The real estate industry is a vast and varied field. Many different terms may be unfamiliar to those who are not as familiar with the industry. This article will go over some of the more common and important terms that would be beneficial for anyone looking to invest in this area to have a basic understanding of.
These are just some of the more common terms that any investor should know before investing in a property.
What does off market mean?
Off market properties are not on the open market. They are usually sold through word of mouth or to select groups of people. There are many reasons why a property may be off-market, but often it is because the owner wants to sell it quickly and privately without having to pay for advertising or marketing materials.
What is “MLS” (Multiple Listing Service)
MLS is a centralized database that houses the listings of all the properties currently for sale in different geographical regions.
The MLS or Multiple Listing Service was created to provide information on properties to the public. This includes information about the property, the seller, and more. The MLS contains a wealth of information about properties and can be accessed online at any time, day or night.
MLS was created in 1972, and today it’s owned by its member real estate boards and associations across North America. MLS is not open to the general public but instead only provides data to real estate professionals who are members of their local board or association.
What does “as is” mean in real estate?
“As Is” is a term that often appears in real estate transactions. It means that the property is being sold in its current condition without any guarantees or warranties. This includes any pre-existing damages, defects, or problems the seller may be aware of. The buyer accepts all responsibility for identifying and negotiating these issues before purchasing the property.
What is “DOM” (Days on Market)
DOM is the number of days since the property was listed.
The DOM is a measure of how long a property has been on the market. The higher the DOM, the longer it has been for sale.
What does Buyer’s agent/listing agent
A buyer’s agent is a real estate agent who represents the buyer of a property. A listing agent is a real estate agent who represents the seller of a property.
Buyer’s agents and listing agents are both professionals in the real estate industry. However, they have different responsibilities, and they typically work as independent contractors for their respective clients, not as employees.
The main responsibility of a Buyer’s Agent is to help buyers find properties that meet their needs and negotiate with sellers for the best possible price on those properties.
Sales agents are paid by commission, which means they receive a percentage of the purchase price when they successfully close on a deal for their client.
The primary responsibility of a listing agent is to represent the property to potential buyers and renters accurately.
When a property owner decides to list their home for sale with a real estate agent, they will need to find a listing agent who has the expertise and experience to sell their property. To be successful, a listing agent needs to understand the housing market in the area, how much properties are going for on average and what future prices can be projected.
What is “Due diligence”
Due diligence is a process of investigation or examination, typically to assess the value or quality of something. In the real estate industry, it is a process of investigating a property to evaluate its condition and potential risks.
The buyer’s responsibility for due diligence begins when they sign an offer to purchase. One of the most critical aspects of due diligence for a home purchase is obtaining a home inspection and reviewing it carefully.
This process includes an examination of the property’s title, environmental hazards, zoning laws and restrictions, flood zone status and flood insurance requirements, local ordinances and regulations, as well as any other factors that may affect the property’s use or value.
What is “Homeowner Association” (HOA)
A homeowner association is a group of homeowners who live in a subdivision or gated community.
It is made up of members who volunteer their time to create and enforce rules that will protect property values and enhance the quality of life for all residents.
The word “homeowner association” is often shortened to HOA.
What is “Subject to inspection”
A subject to inspection clause is a clause in a contract that provides the seller with the right to inspect the property before it’s sold. The buyer can’t refuse this request and must allow the seller to enter the property at a mutually agreed time. This is an essential part of any real estate transaction because it will enable sellers to avoid signing contracts for properties they don’t want and give them time to make sure they’re getting what they want.
What is “Earnest money”
An earnest money deposit is a deposit given by a buyer to a seller as a token of good faith.
Earnest money deposit is the amount of money the buyer gives to the seller as a token of good faith to show that they are serious about buying the property. It can be in any form, such as cash, check, or credit card.
What is “Earnest money deposit”
The Earnest Money Deposit is a deposit of money made by a buyer to show that they are serious about buying the property. This is usually paid when making an offer on a home, and it can be any amount up to 10% of the sales price.
A big fear in home sales is when a buyer backs out. According to the contract agreement, this usually means forfeiting the earnest money deposit, which is typically non-refundable after x days. In some cases, earnest money deposit is non-refundable. (In wholesale deals, for example)
What is “Equity”
Equity is the difference between the value of a property and the amount of debt secured on it.
The equity is calculated by subtracting the total debt secured on a property from its market value. Equity can be positive or negative, depending on whether there is more or less than 100% loan to value ratio. If there is more equity in the property, then it can be sold for cash to pay off debts or used as collateral for another loan.
What is “Natural hazards disclosure report” (NHD)
The Natural Hazards Disclosure Act was introduced in the United States in 1974, and it requires that all properties be disclosed to potential buyers. It is a federal law that applies to all property transactions.
The Natural Hazards Disclosure Act applies to various natural hazards, such as earthquakes, floods, landslides, hurricanes, tornadoes, and wildfires. The disclosure report includes information about the property’s location and any known risks for natural hazards in the area.
The disclosure report also includes information about any structures on or near the property that may be at risk from natural hazards or could cause injury if they were to collapse during a natural hazard event.
What is “Proof of funds”
Proof of funds is a document that proves the buyer has the money to purchase the property.
The purpose of this document is to satisfy potential lenders, sellers, and real estate professionals.
This document can be in any form, but most commonly, it is in electronic form and must include bank statements or other documentation that shows that they have enough funds to purchase the property.
What is “Purchase and sale agreement”
A purchase and sale agreement is a written agreement between two parties that defines the terms of a real estate transaction. The buyer purchases the rights to take ownership of the property from the seller.
The purchase and sale agreement includes:
- Details about the property and its condition
- The price and payment of the home
- Who will be responsible for what costs during construction or repairs on the property
- What happens if there are any problems with the property after closing, such as a leaky roof or faulty plumbing
What is “Seller disclosure”
The seller disclosure is a legal document that must be provided to prospective buyers. It tells the buyer about any known defects in the property.
The seller needs to tell the buyer about any known defects in the property, including anything from a leaky roof or an old septic system to whether or not any bats are living in the attic.
What is “Appraisal”
An appraisal is a process of estimating the value of a property.
The appraiser will look at factors such as location, size, style, and condition to determine the property’s value. Finally, the appraisal report will be given to the borrower to get a sense of how much they can borrow from a lender.
What is “Appraisal report”
The appraisal report is a document that provides an opinion of the value of a property.
The appraisal report includes information about recent sales and other relevant data.
Banks and other lenders then use the appraisal report to determine whether or not they are willing to lend money on that property.
What is “Backup offer”
The backup offer is an offer made by a buyer to the seller if the original offer is not accepted.
The backup offer occurs when a buyer makes an offer on a property and later decides to make another one. The first offer becomes the ‘primary’ or ‘original’ offer, while the second becomes known as the ‘backup’ or ‘secondary’. The backup may be submitted at any time before acceptance of the original.
What is “Inspection”
Inspections are done to identify any defects or deficiencies in the property. They are essential for both buyers and sellers of the property.
An inspection is an examination of the quality of a property. It usually includes the examination of the plumbing, heating, air conditioning, electrical wiring, and other systems. An inspection will often lead to recommendations for repairs.
What is “Offer”
An offer is a binding contract that an individual or company makes to purchase a property. It is made when the buyer and seller agree on the price and terms of the sale. The offer becomes legally binding once the seller accepts it.
What is “Counter offer”
A counter offer is the buyer’s response to the seller’s asking price. The buyer will typically make a lower offer to negotiate for a lower price.
It refers to an offer made by the seller of a property that is conditioned on the buyer’s acceptance of certain terms. For example, if a buyer offers $200,000 for a house and the seller makes an unconditional counter-offer for $225,000, then the seller’s counter-offer would be contingent on the buyer agreeing to pay $225,000.
What is “Title search”
A title search is an essential step in the process of buying a property. It is a legal process that ensures that the person who buys the property has clear ownership over it.
It is necessary to have a title search to ensure that there are no liens against the property or other claims. Otherwise, if you buy it without checking, you might not be able to use your property as collateral for any loans you may need in the future.
What is “Closing”
Closing is one of the most important steps in a real estate transaction. It means to complete the property transfer from the seller to the buyer.
When it comes to the closing process, many steps need to be taken before the property can be transferred. These steps are overseen by an attorney and their team, including drafting contracts, reviewing documents, securing financing, and managing the closing itself.
The closing costs include:
-Escrow fee: This fee covers administrative costs such as appraisal, title search, and recording fees. Escrow typically costs between $400-$1000 for a typical home purchase.
-Title insurance: This insurance protects against any potential issues with ownership of a property, such as fraud or undisclosed liens on a property. Title insurance can cost anywhere from $500-$2000 depending on your specific
What is “Closing Costs”
Closing costs are the fees that a buyer pays to a seller when they purchase a property. These fees cover the cost of title insurance, appraisals, and inspections.
Closing costs are one of the most frustrating parts of the home buying process. They are the fees that a buyer pays to a seller when they purchase a property. These fees cover the cost of title insurance, appraisals, and inspections, ranging from $3,000 to $6,000 or more.
Closing costs can be paid in one or two installments. The first is typically paid at the time of signing the contract and the second is due on closing day.
What is “HUD1”
HUD stands for ‘Housing and Urban Development.
HUD1 is a form that the federal government uses to keep track of housing loans. It contains two parts: an opening statement and a series of questions. The opening statement includes basic information about the property, such as location, address, and type of property. The questions are based on the type of loan being applied for.
What is “Deed”
A deed is a legal document that transfers property ownership from one person to another.
A deed usually includes the following information:
- The name of the grantor (person giving up ownership) and grantee (person receiving ownership)
- A description of the property, which may include the address
- The date and time when ownership was transferred
- A statement that conveys ownership of land to another person, such as “I give and convey unto John Smith all my right, title, and interest in this piece of land”
What is “Title insurance”
Title insurance is a form of insurance that protects the owner from loss of title to property due to defects in the title or liability for injury or damage that the property might cause.
The most common type of title insurance is a policy issued by a private company, called an “owner’s policy.” Owner’s policies provide coverage against losses resulting from defects in the owner’s title to real estate and against losses resulting from injuries and damages caused by someone else on the insured’s property.
What is “Escrow”
Escrow is a process of holding money or documents until the terms of a contract are fulfilled. The escrow company holds these items and only releases them when the agreement has been met. This helps ensure that both parties get what they agreed to in the contract.
The benefits of using an Escrow company include:
- A neutral third party, which reduces risk for all parties involved
- Increased security for buyers
- Protects sellers from non-payment by buyers
- Allows sellers to take care of any contingencies before they sell their property
What is “Conventional sale”
A conventional sale is the most common way to purchase a home in the United States.
A conventional sale is when the buyer (and seller) agree on a price and terms and then sign an agreement with an attorney or real estate agent to handle the closing. After that, the buyer usually takes out a loan from the bank or credit union to buy the house.
What is “Installment contracts”
An installment contract is a type of real estate contract where the buyer makes monthly payments over a set period of time. The seller can be any individual who owns the property, including banks, mortgage companies, and private individuals.
The buyer typically pays the seller an initial down payment and then makes monthly payments to pay off the balance of the property. The buyer usually does not have to make interest payments on these monthly installments.
What is “Deferred payments contract”
Deferred payment contracts in real estate are a type of contract where the buyer pays a down payment and then pays the remaining amount over a period of time.
The deferred payment contract is not just an option for buyers; sellers can also use it to provide financing for their property. This type of contract is also known as an installment contract.
What is “Land contract”
A land contract is a form of real estate financing that allows the buyer to purchase property without paying the full price upfront. Instead, the agreement between the buyer and seller states that the buyer will buy the property and make payments over time.
There are two types of land contracts called installment contracts and deferred payments contracts. An installment contract allows for payments to be made over time with interest charges, while a deferred payment contract does not allow for any payments to be made in advance or with interest charges.
What is “Probate sale”
A probate is a legal proceeding that can take months or even years to complete. This is because it takes time for an executor of the will to go through all of the deceased’s assets, identify what they are worth, and then distribute them accordingly. In addition, the executor is responsible for paying certain expenses with estate funds throughout this process. These expenses are called probate sale payments in real estate.
What is “Short sale”
A short sale is a transaction in which the homeowner sells their property for less than the mortgage balance, and a cash contribution from the lender makes up the difference.
A short sale is an option for homeowners who cannot make their monthly mortgage payments and who owe more on their mortgage than their property is worth. A short sale may be a better option than a foreclosure because it allows you to keep your credit score and avoid paying legal fees.
What is “Trust sale”
A trust sale is a process in which the trustee of a property sells it to a buyer on behalf of the beneficiaries.
A trust sale can be used in cases where the beneficiary does not have enough money to purchase the property outright. In this case, they can sell their right to buy the property at a future date for an agreed-upon price. The trustee then sells the home to the prospective buyer for that amount and receives payment from both buyers.
The trust sale has many benefits for both parties involved. It allows the beneficiary to receive their share of the inheritance now while still retaining ownership rights in case they need it later on. Furthermore, it’s an opportunity for prospective buyers to buy homes without having to make all-cash offers or wait for months on end while bank loans are processed.
What is “Real-estate owned” (REO)
Real estate-owned property can be an excellent option for buyers looking to enter the market with a lower cost of entry. These properties are generally priced below the current market value and offer a perfect investment opportunity.
Real estate owned is a term that refers to the property that the bank or other lending institution owns. This type of property is usually occupied by someone who owes money to the bank and has not paid their mortgage for a long period of time.
The bank will take possession of the property and sell it to recover some of the money owed.
What is “Tenancy in common” (TIC)
Tenancy agreements are just one type of rental agreement that can be found in common in real estate. It is most commonly used because it provides more stability for both parties involved. In addition, tenancy agreements are often used for long-term rentals, whereas other types of agreements are more appropriate for short-term leases.
What is “Adjustable rate mortgage” (ARM)
Adjustable-rate mortgages are loans that have interest rates that vary with the market. They are a great option for people who want to buy a property today and know that their income will increase in the future.
The rates can change, but usually not more than once a year. Adjustable-rate mortgages are often offered to people who want to buy a home but don’t have enough money for the down payment or closing costs.
What is “Debt-to-income ratio” (DTI)
The debt-to-income ratio, or DTI, is the percentage of your income to pay off your debts. The DTI is calculated by adding up your monthly payments and dividing them by your gross monthly income.
DTI ratios are a vital part of the risk assessment process for mortgage lenders. Lenders will typically only approve borrowers with a DTI ratio of 43% or lower. This is because these high DTI ratios can make it challenging to repay the mortgage and other debts in the future.
What is “FHA loan”
FHA loans are mortgages insured by the Federal Housing Administration. FHA loans are popular for first-time homebuyers because they require a down payment of only 3.5% of the purchase price and have lower credit score requirements than conventional loans.
The FHA loan program was created in 1934 to increase mortgage credit availability for low-income families by providing lenders with a guarantee against loss on home loans that conform to their standards.
“What is “FHA 203k rehab loan”
FHA 203k rehab loan is a mortgage loan for purchasing, refinancing, and rehabilitation of homes.
The FHA 203k is a great option for homeowners in need of some extra help in the rehabilitation of their homes. This mortgage loan allows homebuyers to purchase, refinance, and renovate the property all in one. In addition, with this loan, borrowers can finance up to $35,000 in construction costs into their mortgage.
What is “Fixed rate mortgage”
A fixed-rate mortgage is a type of mortgage that has a fixed interest rate for the loan duration.
Fixed-rate mortgages are beneficial because they have predictable monthly payments. This is great for people who want to know exactly what they will be paying each month, and it can help them plan their spending accordingly.
Fixed-rate mortgages also protect against fluctuating interest rates, so they are suitable for people who want to protect themselves against sudden spikes in interest rates.
What is “Hard money loan”
Hard money loans are a type of financing that is often used in the real estate industry.
Hard money loans are usually given by private investors who have a lot of cash. They use this cash to make short-term loans to people who need money for real estate deals. The interest rates are usually higher than what you would get from a bank loan, but the terms are shorter – usually 6-12 months or less.
What is “Mortgage pre-approval”
Mortgage pre-approval is a process in which a lender decides whether or not to lend you money for a home.
A mortgage pre-approval indicates a lender that they are willing to lend money for the cost of the home and additional expenses such as taxes and insurance. It’s an important first step in the process of buying a home or refinancing.
What is “Pre-approval”
Pre-approval in real estate is the process of determining how much a buyer can afford to spend on a home. This process is done before the buyer starts house hunting.
The pre-approval process involves estimating what the buyer can afford in terms of monthly mortgage payments and other costs associated with homeownership. Banks and lenders use this information to determine whether or not they will approve a loan request for the property in question.
What is “Principal”
The principal is the person who owns the property or the person who has a mortgage on the property.
When a person is looking to buy a property, they will need a mortgage. Banks won’t offer loans for more than the property’s value. When you take out a mortgage, you are called the “principal” and your bank is called the “lender.” The bank will fund your loan and then expect monthly payments from you.
What is “VA loan”
VA loans are a type of mortgage guaranteed by the United States Department of Veterans Affairs. They are available to veterans and qualified military members.
VA loans offer competitive interest rates and flexible down payment requirements, making them viable for many buyers. VA loans also come with some protections, including a guarantee against foreclosure and a loan limit based on the borrower’s income.
What is “Default”
Default is a term that is used in the real estate industry. It simply means that the borrower does not pay their mortgage for a certain period, and the lender has to take over.
Default is an event that will happen if the borrower doesn’t make their mortgage payments on time, and it can happen at any point of time during the life of a loan. The lender can take over after default, but this will depend on what kind of agreement you have with your lender.
What is “Foreclosure”
Foreclosure is the process of a homeowner being evicted from their property because they cannot keep up with their mortgage payments.
The process begins when the mortgage company notifies the homeowner that they default on their loan. This usually happens when they have missed one or more payments or if the homeowner has violated the terms of their mortgage agreement.
The next step is for the lender to send a foreclosure notice to inform them that they will be taking over ownership of the home and its contents. The notice also includes information about how much time they have to move out before foreclosure proceedings begin.
What is ARV
ARV stands for “after repair value,” which is the estimated cost to rebuild a property after being damaged. The ARV can be calculated by estimating the market value of the property minus any outstanding debt.
It’s important to note that ARV does not include any costs associated with selling a property.