Real Estate Terms For First Time Home Buyers

Real Estate Terms for the first time home buyerA glossary of the most common real estate terms for first time home buyers, by Lea Van Winkle, Realtor/Broker at Four Seasons Sotheby’s International Realty. This list is based on Lea’s 25 years experience in Vermont real estate.


Brokers can open their own offices and have real estate agents working for them. To be a broker you must first be a licensed real estate agent under a Broker until you meet certain requirements. You must also take a separate licensing exam. Brokers have more education and qualifications than real estate agents. For example, Pleasant Valley Real Estate is a real estate office and the broker is me, Lea Van Winkle. I am also a real estate agent and a Realtor. I can have other real estate agents working for me.

Buyer’s Agent

A buyer’s agent represents and works in the best interest of someone who wants to buy a property. A buyer (someone who is shopping for a house) and an agent will have a signed contract.

Escrow Funds

In Vermont, escrow funds generally refers to a deposit the buyer makes for the agreed upon contract and it acts as a security for the seller in the event of default. In the contract the buyer typically has conditions or contingencies but once all of these conditions have been satisfied then the deposit becomes non-refundable, if the buyer fails to purchase the property the deposit is released to the seller.

Escrowed Taxes and Insurance

In some cases, depending on the amount you put down, the bank may require you to pay everything in the same payment (aka PITI). This means you will be paying your mortgage payment, one-twelfth of your property taxes and one-twelfth of your homeowner’s insurance every month. If you put 20 percent or more down the bank will not require you to escrow (pay in advance) your taxes and insurance. You pay that yourself.

Gross Alpha Test

This test looks for minerals, radon, and any other chemicals that could be harmful to humans.

Limited Agent

Sometimes an agent has been representing a buyer and the buyer decides he really likes one of his agent’s listings. This creates “dual agency,” which is not allowed in the state of Vermont. Either one of the parties (seller or buyer) may be released from their contracts, OR, both parties may agree to work with their agent as a Limited Agent. Both parties then agree that this agent serves to complete the transaction, but in a limited capacity. The agent may not give one party an advantage over the other. The agent is, as the name suggests, limited.


This is the acronym for Multiple Listing Service. It’s a forum in which participating real estate agents can list properties they have for sale. So, when I put a listing of your house on MLS, that means over 8,000 Realtors in Vermont and New Hampshire can see your listing (aka your home) and bring prospective buyers to the table. Since it’s the most sophisticated marketing tool a real estate agent can use, anyone working with an agent should be sure the agent is an MLS member. Nowadays, with the evolution of internet marketing, MLS feeds to other powerful worldwide listing venues, such as your own agent’s website, Trulia, Zillow,, Facebook, and others.

Monthly Revolving Debt

Monthly revolving debt includes car payments, student loans, any credit card payments of any kind, child support, and anything you are required to pay on a monthly basis

P & S

In the real estate world, this does not come at the bottom of a letter as an afterthought. P & S is a purchase and sale agreement. It is signed after an offer has been accepted and all home inspections have taken place. It lists the sellers’ and buyers’ responsibilities during the time period when the property is taken off the market and the actual closing. The purchase and sale agreement It also might include certain conditions that need to be met in order to close, such as the pending sale of a buyer’s previous home or the buyer qualifying for a loan.

Pre-Approval Letter

A pre-approval letter is issued by a lender, such as a bank, and says that the lender has qualified your ability to pay the mortgage, property taxes, and homeowner’s insurance (otherwise referred to as PITI) of a particular property. They have based this qualification on the income you stated in your most recent tax returns vs. your debt, which includes the minimum monthly payment you are required to make on unsecured or secured loans. A pre-approval letter assures the seller that you’re the real deal. More importantly, it tells you what you can afford.


Principle, interest, taxes, and insurance (see above). This acronym describes part of the formula a bank uses to decide what they will loan you. The PITI you can afford is based on the ratio of your income to your debt. 33% of your gross monthly income is what the bank allows for a monthly payment. In addition, your monthly debt (including your consuming debt, i.e. credit card debt) can’t exceed more than 38% of your gross monthly income.

Real Estate Agent

A real estate agent (sales person) is someone who has taken the mandatory educational requirements and passed a licensing test for both state and federal regulations. they must ‘hang’ their license under a Broker, they can not operate alone.


A Realtor is a person who is all the above, and, in addition, has joined an organization with a set of rules, principals, and ethics which govern them. All Realtors are bound by these rules and regulations, and risk losing their license if they screw up. A real estate agent who is not a Realtor is not bound by a code of ethics.

Seller’s Agent

A seller’s agent works in the best interest of someone selling his or her property. A seller (someone who has listed their house for sale with an agent) and an agent will have a signed contract.

Often people don’t realize that unless they have signed a contract with a real estate agent, Realtor, or Broker, they are not being represented and there is no confidentiality. For example, if you want to look at a house that I have listed for sale (I am the seller’s agent), and you ask me to show it to you, I am under no obligation to keep anything you say about the house confidential.

Water Potability Test

This is a simple water test that checks to see if water is potable based on the presence (or, more importantly, lack of presence) of ecoli or other choliform. The state of Vermont allows for none of either in water to consider it potable.



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