A real estate glossary like no other
assessment or special assessment Fee or charge imposed by a homeowners’ association (HOA) in excess of funds raised by the monthly fees, usually a one-time expense for a major repair or improvement. Assessment can also refer to a similar charge by a public authority to pay the cost of public improvements. And to the process of determining real property value for property taxes.
best practices Commercial or professional procedures that are accepted or prescribed as being correct or most effective (Oxford English Dictionary). I personally believe that best practices also encompass high competence and high integrity practices, along with high ethical standards.
breach The breaking of a law, or failure of duty, either by omission or commission; the failure to perform, without legal excuse, any promise that forms a part or the whole of a contract (North Carolina Real Estate Commission).
business model A plan for the successful operation of a business, typically identifying sources of revenue, intended customer base, products, and details of financing (Oxford English Dictionary). In residential real estate brokerage we are seeing a proliferation of various and new models. In addition to the traditional model, we have discount brokerage with flat-fees, limited-service, entry-only, commission rebates, etc. iBuyers offer a new and interesting business model. I hope we will soon see fee-for-service and hourly-billing models. The online system for buyers and sellers I describe in Chapter 30 offers yet another possible business model.
buying the listing The argument that seducing sellers with an inflated and unrealistic price is dishonest because brokers fully intend to lower the price in order to get the property sold. Often used as a justification for underpricing.
client acquisition The broker skill set necessary to acquire clients. To be successful in the real estate business, it is vital to have, or to generate, a stream of potential clients. This is so important that brokers will concentrate their time, effort, and money, on this aspect of the business to the detriment of all others. Client acquisition is a sales pursuit. Also used to describe brokers who focus on this skill set. See rhinestone cowboy.
coach or real estate coach A class of consultant that brokers hire to help the broker acquire and manipulate clients. Essentially sales coaches. Primarily responsible for the scripts used in the business.
coming soon An attempt by a broker to lead a seller into a single-agent dual agency situation by limiting other brokers’ access to the property, and thereby also securing the buyer as a client.
commission rebate A form of discount buyer agency where the buyer’s broker will pay (or rebate) some portion of his commission to the buyer. This money technically moves from the seller to the listing broker to the buyer’s broker to the buyer. And clearly the buyer’s broker can do as he pleases with his money, including give some of it to the buyer. But arguably this is tantamount to an involuntary money transfer from the seller to the buyer as an inducement to buy the property.
commodity A raw material, primary product, or other basic good which is traded in bulk and the units of which are interchangeable for the purposes of trading. In contemporary use, non-tangible resources such as electricity or internet bandwidth, or services such as freight or insurance, are often classed (and traded) as commodities, especially when they are fungible or interchangeable (Oxford English Dictionary). Wikipedia offers a more concise version: In economics, a commodity is an economic good or service that has full or substantial fungibility: That is, the market treats instances of the good or service as equivalent, or nearly so, with no regard to who produced them. Competently executed basic residential property marketing is entirely fungible, and therefore a commodity service.
comparable or comp A recently sold property that has similar characteristics to a property being appraised or otherwise valued (the subject property) and that is used for comparative purposes when estimating the value of the subject property (North Carolina Real Estate Commission).
comparable market analysis (CMA) A study of recent sales of comparable properties used by real estate brokers to estimate the market value of property for a buyer or seller in connection with a real estate transaction (North Carolina Real Estate Commission). In the year 2020, I see absolutely no reason why this process could not be automated in such a way to produce viable and accurate results for most residential properties.
conveying real property The broker skill set necessary for transactional competence. The customer service aspect of the real estate business. Conveying real property is not a sales pursuit. Also used to describe brokers who focus on this skill set. See George Bailey.
copy The text of an advertisement or other marketing asset.
counterpart A person or thing that corresponds to or has the same function as another person or thing in a different place or situation (Oxford Free Dictionary Online). I use this term when discussing the other side. Jim Camp prefers the term respected adversary. In any case, the parties on the other side are not your friends. And even if they are friends, for the purposes of a real estate negotiation and transaction, one should treat them with a certain degree of dispassion.
designated agency A situation where two brokers work for the same firm, but each represents one of the parties in a particular transaction.
disclosure statement or property disclosure statement A seller-initiated form used to disclose material facts to a buyer or a potential buyer.
dual agency A situation where one firm represents both the buyer and the seller in a single transaction. In these situations, it is helpful to make a distinction between designated agency and single-agent dual agency.
due diligence The contractual concept that a buyer will be given an option to purchase property for some period of time, the Due Diligence Period. Also refers to a buyer’s investigation of the property during this period.
Due Diligence Fee The fee the buyer pays the seller for the option to purchase during the Due Diligence Period. This fee is nonrefundable. If during this period, the buyer decides to terminate the contract (typically for any reason or no reason), the seller keeps the fee. And if the buyer does not terminate and therefore moves forward with the transaction, the fee is applied to the Purchase Price.
Due Diligence Period The time period a buyer is given for making the decision whether to move forward with a purchase or to terminate the contract.
duty shifting Any attempt by a real estate broker to shift one or more of their duties to their own client to the broker on the other side.
easement A right to use land owned by another person or entity for a special purpose, such as a right-of-way to go across the property.
entry-only A form of discount listing where the listing broker will enter the property into the Multiple Listing Service (MLS) only. The broker provides no additional services.
feedback (buyer) Notes that a buyer’s broker will share with the listing broker and seller after viewing a property.
fiduciary The North Carolina Real Estate Commission offers a nice definition: A relationship wherein one party imposes special trust and confidence in another party, usually involving the holding or managing of money or other property. An example is the relationship between a real estate broker and his principal. Also refers to the party in whom the special trust and confidence is placed. So, one who acts on behalf of another, putting that person’s interests first and certainly ahead of their own.
flat-fee A brokerage fee arrangement that involves the payment of a fixed fee to a broker. The fee is not a percentage of the ultimate sales price, and may not even be tied to a given transaction’s consummation.
George Bailey A quietly competent real estate practitioner, not afraid of hard work or getting his hands dirty; never a hotshot, but consistently reliable, levelheaded, and scrupulously honest. Perhaps sometimes undervalued or underestimated. I use this term to represent brokers who focus on conveying real property.
Gresham’s Law Originally, bad money drives out good. Later: If we make no distinction for the worthy and no penalty for the unworthy, the unworthy proliferates, and over time becomes the new standard. Finally, the Charlie Munger definition: Bad morals drive out the good; unethical behavior is contagious.
Gresham’s Law for Real Estate The incompetent, low integrity brokers drive out the competent, high integrity brokers. Those brokers who focus on client acquisition drive out the brokers who focus on conveying real property.
gunslinger An aggressive and competent hotshot real estate practitioner.
homeowners’ association (HOA) An organization charged with maintaining common areas and shared structures and amenities of a subdivision or condominium or townhouse development. Also charged with insuring adherence to the association’s covenants, restrictions, and rules. Sometimes referred to as a property owners’ association (POA).
iBuyer A firm that purchases off-market properties for less than fair market value by offering the sellers convenience and expedience. They make money by charging the sellers a fee and also by selling the properties at or above fair market value.
malarkey Something that a real estate broker will say, often in response to a question, in order to avoid saying I’m not sure or I don’t know. The broker fears that these truthful responses will make him look unknowledgeable or even incompetent.
malfeasance Wrongdoing or misconduct, especially by a public official. In addition to public officials, we can extend this term to anyone in a position of responsibility and certainly to fiduciaries. For instance, we read about corporate malfeasance. I use as a generic term for wrongdoing or misconduct, especially of a business or financial nature. Note the OED’s second definition is simply: Wrongdoing.
material fact Fact about a property or a buyer which must be disclosed to the other side (by a broker, but not necessarily by the seller or buyer themselves).
misappropriation Appropriation of something for wrong use; especially the action or an instance of taking (funds, etc.) fraudulently or unfairly (Oxford English Dictionary). I think a simpler definition is: Appropriation by theft or embezzlement.
misrepresentation A false representation, either willful or negligent or fraudulent, of a material fact to another party (North Carolina Real Estate Commission).
Multiple Listing Service (MLS) The formerly print and now online database of all available properties listed by member brokers, and maintained by the local REALTOR® association. Includes currently available properties and a history of transactions and activity.
negotiation I like Jim Camp’s definition best: An agreement between two or more parties, with all parties having the right to veto.
objections Label brokers give to anything that clients or potential clients do not want to do. Objections must be handled or overcome, often using scripts.
odd pricing Pricing that does not end in a zero or a number of zeros. For instance, $1.99. Conventional wisdom and numerous studies say it works because people read left to right. Therefore, the left-most figure is the most important in terms of perception.
omission The willful or negligent failure to disclose a material fact to another party (North Carolina Real Estate Commission).
pain or cause pain In a real estate negotiation and transaction, a financial loss that the counterparts are unable to endure or are unwilling to accept. Or perhaps ultimately do accept, but only after all else fails. Pain is a harsh word, and may even be offensive to some who perhaps feel it turns negotiation and business into a blood sport. I appreciate this concern, but use pain only as a technical and financial term.
REALTOR® A member of the National Association of REALTORS®, a trade organization of real estate brokers. Not all brokers belong to this group. The primary requirement for becoming a REALTOR® is agreeing to abide by the REALTOR® Code of Ethics.
REALTOR® Code of Ethics The REALTOR® codification of ethical duties. It consists of seventeen articles describing REALTOR® duties to clients and customers, to the public, and to other REALTORS®.
REALTOR® Code of Ethics, Article 15 Let’s quote it here: REALTORS® shall not knowingly or recklessly make false or misleading statements about other real estate professionals, their businesses, or their business practices.
rhinestone cowboy A glitzy and inauthentic pretender. I use this term to represent real estate brokers who focus on client acquisition, and not on conveying real property. See client acquisition.
script-reader A broker who uses scripts.
scripted exchange A fake conversation where a broker uses scripts in an attempt to control and manipulate the other party or parties to the conversation.
scripts Canned responses that brokers use to control and manipulate conversations.
signaling Economic concept where firms and individuals signal their competence and value through pricing, credentials, appearance, presentation, location, and other attributes.
single-agent dual agency A situation where one individual broker supposedly represents both the buyer and the seller in a single transaction, and therefore makes more money, often double.
sunk cost In economics and finance, a cost that has already been incurred and that cannot be recovered. In economic decision making, sunk costs are treated as bygone and are not taken into consideration when deciding whether to continue an investment project (Encyclopædia Britannica).
survey The process of determining the quantity and boundaries of a parcel of real estate. Also, the report and diagram of such findings.
syndication The process of a local Multiple Listing Service (MLS) transmitting listing data to other online sites. These other sites include large players like Zillow, but also the websites of other broker members of the MLS. The result is that essentially all online sites include most if not all active properties. Essentially all sites are receiving the same data from the same data feed.
value At its simplest level, value is service over price. Therefore, neither service nor price, alone, determine value.
value proposition The service-level and price combination that an individual or firm offers consumers in a given market.
win-win Let’s use the Harvard Program on Negotiation definition: Win-win negotiations are those negotiations in which each party walks away from the bargaining table having achieved its goals within the confines of an integrative, or value-creating, bargaining process. Win-win strategies are all about increasing your opponent’s satisfaction even as you achieve the outcome you desire.
zebra (solid brown) Metaphor used to demonstrate the concept that people hire their idea of a broker, good or bad, regardless of that broker’s competence or integrity. If someone does not meet the stereotype or look the part, he or she does not get hired for the role.
zero-sum game A situation in which a gain for one side entails a corresponding loss by the other side, such that the net change is always zero.