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Q: I recently went into a Mammoth real estate office to talk to someone about real estate and the agent I spoke to used so much jargon that I could barely understand what she was saying. Can you explain what some of this terminology really means and why it is so important?
A: As and active agent myself and the manager of a large sales force, I am acutely aware of this problem and believe this problem needs to be trained out of agents as they progress in their careers. The problem usually begins in the first year in the business and is usually a sign of inexperience. But I do laugh sometimes when I overhear conversations in my office amongst the agents and listen to how much "real estate speak" we do use. The sign of a true professional is one that does not use jargon when speaking to the public and explains things so that a layman can understand (if he is listening).
You didn't mention any specific terminology, but I can guess, so here goes. The most commonly abused is "MLS". That stands for Multiple Listing Service. Much of our industry assumes the public knows what it is and how it works. The MLS is the working database of properties currently offered for sale, or that have been offered for sale, or that have sold. The MLS has traditionally been owned and operated by the local Board of Realtors®.
Up until a few years ago, this information was not public. With the proliferation of Internet usage and increasing demand by real estate consumers, most MLS data has really become public information in one form or another. And MLS software has become increasingly compatible with websites and Internet usage. Here in Mammoth, the MLS is owned and operated by the Mammoth Lakes Board of Realtors® and also includes information on most of the outlying areas, including most of Bishop.
Look for upgrades in the coming months to the Mammoth system that will allow most agents to offer a good clean interface to the MLS from their own personal or office websites. The thing I do find most interesting about the public having greater access to the MLS information is that with even greater information available to them, they still (in my opinion) seem to make plenty of uneducated and poorly informed real estate decisions.
Another commonly abused term is "caravan". What this refers to is that on every Thursday morning the local agents mount their camels and go around town to view the newly listed properties. It is sometimes referred to as broker's open house. Caravan is important to a seller with a listing because it exposes the property in an efficient manner to the agents in town. Caravan is important to buyers because your agent needs to stay abreast of what is new on the market. Caravan is the easiest way for agents to stay in touch with the market. If your agent doesn't regularly go on caravan, consider dumping them.
Another confusing term tossed about is "exchange". Mammoth's market sees lots of exchanges but what this really refers to are IRS Code Section 1031 tax-deferred exchanges. This great tool pertains to properties "held for investment". It does not pertain to primary residences or true second homes. But because so many of the properties bought and sold here in Mammoth do qualify for tax-deferred exchanges, this mechanism is used again and again.
Through the use of an "accommodator", properties don't really need to be exchanged like bartering cavemen. Instead, an owner can sell his property (to the accommodator) that then in turn buys another property (one the seller wants to acquire) and sells it back to complete the exchange. This is a simplified version, but it is all quite legal if completed properly and is done every day here in Mammoth. I've seen many closing statements where accommodators are both the buyer and seller in a transaction. Exchanges are great way to become a Mammoth property owner and offer an excellent opportunity when the day comes to sell.
More misused jargon is "comps", which is short for comparable sales. Comparable sales are critical in the real estate business because they help establish the value of a property. I emphasize help. Ultimately, the price a buyer is willing to pay and a seller is willing to sell at is the market value of the property. And as we have seen in 2004, those numbers have been all over the place.
What is important to some is that "comps" are what appraisers use to determine value, so if you've just called ditech.com to pull another chunk of cash out of your property, you better hope the comps are "there." Recently, we have seen comps kill transactions because appraisers have to use lower sales figures, especially in cookie-cutter condo complexes, which can bring the new appraised value in less than the new sales price. Then the buyers don't get the loan they want or psychologically don't want to pay more then the appraised value. Damn comps.
Some other jargon comes to mind, but it would probably be unprofessional for me to discuss it. When you hear something you don't understand, always ask for clarification. The answer will give insight into the knowledge and experience of the agent you are dealing with. Or you can always email me. Happy New Year!
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