FARAI CHIDEYA, host:
We spent the last three days making sense of the crazy real estate market. Wrapping up our series, we thought we'd give you a little verbal tip list. Because when it comes to real estate, the words can be as scary as the numbers. Escrow, entry-level, counteroffer, FICO, you name it.
To break it all down, I toured a house for sale in Encino, California, with real estate agent May Ling of White House Properties.
Ms. MAY LING (Real Estate Agent, White House Properties): This is an entry-level house. It's listed at $619,000.
CHIDEYA: Wait a second. Can we define entry-level house?
Ms. LING: Entry level house is someone that wants to buy a freestanding house where you have your own yard and you have your own space and you can change the color, you can put in whatever you want.
CHIDEYA: But when you say entry-level house, I'm thinking cheap. And is this cheap for L.A., or is this modest for L.A.?
Ms. LING: It does need a new roof, it does need some work. But this right now, these homes, maybe two years ago were in the 400-range. And this is the entry level now.
Ms. LING: Ouch.
(Soundbite of laughter)
CHIDEYA: All right. Let's go take a look.
Ms. LING: Okay.
CHIDEYA: I just wanted to ask you a question about the difference, if there is any, between brokers and agents.
Ms. LING: If you're an agent you usually work for a brokerage company. So the broker can list houses, he also can sell houses, but he is the one who oversees the agents.
CHIDEYA: Are you an agent or a broker?
Ms. LING: I am an agent and I've been doing this for around 26 years.
CHIDEYA: You just gave me an information sheet and it has a whole bunch of different designations, like RV ACS - Recreational Vehicle Access?
Ms. LING: Access.
CHIDEYA: Only in California will they have something like that. So this listing sheet, I guess, has all of these different things that you might want to buy in a home?
Ms. LING: Yeah. They have the bedrooms and bathrooms. They have the square footage. But every buyer needs to use this as a guide. But they are required to do your own due diligence in checking these out. And also have a physical inspection. You have a person come out, who's usually a builder or maybe has a contractor's license. He will go through the wiring, the plumbing, he will check the roof, he'll check underneath the house. He'll do all of that and tell you - give you a written report as to the condition of the house. And you always want to do that when you're buying something that's maybe 40 years old.
CHIDEYA: When you put an offer on a house, do you have a legal obligation to buy it if that offer is accepted?
Ms. LING: They usually want a deposit and they'll say on there. They want a three percent deposit and they want a 30-day escrow. So you write that in your offer, and you put on there the price that you want to offer. If he's asking 619 - in this market if you feel that the house is going to have multiple offers, you may want to give that price or you say, well, this house has been here for 90 days, I'm going to offer less.
CHIDEYA: So this sounds like kind of like The Price is Right but on a much larger level. You have to bid high but not so high that you actually harm yourself.
Ms. LING: What you have to do is once you get all the solds in the area that you're looking at...
CHIDEYA: So solds are houses that have recently sold?
Ms. LING: Within the last three months. So you look at that and you decide well do and - you know, this house had upgraded floors, it had some granite in here. Maybe I'll offer the asking. What you want to do is you want to negotiate with the seller. But you don't want to go so low that you alienate the seller by insulting him saying - if you went in and he's asking 619 and you say 500, that's an insult.
But if you came in and you said, well, I'll offer you 575. That may be a starting point.
CHIDEYA: Well, what about that initial question, if you offer is accepted do you have to then buy the place? Or can say, oh, no, no, no, wait, wait, I'm having second thoughts.
Ms. LING: Well, if your offer is accepted, whatever it was, then you usually have a timeframe between one and 17 days to do your physical inspection. During that time, you decide, well, I had the physical inspection - right after the physical inspection you'll have probably a ten-page written accounting of what the condition of the house.
And you look at it and you say, there's just too much work to be done here, I can't afford maybe $10,000 or $20,000 to bring this up to the level. And if the seller comes back and says, oh, this house is wonderful, I love it the way it is, then you can say at that point, I decline to buy the house because it's out of my price range for the amount of things that have to be done to the house.
And then at that point, your deposit was put in an escrow account and the seller and the buyer will sign an instructions saying that the deposit will be returned to you.
CHIDEYA: So I guess that's why sometimes you see signs that say in escrow. Because it's like well, it's not really sold but it's almost sold.
Ms. LING: Right. And when it's in escrow, the seller can still look at offers and they can still accept a backup offer. And the backup offer says when this falls out of escrow then I can come in and negotiate with the seller.
CHIDEYA: FICO score, what's that?
Ms. LING: FICO scores, these are the scores that a lender will look at. They'll run your credit and they'll see how many lates you have on there, if you have bankruptcy or if you're in foreclosure or whatever.
CHIDEYA: So late payments could be something like a credit card? It doesn't have to be on housing or anything?
Ms. LING: Exactly. Any late payments on your credit card or on your Macy's account or on your Bloomingdales, you need to get those paid on time. Usually in a range, if you're a first-time buyer, you want to be up in the 700 range. If you're down in the 550 to 600 - and you could probably qualify for a loan, but you would have to pay a higher interest rate than someone who's got an 800 FICO score.
CHIDEYA: What's the maximum?
Ms. LING: I think around 850, something like that.
CHIDEYA: Well, Mrs. Ling, you have done an amazing job explaining this. Thank you very much.
Ms. LING: You're welcome. You (unintelligible) come to Los Angeles then call May Ling at White House Properties and I'll help you.
CHIDEYA: Did you catch all of that? Don't worry, there's a glossary of the real estate terms that we just talked about, plus more tips, at our Web site, npr.org.
Thanks for joining us. That's our program today. To listen to our show, visit npr.org. NEWS AND NOTES was created by NPR News and the African-American Public Radio Consortium.