent for them.
• Use a large monitor or tablet to give your presentation. If you don’t have a conference room with a large monitor, consider pooling together with other agents in your office to buy a big tablet specifically for presentations—better yet, convince your broker to buy you one!
• Break the ice with small talk (but don’t overdo it!). Starting your presentation with a minute or two of small talk will not only break the ice, but it also has the potential to build rapport more quickly than your entire presentation.
• Tell them how long the presentation will take. We think you should keep your part to less than 15 minutes and leave plenty of room for questions.
• Ask specific and open-ended questions. So you can gather information for your profile, build trust, and get them excited about their search. You can ask questions to create an actionable buyer profile during your presentation. Choose three to four questions that best fit your situation and help you build the most knowledge:
  • Have you ever worked with a buyer’s agent?
  • Why do you want to find a new home, and why now?
  • What kind of monthly payment would you be comfortable with?
  • How experienced are you with the mortgage process?
  • If you had to choose one, would you choose a great location, price, or home?
  • Is there a specific school district you want to be in?
  • How important is a fast commute to work?
  • What is your time frame for finding a home?
  • When is the best time and day of the week to reach you, and how do you prefer to communicate?
  • Can you paint me a picture of your dream home?
• Don’t ask them to sign an exclusive buyer agreement…yet. Walk them through the agency disclosure agreement and tell them you don’t want them to sign an exclusive agreement until they know you better. Promise to earn their loyalty. When you are ready to ask for the signature, I like a simple, straightforward, “So what do you think? Have I earned your business?”
• Send them a PDF of the presentation. If you really want to wow them, come with buyer agent checklists or write an e-book on the buying process and local market and send it along with your presentation and packet.
• Remember that knowledge = confidence. Walk into your presentation confidently because you have the information and the skills.

Bringing It All Together

Delivering a top-notch, successful buyer’s presentation takes confidence (and a little thoughtfulness), but if you do it well, you can convert those warm buyer leads in as little as 15 minutes. Do you have any real estate buyer presentation templates, buyer presentation scripts, or advice for new agents giving their first buyer presentations? Or maybe a story about a buyer presentation that went sideways? Let us know in the comment section.

The post The Buyer Presentation: A Step-by-Step Guide to Convert Clients appeared first on The Close.

Disclaimer: This article contains suggestions for informational purposes only and does not offer legal advice. Laws and restrictions vary by area. Before using any of the techniques listed, check with your local real estate commission and attorney for guidance.

What Is a Cash Offer in Real Estate?

“Cash is king” is a common phrase in many industries, but it definitely applies to real estate purchases. A cash offer is when a homebuyer doesn’t require financing (like a mortgage) and can pay for the property in full with cash.

Why Is a Cash Offer Better?

Cash is an appealing choice for sellers because it is usually ready to go, and they don’t have to risk many hiccups in the closing timeline. The mortgage lender usually requires inspections, appraisals, and repairs, so there are more logistics and obstacles to overcome when buyers are financing a home.

10 Ways to Complete With Cash Offers

Since you’ll have clients with many financial backgrounds, agents need a strategy ready to make their offer stand out for every different type of transaction. When you don’t have a cash offer, here are the top 10 ways to successfully beat them—even in a red-hot market!

1. Use a Cash Lender

If you’re wondering how to beat a cash offer on a house, one of the most straightforward methods is to transform your offer into a cash offer with a cash lender. Cash lenders were born to help mortgage buyers compete with cash buyers. They will buy the home with cash and then work with the buyers to refinance or purchase the property after closing.

Here’s an example of how it works:

• Get qualified with a cash lender like Homeward Mortgage
• Find a house to purchase
• Homeward will place a cash offer on the property
• Once the property is purchased, the buyer rents the property from Homeward while the loan gets finalized

Cash lenders typically charge 2%, but Homeward Mortgage’s fee is reduced if the buyer uses them for their final loan.

2. Submit Your Offer Early 

Some investors and buyer’s agents believe the best strategy to win bidding wars is to wait until the last minute before submitting an offer. Don’t do this, especially when figuring out how to compete with cash offers! The adage “the early bird gets the worm” is very accurate in this situation. The more time you give before submitting your offer, the higher the buyer’s chance of giving more (and better) offers if their offer is rejected.

Also, if you have clients looking at homes and you find they’re not quite ready to buy—you should stop right now and help them get everything in order. Use our home buying checklist to make sure they’re prepared. This prep will help you get offers in quickly and compete with even the most competitive cash offers.

3. Offer a Signing Bonus

The best way to overcome a situation where there are multiple offers is to offer a “signing bonus” if your buyer’s offer is accepted quickly. To do this successfully, you have to present the highest and best offer, but it can be a great way to compete with cash offers.

This approach allows your buyer to stand out and potentially eliminate the competition—and the seller and agent both feel like they get a fair price. Plus, if the seller doesn’t accept the offer, it stays in the mix, so your buyer can still have a chance to win.

4. Be Memorable & Likable

Getting an offer accepted over others is a competition. Home sellers compete for cash, but you must compete to get your buyers to the closing table, and slipping through the cracks is no way to win a competition. Being likable and memorable is key!

Listing agents might deny it, but professional and polite agents are more likely to get their offers accepted. An agent who lacks professionalism, is unfriendly, or oversteps boundaries isn’t someone people like to work with. So, if you want to beat out a cash offer, kill them with kindness. 

Here are easy ways to be more memorable and likable to the listing agent:

• Communicate consistently: Start building trust with the listing agents as soon as you schedule the first showing. Be friendly, answer texts quickly, and be respectful of the listing.
• Leave unique feedback: Instead of leaving generic feedback on the listing, mention specific things your buyer loved, like the style of the home, the neighborhood, or how they can see themselves living there. This extra effort can leave a great first impression and make them feel emotionally connected to you or your buyers.
• Send an introductory video: Record a quick introductory video of yourself to the listing agent. Due to Fair Housing regulations, don’t include your clients. Let them know you will submit an offer and ask them to keep you updated on any status changes. Videos make people feel like they’re talking directly to you and are more personal than text—plus, they stand out from all the other buyer agents.

5. Offer to Cover the Appraisal Gap

One of the main reasons why a cash offer is better is that it’s simpler—there are more requirements when a mortgage is involved, like an appraisal. Bidding wars can sometimes cause sales prices to rise far beyond what agents or appraisers can realistically justify, which can cause financing issues for buyers. 

The difference between the actual sales price and the lower appraised value is called an appraisal gap. If your clients are in this situation, buyers can mitigate the risks for the seller by offering to cover an appraisal gap. This strategy means your buyers will put up additional money for the down payment and closing costs.

For example: if a property is marketed for $400,000 and it gets bid up to $420,000, the financed buyer may agree to bring in an additional $20,000 if the property doesn’t appraise at $420,000.

Of course, buyers may not jump at this idea, but it can be instrumental in highly competitive situations. Remind them they will only need this money if the appraisal is lower than the agreed sales price. However, here are a few ways you can suggest to your clients on how to offer an appraisal gap:

• If they don’t have the additional funds for an appraisal gap to try to restructure their loan to a lower down payment option
• Have them ask parents, grandparents, or even borrow from their 401(k) to cover the gap in the event the appraisal comes up short

Pro Tip: It may be wise to discuss this with your clients when you start looking for houses, not when their emotions are tied to a property. Use a house hunting checklist to help you broach the subject.

6. Have Your Buyer Pay Your Commission

Figuring out how to beat a cash offer on a house is challenging because there isn’t a single method that will work every time, so you’ll have to get creative. If you’re still stumped, think about how many sellers feel that it isn’t fair that they pay commissions for both their agent and the buyer’s agent. Commissions have always been a touchy topic, so here’s how Sean Moudry used the commission to beat a cash offer:

7. Add an Escalation Clause

An escalation clause can be part of a real estate contract, stating that the buyer will increase their offer if a higher bid is made. They often get a bad reputation, but when used correctly, they allow buyers to make their strongest offer without the risk of overpaying. This technique can place a financed offer ahead of a cash offer on a house, meaning success for you and your client.

For example, a home listed for $460,000 gets multiple offers for $470,000, $480,000, and $500,000. Most likely, the $500,000 offer from the most earnest buyers will get accepted at $500,000.

However, the buyers could offer $475,000 with an escalation clause offering $1,000 more than any viable competing offer up to $500,000. This creates the potential for them to get their offer accepted at $481,000, since the highest offer at $480,000 + $1,000 = $481,000. If this offer were accepted, it would save them $19,000 because of the escalation clause!

8. Pay the Seller’s Closing Costs

In most real estate transactions, the seller pays for the costs of the title insurance, escrow, agent fees, and homeowner association (HOA) fees. These costs can add up to between $2,000 and $29,888. However, having the seller pay is just standard practice, not an actual legal requirement, so the buyers offering to pay closing costs can be a huge advantage.

This may seem like a small gesture, but this strategy can go a long way with some money-conscious sellers. Make sure to get estimates of the fees before including this in your offer, or set a limit on the costs your buyers will pay based on their budget.

9. Give the Seller a Flexible Possession Time

Many sellers need to buy a home at the same time that they’re selling, which can be nerve-racking. You can give some peace of mind to sellers and compete with cash offers by offering a flexible purchasing timeline. Of course, cash offers can also have flexible possession dates, but they aren’t always offered. There are two main strategies buyers with financing can use to give the seller more time to move:

• No-cost rent-back or leaseback: If a seller needs time to stay after the home is sold, then a no-cost rent-back can give them time to stay in the home long after it’s been sold. Most states provide a pre-approved form for post-occupancy. If your state doesn’t provide these forms, advise your client to have a lease drafted by a local real estate attorney. Remember that FHA and conventional loans only allow 60 days of flexibility, but buyers can qualify for an investment loan to extend the time further.
• Replacement home contingency: This is a two- to four-week contingency for the seller to find, contract, and inspect a replacement home. If the seller cannot complete this by the end of the time period, they may extend the time, or either party can terminate the contract. This technique avoids the 60-day occupancy requirement, but the contract could be terminated if the seller cannot find a replacement home.

10. Communicate

It sounds simple, but many buyers’ agents send offers without calling or texting first. It’s best practice to make accepting an offer as easy and appealing as possible for the listing agent and seller—and it’s just smart business to build trust during the process.

Consider what a cash offer on a house means for the seller and the agent—easy and hassle-free. To compete with that, you must build a relationship and keep your communication clear and consistent. A great way to do this is by calling the listing agent (yes, on the phone!) to clearly understand the seller’s situation and how you can draft an offer that meets their specific needs. Always call or text the listing agent to let them know the buyers submitted an offer and ask the listing agent to confirm they received it.

FAQs

How do you counter a cash offer?

Do all cash offers ever fall through?

How are so many people making cash offers on homes?

Bringing It All Together

What does a cash offer mean in real estate? For home sellers, it’s usually appealing because it’s easier. For competing homebuyers and agents, it means that the home is more competitive. However, there are plenty of strategies on how to compete with cash offers. Stay positive, think about the other concerns a seller may have, and craft an offer to meet their needs.

Got other ways to beat the cash offer competition? Let us know below!

The post How to Compete With Cash Offers: 10 Ways to Write Winning Offers appeared first on The Close.