Real Estate can be confusing. As the world’s largest asset class, the industry has countless terms describing all aspects of ownership, transactions, property type, and other parts of the equation.
The sheer volume of terminology when buying or selling a home can leave you scratching your head. However, Mosaik Real Estate wants its clients to feel informed at each stage of their process.
The California Department of Real Estate has published a comprehensive glossary with the legal definitions for most terms involved in transactions. While authoritative and accurate, these definitions can be a little difficult to understand.
Here are simplified definitions for some important terms you should know about the industry:
A Brokerage serves as a middleman between buyers and sellers to facilitate a transaction. Brokerages receive a share of both the buyer’s and listing agent’s commissions from each transaction.
“Agent” vs. “Broker” vs. “Realtor”
You’ve probably heard all three of these terms used to describe real estate agents. Sometimes people use these terms interchangeably, but each means something different. Here’s what you need to know:
- “Agent”: An Agent is a licensed industry professional attached to a Brokerage who facilitates real estate transactions. In a given transaction they represent either the buyer or the seller (or sometimes both…see “Dual Agency” below!). Agents are compensated by commission, which is a percentage of the property’s sale price.
- “Broker”: A Broker is an Agent who has obtained a broker license, which allows that person to own a brokerage and/or employ other real estate agents.
- “Realtor”: A Realtor is a member of the National Association of Realtors, and is bound by the Association’s code of ethics. Both Agents and Brokers can be Realtors.
This describes a situation in which a single agent represents both the buyer and the seller in a transaction. Because of the possible conflict of interest, we do not recommend clients enter this kind of arrangement.
Escrow is a financial arrangement in which sellers and buyers enlist a third party (i.e. an “Escrow Officer”). The Escrow Officer holds money, paperwork, or other assets until both parties have met their obligations for the agreement. Those obligations often include any home inspections, disclosures, or objections that need to be completed or resolved on time.
The Bottom Line
Certainly there’s much, much more to know about our industry. In that same vein, check out our other posts covering terms buyers and sellers should know: