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Useful Real Estate Terms

Appraisal - An appraisal is a report prepared by a person licensed by the State of Vermont to determine the approximate value of a property. The appraisal is typically the key element to obtaining financing from a bank. Most banks will not provide a buyer a loan unless an appraiser confirms that the contract price is equal to or less than the appraised value of the property.

Boiler - Most homes in Vermont are heated by hot water rather than hot air. The water is heated by a boiler. A boiler is usually either fueled by oil, propane or natural gas. The rooms are either heated by baseboard or radiant floors. There are new fuel sources such as geothermal but these technologies are still relatively new. Buyers should determine the efficiency of the boiler in the home. The most efficient boilers today are "on demand" boilers.

Buyer Agency Agreement - This is the agreement or contract between a prospective home buyer and a real estate agent. The agreement is usually an exclusive one meaning that the buyer can only use that agent during the term of their agreement to help find a home. The agreement states the amount of pay for the agent. The pay can either be a percentage of the sales price or a flat fee. Buyers should shop around because fees vary by agent.

Buyer Broker/Buyer Agent - The buyer broker is the real estate broker hired to represent a buyer in the search for property. This party is an agent of the buyer and their sole duty is to represent the interests of the buyer.

Central Air Conditioning - For homes heated with hot air, they can also have a central air conditioning system. The cold air is created by a condenser located on the exterior of the building then blown back through the houses duct system.

Comparable Sale - This term refers to a property that has sold recently (usually within the past 6 months or sooner) that is similar to a property that a buyer is considering purchasing. You can find these properties on the MLS' sold properties list.

Contract Contingency - Most contracts include clauses that allow a purchaser to terminate the contract unless the buyer confirms that certain things meet with the buyer's approval. The most common contingency in a contract is an "Inspection Contingency." An inspection contingency normally states that a buyer may terminate the contract if they have the property inspected and they are not satisfied by the results of the inspection.

Counteroffer - Once a buyer presents an offer to a seller, the seller can either accept it as is, reject or counteroffer. A counteroffer is a legal rejection of the buyer's initial offer. The counteroffer is essentially a new offer from the seller to the buyer.

Credit Score - There are 3 major credit reporting agencies. These agencies use a FICO score to determine the level of credit risk a purchaser poses should they be given a loan to buy a home. These scores can vary from company to company for a variety of reasons. It is important to note that your credit score can be negatively affected the more times inquiries are made so be careful when shopping for a lender to avoid having to many inquiries made during the process.

Deposit (aka earnest money) - This is the amount the buyer gives to the seller at the time of the signing of the contract. Typically the deposit is only refundable if the buyer terminates because of a "contract contingency" (see below). If the buyer breaches the contract then the seller normally has the right to retain the buyer's deposit. If the buyer does purchase the property, the deposit is credited towards the buyer's purchase price at closing.

Ductless Air Conditioning - For homes heated by hot water, there is no duct system. In order to have air conditioning in these homes, the owner must use ductless systems. Most ductless systems these days have a small condenser located on the outside of the building and a cooling unit attached to the wall of the room.

Escrow Agent - An escrow agent acts as an intermediary between the buyer and seller in a real estate transaction. Unlike an agent for one party or the other, the escrow agent has a duty to both parties to act only upon the instructions of both parties. Escrow agents are often charged with holding deposit money.

Furnace - Some homes in Vermont are heated by hot air rather than hot water. The heating unit in these homes is known as the furnace. The furnace creates hot air and then blows the air out through a system of ducts in the house.

FSBO - (pronounced "Fizz Bo") stands for "For Sale By Owner." This is a property that is marketed for sale but the owner is not represented by a Listing Broker.

Good Faith Estimate (GFE) - This is the estimate of closing costs provided to a buyer by a lender or bank before the buyer commits to a loan.

Insurance Binder - Most lenders require a homeowner to prepay for 1 year of homeowner's insurance prior to purchasing a home. Most lenders will require proof of this insurance to be provided by the purchaser at the time of closing.

Lead Based Paint Disclosures - Because lead based paint was not banned in the United States until 1978, sellers of residential structures built before 1978 must disclose to prospective buyers whether they have knowledge of the presence of lead based paint or reports pertaining to lead based paint. The seller is not required to test the house but a prospective buyer upon signing a contract could have such a test performed. It is not customary in Vermont for a buyer to have the house tested for lead based paint. Additional requirements pertain to sellers of residential rental buildings.

Listing Broker - This is the firm or individual that represents the seller for the purpose of marketing the seller's home. This party is an agent of the seller and their sole duty is to represent the interests of the seller of the property.

Listing Cart - This is a tool that real estate agents use to send listings of properties to buyers. The MLS allows agents to create Listing Carts based upon the search criteria of a buyer and those listings will be emailed on a daily basis to the buyer as they come to the market.

MLS - This stands for "Multiple Listing System." The MLS is a database of property listings. In Vermont the MLS is owned by the Northern New England Real Estate Network or NNEREN. Real estate agents in Vermont input data into the MLS. This data is used by local brokerage websites, including this one, for content. Thus, most if not all real estate content on websites is fed directly from the MLS. Very few public listings are exclusive to a particular website.

Municipal Water and Sewer System - Some towns in Vermont have both municipal water and sewer systems. However, many towns have only municipal water but not sewer. If the home is served by municipal water but not sewer then it is likely served by a septic system. If this is the case, the buyer should ask for maintenance records of the septic system and may want to have the system inspected themselves.

Offer - When a buyer is interested in a home, they convey their interest to the seller in writing. In order to be legally enforceable the written document must include the property address, the price, and the date of the closing. Although these are the minimum requirements the written document usually includes additional terms including but not limited to clauses related to the buyer's mortgage and inspecting the property.

"Open" Permits - Vermont is somewhat unique in that because of Vermont Supreme Court decisions, zoning and building permits are considered part of a property's title (see below). As a result of these decisions, most buyers will need to ensure that any and all permits affecting the property have been properly disposed of in the town offices. In some cases a final inspection may be required by a town official even if the permit is very old to finally "close out" the so-called "open" permit.

Option (to purchase) - An option to purchase is an agreement between a buyer and seller that gives the buyer the future right to purchase. The buyer usually pays the seller a non-refundable amount of money for this right. Unlike a right of first refusal (see below), the buyer has the exclusive right to purchase during the option period.

Private Mortgage Insurance - Also known as "PMI," this is an additional insurance that a buyer is typically required to obtain if a buyer's downpayment is not large enough for their lender's non-PMI loans. We recommend checking with your loan officer to determine if you will be required to pay PMI.

Property Inspection - Although not legally required, most buyers in Vermont will have a home inspected by a professional home inspector prior to purchasing a home. It is important to note that at this time there is no licensing in Vermont for home inspectors so the only standards used are those of their national trade association.

Property Transfer Tax - In Vermont the State charges a 1.25% tax on the transfer of real estate. It is customary for the buyer to pay this tax, which differs from states in the U.S. where the sellers customarily pay. The tax is due at the time of the transfer. There is an exception for a property that will be used as the primary residence of the purchaser. If the purchaser will use the property as their primary residence then the first $100,000 of the sales price is taxed at .5% or $500. Thus, if a buyer purchases a $200,000 as their primary residence the tax will be $1,750, whereas if the house is not the buyer's primary residence the tax would be $2,500.

P&S - Purchase and Sale Contract. This is the written agreement creating the legal obligation of the seller to sell and the purchaser to buy the property.

PTTR - This stands for "Property Transfer Tax Return." This is the form filed with the State at closing to report the transfer tax paid by the buyer.

Radon - Is a gas that has been linked to an increased risk of cancer. The U.S. Environmental Protection Agency's website has a detailed description of the gas and the risks associated with it. It has become customary in Vermont to have a home tested for radon before purchasing. While there are no laws regarding radon, the EPA has recommended levels for installing mitigation devices and systems. Most home inspectors in Vermont also are trained in conducting radon tests.

Right of First Refusal - A right of first refusal is usually provided by a seller to a buyer for the opportunity to match the terms of another offer should the seller receive one. In Vermont the most common scenario is where the buyer has a home of their own to sell before they can purchase the seller's home. The buyer and seller agree to the terms of the purchase of the seller's home. The seller then has the right to continue to show their home and take other offers. The buyer then has the right to match the terms of any offer the seller receives that is better than the agreement between the buyer and the seller.

Roof - There are several types of roofing materials. In Vermont the most common roof materials are shingle, slate and metal. Roof shingles typically are classified by the length of their durability (i.e. 20 year, 30 years, 40 years). The most common type of metal roof in Vermont today is the standing seam type. Standing seam roofs are said to last for a lifetime. Slate roofs are very durable but tend to be expensive to install new. If the home has a slate roof, it will be important for the buyer to conduct periodic maintenance on broken and missing pieces to extend the roof's life.

Seller's Property Information Report (SPIR) - This is a document customarily provided by a seller to prospective buyer. Sometimes referred to as the "Seller's Disclosures," this document is not legally required under Vermont law at the current time. However, it is common practice for the seller to provide this document to a prospective buyer prior to the buyer signing a contract to purchase the seller's home.

Septic System - For homes not served by a municipal sewer system, the home is likely served by a septic system. In some cases, the home may share its septic system with other homes in the neighborhood but in most cases the home will be served by its own septic. A buyer should request septic maintenance records from the seller and may want to consider having the system inspected themselves.

Showing - This is the term used for when a buyer views a property for sale. Typically the buyer should ask their agent to schedule an appointment with the listing agent to see the home. If you have a buyer's agent it is important to have the agent schedule the appointment to avoid any disputes as to "procuring cause" later on (see definition of "procuring cause").

Siding - The exterior of a home can be critical to the level of maintenance that will be required over time. The most common types of siding are clapboard, shingle, aluminum and vinyl. While many people find wood siding more attractive, a synthetic siding like vinyl requires less maintenance over time. It is important for a buyer to balance their personal aesthetic preference with the costs it will take to maintain the siding over time.

State of Vermont Consumer Disclosure - The State of Vermont requires that every real estate agent upon "substantial contact" with a prospective client provide a consumer disclosure. This website contains a link to the disclosure on the homepage to meet this requirement.

Title Search - In Vermont a property is sold by a seller giving a "deed" to a buyer. The deed is evidence of the ownership of the seller. Similar to an automobile, the deed is often referred to as the title to the property. It is important for a buyer to make sure that the seller owns the title and that there are no mortgages or other liens on the property. A buyer or a buyer's lender will typically hire an attorney in Vermont to search the history of the title (often referred to as the "chain of title") to ensure that the seller has a good title to sell to the buyer. In Vermont the records of title are kept at the local level in the town and City land records.

Well Water - Because of Vermont's rural nature most homes cannot be served by municipal water sources. Thus, many homes rely upon underground wells located on the property. If the property is served by a well, a buyer should have the well tested to make sure that bacteria and E. coli levels are acceptable for potable water.