COMMONLY USED REAL ESTATE TERMS

Transcription

1 COMMONLY USED REAL ESTATE TERMS

2 Commonly Used Real Estate Terms 2 Absentee Owner An individual who owns a piece of real estate but does not live in it. Appraisal An appraisal is the evaluation of a property by a licensed appraiser on its price based on previous sales of similar properties. The appraised value is used by a bank to determine the lending limit on a given property. A seller may also have a property appraised to determine the offering price during a sale. Assignment Assignment is the process by which a right or contract is transferred from one party to another. Examples of typical assigned contracts are mortgages, leases and deeds of trust. Authorization to Release Information (ATR) A form that gives permissions to an individual to obtain information that would normally be classified as private. Bandit Signs 18x24 inch corrugated white sign that you put a short marketing message on that drives buyers or sellers to call you.

3 Commonly Used Real Estate Terms 3 Buyer's Broker / Buyer s Agent A buyer's broker is a broker who represents the buyer in effectuating a purchase. Normally in residential real estate transactions, the buyer's broker shares the commission received by the listing broker, who represents the seller. Buyers On Fire A software developed to assist Real Estate investors run their business in the most efficient manner. It is a full CRM allowing investors to easily keep in contact with their buyers and sellers list. Buyers on Fire also offers a plethora of features such as the property launch, lead capture numbers, tagging of contacts, and broadcast messaging. Simply put, Buyers on Fire is your marketing department. Capital Gain Capital gain is the seller's gain on an asset used in a trade or business or for investment, including real estate. This gain is taxed at varying rates depending on whether the asset was held for more or less than one year. Cash Flow Cash flow is the income produced by an investment property after deducting operating expenses and debt. Closing The closing is when the transfer of ownership of a property from the seller to the

4 Commonly Used Real Estate Terms 4 buyer occurs according to the sales contract. Closing Costs Closing costs are the expenses incurred in the purchase and sale of real property paid at the time of settlement or closing. Some examples of closing costs are title insurance, attorney fees, appraisal fees, recording fees and taxes. Closing Statement / Settlement Statement A closing statement is an accounting of the funds received and distributed in a real estate transaction. Collateral Collateral is the security put up in exchange for a loan, which can be taken by the bank if the loan goes unpaid. In the case of a mortgage loan, the collateral is the property. Commission The commission is the payment to the broker for his or her efforts on marketing and selling the property, and is usually a percentage of the total purchase price. Commission Split A commission split is the sharing of commissions between the listing agent and the broker of the buyer.

5 Commonly Used Real Estate Terms 5 Comparables / Comps Comps are used in assessing or establishing the fair market value of a property, a property which has been sold recently that is similar in size, condition, location and amenities. Condominium A condominium is a building in which ownership has been partitioned into unit interests. Each apartment owner receives a unit deed and owns an individual unit, but common areas are shared with the other unit owners of the building. Contingency Contingency is a condition in a contract relieving a party of liability if a specified event occurs or fails to occur. Contract A contract is a legally binding agreement between two parties, and in order to have a valid Contract of Sale in real estate there must be: an offer, an acceptance, competent parties, consideration, legal purpose, written documentation, description of the property, and signatures of the principals. Conventional Mortgage Loan A conventional mortgage loan is a loan in which the federal government does not insure or guarantee payment to the lender, but is under the amount of a jumbo

6 Commonly Used Real Estate Terms 6 mortgage. Counter-offer A counter offer is a new offer made by either the buyer or seller when rejecting a previous offer. Deceased Owner When a homeowner passes away. Deed A deed is a written instrument transferring an interest in real property when delivered to the grantee. Deed in Lieu of Foreclosure Deed in lieu of foreclosure is the conveyance of title to the mortgagee by a mortgagor in default to avoid a record of foreclosure. Deed Restriction A deed restriction is a limitation on land use appearing in a deed. Default An act performed by the buyer, seller, tenant or landlord that breaches the contract of sale or lease and permits a claim for damages.

7 Commonly Used Real Estate Terms 7 Absentee Owner An individual who owns a piece of real estate but does not live in it. Down Payment The down payment is the amount of money a buyer pays upfront in order to purchase a property. It is usually paid at the signing of the contract in the form of a certified check. The amount is typically 10% of the sales price. Dual Agent A dual agent is a broker or salesperson who represents both the buyer and seller in the same transaction. Due Diligence Due diligence is the investigation and review of a property to determine any legal liability. Earnest Money Deposit Earnest money deposit is the deposit a buyer makes at the time of submitting an offer to demonstrate the true intent to purchase. It is also called a binder or good faith deposit. Equity Equity is the difference between what something is worth and any loan secured by

8 Commonly Used Real Estate Terms 8 the asset (i.e. the value of a property less the outstanding mortgage). For example, if a home is worth $100,000 and the owner/borrower owes $65,000 on the mortgage loan secured by the borrower's home, then the borrower's equity is $35,000 or 35% equity in the home. Escrow A state where consideration, benefits, legal rights, document, or a sum of money is held by one person in trust for another, for the purpose of assuring performance under an agreement. Normally in a residential real estate sale, the attorney for the seller is the escrow agent for the deposit money securing the deal until closing. The money is held in an escrow account. Estate Estate refers to the collection of all assets of a deceased person. It is also the extent of interest a person has in real property. Executed Contract An executed contract is an agreement that has been fully performed. Fair Market Value The fair market value is the price for a property agreed upon between a buyer and seller in a competitive market. Fannie Mae

9 Commonly Used Real Estate Terms 9 Fannie Mae is the nickname for the Federal National Mortgage Association (FNMA), a privately owned corporation that purchase FHA, VA, and conventional mortgages. Federal Housing Administration Loan (FHA Loan) An FHA insured loan is a mortgage insured by the Federal Housing Administration. The Federal Housing Administration (FHA) is a federal agency that is part of the Department of Housing and Urban Development (HUD) that sets policy for mortgage underwriting and provides insurance for residential mortgages. FICO Score A person's credit score calculated with software from Fair Isaac Corporation (FICO). Financing A loan secured by personal property, such as real estate property. The stock and lease of a cooperative corporation also constitute such personal property, and a loan secured by these instruments is referred to as a financing loan. Generally, real estate brokers refer to these financing loans as mortgages because they operate in the same manner, even though technically they are not. First Mortgage A first mortgage is a mortgage whose lien is superior to the lien of any other mortgage on the same property. This lien is superior either because it was recorded prior to all other mortgages or because the mortgagee of another

10 Commonly Used Real Estate Terms 10 mortgage which had been recorded ahead of this mortgage has agreed to have a lien subordinated to the lien of this mortgage. Foreclosure Foreclosure is an enforcement process in which the lender under a defaulted mortgage takes title to the property for the purposes of selling it to recoup moneys owed under the mortgage. Freddie Mac Freddie Mac is the nickname for Federal Home Loan Mortgage Corporation (FHLMC), a corporation wholly owned by the Federal Home Loan Bank System that purchases FHA, VA, and conventional mortgages. Full Bath A full bath is a bathroom that consists of a sink, toilet, and a bathtub or shower. General Warranty Deed A general warranty deed is a deed denoting an unlimited guarantee of title. Gross Profit The profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services. Gross profit will appear on a company's income statement or can be calculated with this formula: Gross profit = revenue cost of goods sold.

11 Commonly Used Real Estate Terms 11 Half Bath A half bath, or powder room, has a sink and toilet, but does not have a bathtub or shower. Hard Money Lenders Hard money lenders are lending companies, or individuals, offering a specialized type of collateral backed loan. They tend to lend short term capital (also called bridge loans ) that provide funding and or cash, based on the value of the collateral. Hard money lenders can and will utilize all types of collateral cars, boats, land, airplanes, hard assets, paintings, etc. to complete the loan. HVAC HVAC is an acronym that stands for heating, ventilation and air conditioning. Improvements Improvements are changes or additions made to a property. These typically increase the value of the property. Interest Rates The interest rate is the cost of borrowing money from a lender. Rates will vary and will change over time. Judgment Lien

12 Commonly Used Real Estate Terms 12 A judgment lien is a general lien resulting from a court decree. Land Contract An agreement between a buyer and seller of property in which the buyer makes payments toward full ownership (as with a mortgage), but in a land contract, the title or deed is held by the owner until the full payment is made. Lead Capture Numbers (LCN) LCN s are real phone numbers that you can put in any marketing piece, yard sign, online etc that as soon as their dialed act as a caller id and capture the callers phone number and store it in a database for you. Market any LCN and immediately when someone dials it, our software will forward it to any phone number of your choice and at the same time we capture the callers correct phone number and store it in a database for you for future marketing. You should use a LCN anytime you market anything to build your subscriber base and make future marketing a breeze Lease Option More formally Lease With the Option to Purchase, is a type of contract used in both residential and commercial real estate. In a lease option, a property owner and tenant agree that, at the end of a specified rental period for a given property, the renter has the option of purchasing the property. Lease Purchase Also known as a Lease Purchase Agreement, is the heart of Rent To Own

13 Commonly Used Real Estate Terms 13 properties. It combines elements of a traditional rental agreement with an exclusive right of first refusal option for later purchase on the home. It is a shortened name for Lease with Option to Purchase Contract. Lien A lien is an encumbrance on property which acts as security for the payment of a debt or the performance of an obligation. A mortgage is a lien. A lender will want most, if not all, liens on a property removed before making a mortgage loan. Limited Liability Company (LLC) A form of organization that is similar to a partnership, in that recognition of income and expenses flow directly through to the owners for tax purposes (without a corporate tax), but that still permits insulation from liability similar to that of a corporation. Liquidity Liquidity refers to the ability of assets that are readily convertible to cash. Lis Pendens Lis pendens means a "lawsuit pending". See Notice of Lis Pendens. Listing The term used by brokers to market an apartment for sale or rent.

14 Commonly Used Real Estate Terms 14 Listing Broker The listing broker represents the interests of the seller or landlord in the sale or rental of his or her property. Loan-to-Value Ratio (LTV) The loan to value ratio is the mortgage amount divided by the lower of the purchase price or the appraised value of the property. This ratio is expressed as a percentage. A lender will use this ratio in determining the maximum mortgage loan that it will make on the property. Lot A lot is a measured section of land. Market Value The market value of a property is an estimation of the price for a property in relation to the current real estate market. Mechanic's Lien A mechanic's lien is a statutory lien available to anyone supplying labor or material to the construction of an improvement of land that has not been properly compensated. Membership Site

15 Commonly Used Real Estate Terms 15 Your one stop shop for all of Real Estate U s trainings. Simply log in with your unique credentials and you ll immediately have access to all of the training videos and Mindmaps for the course(s) that you have purchased. Absentee Owner An individual who owns a piece of real estate but does not live in it. Mindmaps Mindmaps are the organizational tool that Real Estate U uses to teach our students. They are laid out in a simple, easy to follow format that teaches in a step by step manner. To get the free software go to Xmind.Net Mortgage A mortgage is a pledge of real estate collateral to secure a debt. Also, it is a legal document describing and defining the pledge. The mortgage may also include the terms of repayment of the debt. It is also referred to as a deed of trust. Mortgage Note A mortgage note is a document signed at closing which states the borrower's promise to repay a sum of money. The note states an interest rate and a fixed period of time (term) for repayment. Mortgagee The mortgagee is the lender in a mortgage transaction.

16 Commonly Used Real Estate Terms 16 Mortgagor The mortgagor is the borrower in a mortgage transaction. Motivated Seller A seller of property for example, a residence or automobile who is compelled to entertain reasonable offers from prospective buyers. The motivation may come from economic circumstances or a desire to abandon ownership. The buyer is often able to purchase the property at a reduced price or under favorable terms. Multi-Family Unit A structure with two or more residential units. Multiple Listing Service (MLS) A MLS is a central service for real estate listings available to member brokers. National Association of Realtors (NAR) The NAR is the largest and most prominent trade organization for real estate brokers and agents. Net Profit The actual profit after working expenses not included in the calculation of gross profit have been paid.

17 Commonly Used Real Estate Terms 17 Non Owner Occupancy A property that is not occupied by the purchaser or owner of that property. Many mortgages given on non owner occupied properties are related to multi unit rental properties like an apartment complex. Mortgages for non owner occupied properties typically will have a higher interest rate than those for owner occupied properties. Offer An offer is made to purchase a property at a specific price. Once an offer is accepted, then a contract of sale is issued by the seller's attorney. Origination Fee The origination fee is a service charge by a lending institution for a mortgage. Origination is the first step in the mortgage loan process consisting of the completion of the application. Parcel A parcel is a specific portion of land such as a lot. Partnership A business or firm owned and run by two or more partners. Points

18 Commonly Used Real Estate Terms 18 Points refer to the payment made to a lender as consideration for issuing a mortgage, usually based on a percentage of the loan amount. Each point is equal to 1% of the principal of the mortgage. Power of Attorney (POA) Written legal authority given by one party (the principal) to another (the agent or attorney in fact) to act on the principal's behalf. It may be a (1) General power Of attorney that authorizes the agent to act generally on behalf of the principal, or (2) Special power of attorney that is limited to a specific act or situation. Decisions made and actions taken by an attorney in fact (within the scope of his or her authority) are legally binding on the principal. A power of attorney can remain in force only so long as the principal is alive and does not become disabled or incapacitated. Although it is often conferred on the principal's attorney, one does not need to be an attorney at law to be an attorney in fact. Prehab Prehabbing is the happy medium between wholesaling and rehabbing.you re making mostly minor cosmetic improvements to the property using builder s grade materials. The end product is a home that feels completely new, updated, fresh and clean with way less renovation costs. These homes are priced 10% below full retail value and are marketed to owner occupants. As a result, they sell very quickly. In basic terms, you making a property rental ready. Pre-Vacant / Moved A Pre Vacant home is where someone is moving and has filled out the change of

19 Commonly Used Real Estate Terms 19 address form at the post office. Primary Residence Generally, a primary residence of an owner or renter is one that they occupy the majority of time, usually considered to be 6 months and 1 day out of every year. Private Money Lenders A private money lender is a non institutional (non bank) individual or company that loans money, generally secured by a note and deed of trust, for the purpose of funding a real estate transaction. Private money lenders are generally considered more relationship based than hard money lenders. Proof of Funds (POF) A proof of funds (POF) is a document or bank statement proving that a person has the financial ability to perform a transaction. Property Description The property description is an accurate, legal description of the land. Property Launch The property launch feature inside Buyers On Fire is a marketing process that requires minimal time from the seller and yields a large number of leads. All the seller must do is fill out a simple form (number of bedrooms, bathrooms, sq.ft,upload pictures, etc) and Buyers on Fire blasts their property all over the

20 Commonly Used Real Estate Terms 20 internet (Facebook, Blogger, Craigslist, etc). Sellers can also easily order bandit signs to be shipped which will increase the number of leads significantly. When properties are launched correctly, they often sell in less than 7 days. Property Tax The tax issued by a municipality on the ownership of a property. Quick Claim Deed A type of deed that transfers an interest in real property, like a house, vacant land or a mobile home. The person giving the property is the grantor. The person receiving the property is the grantee. Quitclaim deeds are sometimes referred to as quit claim or quick claim deeds. Radon Radon is a colorless, odorless gas present in soil that enters a home through small spaces and openings. Real Estate Broker A real estate broker is essentially the boss of all agents at a real estate brokerage. All agents must be supervised by a broker. A broker is also able to complete the tasks of a Real Estate Salesperson (Realtor). Real Estate Salesperson / Realtor A person who acts as an agent for the sale and purchase of buildings and land.

21 Commonly Used Real Estate Terms 21 Real Estate Settlement Procedures Act (RESPA) RESPA is a federal law that regulates the activities of lending institutions in making mortgage loans. Real Property Tax Lien / Real Estate Taxes This lien is a tax levied against real property by the local government and has priority over all other liens. Recording Recording is registering the ownership, lien, or claim of a party to a specific parcel of real estate with the local county. Recording Fees Recording fees are the fees charged by the recorder's office to record a document such as a mortgage, deed of trust, deed and UCC Financing Statement. Referral Fee A referral fee is a percentage of a broker's commission paid to another broker for the referral of a buyer or seller. Rehab Rehabbing a home is the process of completely re doing a home. It can include tearing down walls, relocating plumbing/electrical, replacing the roof/siding,

22 Commonly Used Real Estate Terms 22 changing the house s layout, etc A full rehab completely transforms the house. While they can be rather expensive and time consuming, a rehabbed home can bring very large profits if done correctly. Sale Price The sale price, also referred to as the purchase price, refers to the amount of money paid by the purchaser to the seller. Seller Contribution The seller contribution is a payment by the seller of a property of some, or all, of the buyer's closing costs. Seller's Agent A seller's agent is the listing agent that works in the best interests of the seller. Short Sale A sale of real estate in which the proceeds from selling the property will fall short of the balance of debts secured by liens against the property, and the property owner cannot afford to repay the liens' full amounts and where the lien holders agree to release their lien on the real estate and accept less than the amount owed on the debt. Simple Interest Money you can earn by initially investing some money (the principal). A percentage

23 Commonly Used Real Estate Terms 23 (the interest) of the principal is added to the principal, making your initial investment grow! Special Warranty Deed A deed in which the seller warrants or guarantees the title only against defects arising during the period of his or her tenure or ownership of the property. The grantor makes no warranty against defects existing before the time of his or her ownership. Square Footage The area measured in square feet of a certain property. Square footage can be measured in different ways and is usually considered approximate. Condominium apartments have specific laws that determine the way in which the apartment is measured and usually more accurately reflect the actual square footage within a property. Staging Staging is decorating a house to make it look like a model home: cozy, comfortable, colorful and inviting, with a personalized look to make it stand out from the rest of the other houses on the market. Sellers can choose to stage an entire home or to partially stage a home. When partially staging a home it is often the Master Bedroom, Kitchen and Living room that are staged. Survey A survey is a document indicating measurements, boundaries and the area of a

24 Commonly Used Real Estate Terms 24 property. Sweet Spot Your Real Estate Sweet Spot tells you which areas you should be doing business in. You have 3 different types of sweet spots : Wholesale, Prehab and Rehab. Sweet Spots are based off of unit sales in an area which essentially tells you where most people want to buy homes in your area. Sweet Spot Locator The Sweet Spot Locator is an app designed to tell you what areas you should and should NOT be doing business in. SweetSpotLocator.Com will give you a comphrensive report. The report will tell you what zones/areas you can wholesale, prehab and rehab in. It will also tell you which areas to avoid. The report will give you a summary of your area that includes: total homes sold, average sale price, average bedrooms, average bathrooms, and average sq.ft. For each zip code it will tell you how many units sold and the average sold price. Title The title of a property is the evidence or documentation that an owner is in lawful possession of the property, such as a property deed. Title Insurance Title insurance is an insurance policy protecting the insured from financial loss caused by a defect or question about the title to real property.

25 Commonly Used Real Estate Terms 25 Title Search Title search is a process that examines local public records, laws and related court decisions to determine if any other parties have valid claims against the subject property (such as past due taxes, judgments or mechanic s liens). It also discloses past and current facts about the subject property's ownership. Title Transfer Tax Title transfer tax is a tax imposed on the conveyance of title to real property by deed. Underwriting In mortgage lending, underwriting is the decision making process used to determine whether the loan risk is acceptable to the lender. Underwriting involves the satisfactory review of the property appraisal and examination of the borrower's ability and willingness to repay the debt and sufficiency of collateral value of the property. U.S. Department of Housing and Urban Development (HUD) A federal agency that administers funding for projects related to housing. USDA Home Loan A USDA home loan from the USDA loan program, also known as the USDA Rural Development Guaranteed Housing Loan Program, is a mortgage loan offered to

26 Commonly Used Real Estate Terms 26 rural property owners by the United States Department of Agriculture. This is typically for first time home buyers and usually is 100% financing. VA Guaranteed Loan A VA guaranteed loan is a mortgage loan in which the loan payment is guaranteed to the lender by the Department of Veteran Affairs. Vacant Home A home that has no occupants. Walk-Through Inspection The walk through inspection of a property occurs right before a closing to ensure that the property is being delivered as stipulated in the contract of sale. Wholesaling The process of putting a property under contract and assigns or resells the property to another investor. Zoning Zoning are the laws regulating land use. Zoning Ordinance / Zoning Restriction Laws setting limits on how you can use your property. For example, a business cannot be built on land that has been zoned residential.