Real Estate Glossary:
the act of acquiring or purchase, v. The purchase itself, n.
to change the use of a structure from that originally intended. Example: Conversion of industrial “loft” building to residential use.
There are two types of conventional loans: the fixed-rate and the adjustable-rate mortgage. In an adjustable-rate mortgage, the interest rate can change over the course of the loan at five, seven, or ten year intervals. For homeowners who plan to stay in their home for more than a few years, this is a risky loan as rates can suddenly skyrocket depending on market conditions.
This is the process of combining both interest and principal in payments, rather than simply paying off interest at the start. This allows you to build more equity in the home early on.
In order to get a loan from a bank to buy a home, you first need to get the home appraised so the bank can be sure they are lending the correct amount of money. The appraiser will determine the value of the home based on an examination of the property itself, as well as the sale price of comparable homes in the area.
An arbitration clause is a clause in a contract that requires the parties to resolve their disputes through an arbitration process.
This is how much a home is worth according to a public tax assessor who makes that determination in order to figure out how much city or state tax the owner owes.
AVMS-Automated Valuation Models
Dodd-Frank defines the term "automated valuation model" (AVM) to mean
"any computerized model used by mortgage originators and secondary market issuers to determine the collateral worth of a mortgage secured by a consumers principal dwelling.
This is the agent who represents the buyer in the home-buying process. On the other side is the listing agent, who represents the seller.
The cash reserves is the money left over for the buyer after the down payment and the closing costs.
The closing refers to the meeting that takes place where the sale of the property is finalized. At the closing, buyers and sellers sign the final documents, and the buyer makes the down payment and pays closing costs.
In addition to the final price of a home, there are also closing costs, which will typically make up about two to five percent of the purchase price, not including the down payment. Examples of closings costs include loan processing costs, title insurance, and excise tax.
Comparative market analysis
Comparative market analysis (CMA) is a report on comparable homes in the area that is used to derive an accurate value for the home in question.
This term refers to conditions that have to be met in order for the purchase of a home to be finalized. For example, there may be contingencies that the loan must be approved or the appraised value must be near the final sale price.
Dealer, real estate
One who buys and sells real estate as a business, as opposed to an investor. The importance of the term is for tax purposes. If IRS determines that a taxpayer is a dealer, said tax payer is a dealer, said taxpayer will not be allowed the capital gains benefits of an investor, but will be taxed at ordinary income rates. The term applies to the transactions more than the person. One may be a dealer in certain transactions and an investor in others.
1. in appraisal, a loss value in property due to any cause, including physical deterioration, functional obsolescence and external obsolescence. 2. in real estate investment, an expense deduction for tax purposes taken over the period of ownership of income property. (1) Depreciation will be imputed by the IRS, whether claimed or not, when determining profits (ordinary or capital gain) for tax purposes.
those real estate assets discounted in value by the marketplace due to some aspect of physical condition (deferred maintenance, fire damage), ownership or condition of title.
Dual agency is when one agent represents both sides, rather than having both a buyer’s agent and a listing agent.
yhe act of investigating any/all matters relating to an immanent or future act having a potentially adverse outcome. e.g., in real estate, checking for outstanding code violations and inspecting the physical condition of the property are considered “exercising” due diligence.
Equity is ownership. In home-ownership, equity refers to how much of your home you actually own—meaning how much of the principal you’ve paid off. The more equity you have, the more financial flexibility you have, as you can refinance against whatever equity you’ve built. Put another way, equity is the difference between the fair market value of the home and the unpaid balance of the mortgage. If you have a $200,000 home, and you still owe $150,000 on it, you have $50,000 in equity.
Escrow is an account that the lender sets up that receives monthly payments from the buyer.
1. the interest or nature of the interest which one has in property, such as a life estate, the estate of a deceased, real estate, etc. 2. a large house with substantial grounds surrounding it, giving the connotation of belonging to a wealthy person.
There are two types of conventional loans: the fixed-rate and the adjustable-rate mortgage. In a fixed-rate mortgage, the interest rate stays the same throughout the life of the loan.
Quick-profit strategy in which an investor purchases real estate at a discount price and improves the property in order to sell it at a higher price. ... Sometimes contractors are used to do the upgrades to the property, but an experienced house flipper may do the work his or herself.
a legal procedure whereby property used as security for a debt is sold to satisfy the debt in the event of default in payment of the mortgage note or default of other terms in the mortgage document. The foreclosure procedure brings the rights of the parties to a conclusion and passes the titles in the mortgaged property to either the holder of the mortgage or a third party, who may purchase the realty at the foreclosure sale, free of all encumbrances affecting the property subsequent to the mortgage
General warranty deed
a deed in which the grantor fully warrants good clear title to the premises. Used in most real estate deed transfers, a general warranty deed offers the greatest protection of any deed
“Hard Money” mortgage
a mortgage given in return for cash, rather than to secure a portion of the purchase price, as with a purchase money mortgage.(2) In the rehab. business, premium priced short term financing made available to dealers in distressed property for the purpose of acquisition and improvement; upon completion, the property is typically sold or refinanced for investment purposes.
an individual, generally licensed, who performs an on site comprehensive inspection of a residential dwelling and produces, for a fee, an authoritative summary of physical conditions. A professional home inspection is considered to be an objective evaluation, free from self interest (as may not be the case with a contractor’s opinion.
This warranty protects from future problems to things such as plumbing and heating, which can be extremely expensive to fix.
Home inspections are recommended for potential buyers. Typically, they cost a few hundred dollars. The purpose is to check that the house’s plumbing, foundation, appliances, and other features are up to code. Issues that may turn up during an inspection may factor into the negotiation on a final price. Failing to do an inspection may result in surprise costly repairs down the road for the home buyer.
This is the cost of borrowing money for a home. Interest is combined with principal to determine monthly mortgage payments. The longer a mortgage is, the more you will pay in interest when you have finally paid off the loan.
A listing is essentially a home that is for sale. The term gets its name from the fact that these homes are often “listed” on a website or in a publication.
This is the agent who represents the seller in the home-buying process. On the other side is the buyer’s agent, who represents the buyer.
L. T. V. abbrev. Loan to value ratio
The relationship between the amount of the mortgage loan and the value of the real estate being pledged as collateral.
The broker is an individual or company that is responsible for taking care of all aspects of the deal between borrowers and lenders, whether that be originating the loan or placing it with a funding source such as a bank.
This is the initial price offered by a prospective buyer to the seller. A seller may accept the offer, reject it, or counter with a different offer.
Before buying a home, a buyer can obtain a pre-approval letter from a bank, which provides an estimate on how much the bank will lend that person. This letter will help determine what the buyer can afford.
The principal is the amount of money borrowed to purchase a home. Paying off the principal allows a buyer to build equity in a home. Principal is combined with interest to determine the monthly mortgage payment.
Private mortgage insurance
Private mortgage insurance (PMI) is an insurance premium that the buyer pays to the lender in order to protect the lender from default on a mortgage. These insurance payments typically end once the buyer builds up 20% equity in a home.
Real estate agent
A real estate agent is a professional with a real estate license who works under a broker and assists both buyers and sellers in the home-buying process.
Real estate broker
A real estate broker is a real estate agent who has passed a state broker’s exam and met a minimum number of transactions. These brokers are able to work on their own or hire their own agents.
A Realtor is a real estate agent who specifically is a member of the National Association of Realtors. NAR has a code of standards and ethics that members must adhere to.
Refinancing is when you restructure your home loan, replacing your old loan with an entirely new loan that has different rates and payment structures. The main reason people refinance their home loans is to get a lower interest rate on their mortgage, and therefore lower not only the monthly payment but also the overall debt owed.
Subject-To Real Estate Investing
"Subject-To" is a way of purchasing real estate where the real estate investor takes title to the property but the existing loan stays in the name of the seller. In other words, "Subject-To" the existing financing. The investor now controls the property and makes the mortgage payments on the seller's existing mortgage.
A form of indemnity insurance predominantly found in the United States which insures against financial loss from defects in title to real property and from the invalidity or unenforceability of mortgage loans. The vast majority of title insurance policies are written on land within the United States. Title insurance is often required as part of the closing costs. It covers research into public records to ensure that the title is free and clear, and ready for sale. If you purchase a home and find out later that there are liens on the home, you’ll be glad you had title insurance.
Real estate wholesaling occurs when a party (the "wholeseller") contracts with a home seller, markets the home to potential buyers, and then assigns the contract to one of them. The wholesaler makes a profit, which is the difference between the contracted price with the seller and the amount paid by the buyer.
National Multi-Family Housing Council-Glossary