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Glossary of Terms A-Z

A
  • Acceleration Clause

    An Acceleration Clause is a provision in a Mortgage or Loan Agreement that allows the lender to demand early repayment of the entire loan balance. This can be triggered by specific events, such as missed payments, violation of the Loan Agreement, or sale of the property. The clause protects lenders by allowing them to recover their funds if the Borrower fails to meet the Terms of the agreement.
  • Accredited Investor

    An Accredited Investor is an individual or entity recognized by financial regulations as having the financial sophistication and capacity to bear the risks of certain types of investments. In real estate, accredited investors often participate in high-stakes investment opportunities, such as private real estate funds or complex investment vehicles. The status is typically determined by income, net worth, asset size, governance status, or professional experience.
  • Accrued Depreciation

    Accrued Depreciation refers to the cumulative loss in value of a property over time due to wear and tear, aging, and obsolescence. In real estate, it's an important factor in determining the current value or selling price of a property. This concept is especially relevant for investment properties and is used in accounting to allocate the cost of a property over its useful life for tax and valuation purposes.
  • Affordable Housing

    Affordable Housing refers to housing options that are economically accessible to people with low to moderate incomes. In real estate, it's a crucial aspect of urban planning and social policy, aimed at providing safe and decent living spaces at a cost that doesn't impede other basic living expenses.
  • After Repair Value (ARV)

    ARV is an estimate of a property's value after it has undergone repairs and renovations. This term is commonly used in real estate investing, particularly in house flipping and rehab projects. It helps investors assess the potential profit margin by comparing the cost of purchase and repair to the expected selling price post-renovation.
  • Airbnb

    A popular online platform for renting out properties or rooms for short-term stays, often used as an alternative to hotels.
  • Amortization

    Amortization in real estate refers to the process of gradually reducing a Mortgage loan through scheduled, periodic payments over time. These payments cover both the principal amount and the interest. Amortization schedules typically involve higher interest payments at the beginning, which gradually shift towards more principal reduction as the loan matures.
  • Appraisal

    A professional assessment of a home's market value, often required by lenders before approving a Mortgage.
  • Appraiser

    A qualified individual who uses his or her experience and knowledge to prepare the Appraisal estimate.
  • Appreciation

    Appreciation in real estate refers to the increase in the value of a property over time. This can result from various factors, including market dynamics, neighborhood development, and improvements to the property itself.
  • As-is

    A term indicating that a property is being sold in its current condition, with the buyer accepting it, including any faults or issues.
  • Assignment of Contract

    In real estate wholesaling, an Assignment of Contract occurs when a wholesaler secures a below-market deal with a seller and transfers this agreement to an end buyer, like a rehabber, through a contract assignment. This is a pivotal aspect of the wholesaling process.
  • Assumable Mortgage

    This refers to a property sale where the buyer takes over the seller's existing Mortgage, retaining the same Terms and debt, thereby bypassing the need for a new Mortgage.
B
  • Balloon Mortgage

    A Balloon Mortgage is a type of loan that typically features lower initial payments and a large, one-time payment at the end of the loan term. This final payment, the "balloon," covers the remaining principal balance. Balloon mortgages are often used when a Borrower expects to sell the property or refinance before the Balloon Payment is due.
  • Balloon Payment

    A Balloon Payment is a large, one-time payment due at the end of a Balloon Mortgage term. It represents the remaining principal balance of the loan.
  • Bankruptcy

    Bankruptcy, when related to real estate, is a legal status for individuals or businesses unable to repay their debts. It significantly impacts property owners and investors. In this context, Bankruptcy can provide temporary relief from Foreclosure through an automatic stay. Key types include Chapter 7, which may involve liquidating real estate assets to settle debts, and Chapter 13, which allows for debt reorganization and potentially enables debtors to retain their properties. This process has profound implications for one's credit score, Mortgage eligibility, and future property transactions, making legal guidance essential for navigating Bankruptcy's complex impact on real estate holdings.
  • Borrower

    A Borrower in real estate is an individual or entity that takes out a loan, typically a Mortgage, to finance the purchase of a property. The Borrower is responsible for repaying the loan amount along with interest, according to the Terms agreed upon with the lender. Their ability to borrow and the Terms of the loan depend on factors like Credit History, income, and the value of the property. In real estate transactions, the Borrower's financial reliability and stability are key to securing a loan for property acquisition.
  • Bridge Loan

    A Bridge Loan is a short-term financing option used in real estate to bridge the gap between the purchase of a new property and the sale of an existing one. It provides immediate cash flow and is typically used when a buyer needs to make a quick purchase before their current property is sold.
  • Broker

    In real estate, a Broker is a licensed professional who acts as an intermediary in real estate transactions, facilitating the buying, selling, or leasing of properties. Unlike real estate agents, brokers have additional training and licensing qualifications, allowing them to manage their own firms or supervise agents. They play a key role in negotiations, handling contracts, and ensuring legal compliance.
  • BRRRR

    BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. It's a strategy used by real estate investors where a property is purchased, renovated, rented out, and then refinanced to fund the purchase and rehab of the next property. This method allows investors to recycle their capital through real estate investments, growing their portfolio.
  • Buy and Hold

    A long-term real estate investment strategy where an investor purchases a property to hold onto it and generate rental income over time.
  • Buydown

    A Buydown is a financing technique in real estate where the Mortgage Interest Rate is reduced for a certain period, typically at the beginning of the loan term. This reduction is achieved by paying upfront fees or points.
  • Buyer’s Agent

    A real estate agent who represents the buyer in the home purchasing process.
C
  • Cap Rate

    The capitalization rate, or Cap Rate, is a metric used to assess the profitability and return potential of a real estate investment. It's calculated by dividing the property's annual net operating income (NOI) by its current market value or purchase price. A higher Cap Rate indicates a potentially higher return on investment, but may also involve higher risk. This rate is crucial for investors in evaluating the performance and value of income-producing properties, such as rental buildings or commercial real estate.
  • Capital Gains Exclusion

    A tax benefit that allows homeowners to exclude a certain amount of profit from Capital Gains Tax when selling their primary residence.
  • Capital Gains Tax

    A tax on the profit made from selling a property or investment.
  • Cash Buyer

    An individual or entity who purchases a property using cash rather than financing, often leading to a quicker transaction.
  • Cash Buyer List

    A critical resource for real estate investors, this list comprises investors actively seeking new investment opportunities. It's typically developed through marketing, networking, and repeat business.
  • Cash Flow in Real Estate

    Refers to the net income a rental property generates after accounting for all operating expenses, a key metric for property investors.
  • Cash-on-Cash Return

    A financial metric in real estate investment, measuring the yearly return on investment compared to the cash invested. For instance, a $5,000 return on a $100,000 investment represents a 5% Cash-on-Cash Return.
  • Certificate of Title

    A document, often issued by a title company, verifying the legal ownership of a property. It confirms that the title is clear of liens and ready for transfer upon closing.
  • Closing Costs

    Expenses, over and above the price of the property, incurred by buyers and sellers during the real estate transaction.
  • Closing Date

    The date when the sale of the property is officially completed, and ownership is transferred from the seller to the buyer.
  • Commercial Loan

    A loan specifically for purchasing or renovating commercial properties, like office buildings, shopping centers, or hotels.
  • Comparable Sales (Comps)

    Sales of similar, nearby properties used to determine a property's market value, essential in conducting a comparative Market Analysis (CMA).
  • Construction

    Construction in real estate involves the process of building or assembling structures, typically housing or commercial properties. It encompasses planning, design, financing, and the actual physical Construction of buildings. In real estate development, Construction is a crucial phase, transforming ideas and designs into tangible, functional properties. This process requires coordination among various professionals and adherence to local building codes and regulations. For investors and property developers, understanding the Construction process is essential for successful project completion and property valuation.
  • Contingency

    A clause in a real estate contract that requires certain conditions to be met before the transaction can proceed.
  • Conventional Mortgage

    A home loan not insured or guaranteed by the government, typically requiring a higher credit score and down payment than FHA or VA mortgages.
  • Counteroffer

    A response to an Offer to Purchase a home, where the seller proposes different Terms or price.
  • Creative Financing

    Innovative or unconventional methods used in real estate transactions, such as lease options or seller financing, to make purchases more accessible or flexible.
  • Credit Bureau Score

    A numerical representation of a Borrower's creditworthiness, based on Credit History, and crucial in Mortgage loan qualification.
  • Credit History

    A record of a Borrower's debt repayments, used by lenders to assess the Borrower's reliability and ability to repay a loan.
  • Credit Report

    A comprehensive record of an individual's Credit History, detailing past and present debts and repayment timeliness.
  • Curb Appeal

    The attractiveness of a home's exterior when viewed from the street, an important factor in attracting potential buyers.
D
  • Deed of Trust

    A legal arrangement where property title is held by a trustee as security for the lender. Upon full loan repayment, the title is returned to the Borrower, or sold if the Borrower defaults.
  • Double Escrow

    A transaction method involving a single Escrow account for both purchasing and selling a property.
  • DSCR Loan

    Debt Service Coverage Ratio loan, a type of Commercial Loan where loan eligibility is primarily based on the property's cash flow and ability to service the debt.
E
  • Earnest Money

    A deposit made by the buyer to demonstrate a serious interest in purchasing the home.
  • Equity

    The difference between the market value of a property and the amount still owed on its Mortgage.
  • Escrow

    A legal arrangement where a third party temporarily holds funds or assets until specific conditions are met, commonly used in real estate transactions.
  • Escrow Account

    An account funded by Mortgage payments, used for paying property taxes and homeowners' insurance.
  • Estate

    In real estate, an Estate refers to the total property, both real and personal, owned by an individual at the time of their death. It encompasses all assets, including land, buildings, finances, and other possessions.
  • Estate Sale

    An Estate Sale, in the context of real estate, typically refers to the sale of property and belongings of a deceased person. It's often conducted to liquidate the deceased's assets, including their home and personal property. Estate sales are usually managed by family members, executors, or professional Estate Sale companies.
  • Eviction

    Eviction is the legal process by which a Landlord removes a Tenant from a rental property, usually due to violations of the rental agreement, such as non-payment of rent or damage to the property. The process involves legal notices and, in some cases, court proceedings. It's governed by specific laws that vary by location, ensuring both landlords' rights and tenants' protections are considered.
F
  • Fannie Mae (FNMA)

    A government-sponsored entity that buys residential mortgages, converts them into securities, and sells them to investors, providing capital for new homebuyer loans.
  • Fee Simple

    The most comprehensive form of property ownership, granting owners complete control over property transfer and Inheritance.
  • FHA Mortgage

    A Mortgage insured by the Federal Housing Administration, designed for low-to-moderate income borrowers, requiring lower minimum down payments and credit scores.
  • Final Walk-Through

    The last inspection by the buyer before the closing, ensuring the property is in the agreed-upon condition.
  • Fixer-Upper

    A Fixer-Upper is a property that requires repair work, renovations, or updates. Often sold at a lower price due to its condition, it presents an opportunity for buyers to invest in improvements and potentially increase the property's value. This type of real estate is popular among investors and homeowners willing to put in the work and time to refurbish and personalize their property. A Fixer-Upper can be a cost-effective way to enter the housing market or to achieve a higher return on investment.
  • Forbearance

    Forbearance is a Mortgage agreement option where a lender temporarily reduces or suspends Mortgage payments for a Borrower facing financial hardship. This real estate term is crucial for homeowners struggling to meet loan obligations, potentially preventing Foreclosure. It's a temporary measure, not loan forgiveness, requiring eventual repayment of missed payments. Homeowners should understand Forbearance Terms, impacts on credit scores, and long-term financial implications before entering such agreements.
  • Foreclosure

    A legal process where a lender takes control of a property due to the Borrower's failure to make Mortgage payments.
  • Freddie Mac (FHLMC)

    Similar to Fannie Mae, this corporation buys residential mortgages, securitizes them, and sells them to investors, bolstering the home loan market.
  • FSBO (For Sale by Owner)

    FSBO, or For Sale by Owner, refers to a property being sold directly by its owner without the representation of a real estate agent. This approach can potentially save on Realtor fees, giving the owner more control over the selling process. FSBO sellers manage tasks such as marketing the property, conducting showings, negotiating with buyers, and handling legal paperwork.
G
  • Ginnie Mae (GNMA)

    A government-owned corporation that backs securities for private investment using FHA-insured and VA-guaranteed loans, aiding lenders in providing loans to eligible borrowers.
H
  • Hard Money Lender

    A company or individual offering short-term loans secured by real estate, focusing on the property's value rather than the Borrower's creditworthiness.
  • Home Improvement

    Home Improvement refers to the process of making renovations, upgrades, or repairs to a property. These enhancements can range from minor aesthetic changes to major structural repairs or expansions. Home Improvement aims to increase the property’s value, enhance living conditions, or adapt the home to new needs. It's a key consideration for homeowners looking to improve their property's marketability, functionality, or to personalize their living space. Home Improvement projects vary widely in scope, cost, and impact on the property's overall appeal and value.
  • Home Inspection

    A thorough examination of a property by a professional inspector to identify any issues or necessary repairs before a sale is finalized.
  • Home Warranty

    A service contract that covers the repair or replacement of home appliances and systems, often offered by the seller as part of the sale.
I
  • Inflation

    Inflation refers to the general increase in prices and the decline in the purchasing power of money over time. In real estate, Inflation can significantly impact property values, rental rates, and the overall investment appeal. As Inflation rises, the cost of Construction and property maintenance often increases, potentially leading to higher property prices and rents.
  • Inheritance

    Property or assets received from a deceased individual, often including real estate holdings.
  • Installment Sale

    A real estate transaction where the buyer makes payments overtime to the seller.
  • Interest Rate

    Interest Rate is a critical factor in real estate, representing the cost of borrowing money. It directly influences Mortgage rates, affecting the affordability of purchasing or Refinancing properties. Lower interest rates generally make borrowing cheaper, encouraging buying and investing in real estate, leading to a more active market. Conversely, higher interest rates can increase the cost of mortgages, potentially cooling down the housing market by making it more expensive to buy or refinance properties.
J
  • Joint Tenancy

    A form of property ownership where two or more people own equal shares and have equal rights to the property.
L
  • Landlord

    A Landlord is a property owner who rents out real estate, such as apartments, houses, or commercial spaces, to tenants. In the real estate sector, landlords play a key role in providing rental accommodations and managing properties. They are responsible for maintaining the property, collecting rent, and adhering to local housing laws and regulations. Effective Landlord-Tenant communication and property management are crucial for successful real estate rental business operations. Understanding and fulfilling Landlord obligations ensures legal compliance and promotes a positive rental experience for all parties involved.
  • Lease Agreement

    A Lease Agreement is a legally binding contract between a Landlord and Tenant, outlining the Terms and conditions of renting a property. In real estate, it specifies details like rent amount, lease duration, and Tenant and Landlord responsibilities. Essential for both residential and commercial Rentals, this document is crucial for defining the rights and obligations of each party, ensuring clear communication and legal protection.
  • Lease Option

    An agreement where a renter has the option to purchase the property at a predetermined price during or at the end of the lease term.
  • Lien

    A legal claim against a property that must be paid off when the property is sold.
  • Listing Agreement

    A contract between a homeowner and a real estate agent, granting the agent the authority to act as the seller's representative in the home selling process.
  • Loan Agreement

    A Loan Agreement in real estate is a legally binding contract between a lender and Borrower, outlining the Terms of the loan. It specifies the loan amount, Interest Rate, repayment schedule, and other conditions. Essential in property financing, this agreement governs the Borrower's commitment to repay the borrowed funds, often for purchasing property.
  • Loan Modification

    A Loan Modification in real estate refers to a change made to the Terms of an existing Mortgage, typically initiated by the Borrower, and agreed upon by the lender. This process is designed to make the Mortgage more manageable for the Borrower, often in situations of financial hardship or changes in financial circumstances. Modifications can include adjusting the Interest Rate, extending the loan term, changing from a variable to a fixed-rate Mortgage, or reconfiguring monthly payments. Loan modifications are distinct from Refinancing, as they modify the existing loan rather than replacing it with a new one. This option can be valuable for homeowners seeking to avoid Foreclosure and retain their homes by making their Mortgage payments more affordable.
  • Loan-to-Value Ratio (LTV)

    A metric used by lenders to evaluate loan amount relative to property value. Lower LTV ratios often attract lower interest rates, influenced by down payments.
M
  • Market Analysis

    An assessment to determine the potential sale price of a home, based on the current real estate market and comparable properties.
  • Monetary Policy

    Monetary Policy, set by a country's central bank, plays a significant role in the real estate market. It involves managing the economy through controlling interest rates and money supply. Changes in Monetary Policy can influence Mortgage rates, affecting the affordability of buying or Refinancing properties. Lower interest rates generally boost real estate activity by making borrowing cheaper, while higher rates can cool down the market.
  • Mortgage

    A loan specifically used to purchase a property, where the property itself serves as collateral until the loan is fully repaid.
  • Mortgage Financing

    Mortgage Financing refers to the process of obtaining a loan to purchase a property. It is a crucial step in home buying, involving a Borrower receiving funds from a lender (like a bank) and then repaying the loan over time with interest. This financing option allows individuals to buy homes without paying the full price upfront. Mortgage Financing Terms, including interest rates and repayment periods, vary based on the Borrower's creditworthiness and the lender's policies.
  • Mortgage Lenders

    These are institutions that provide loans for real estate purchases. Including banks and credit unions, they assess a Borrower's financial status to determine loan eligibility. Mortgage lenders offer various loan types with different rates and Terms, playing a key role in the home buying process. Choosing the right lender is crucial for favorable loan conditions.
  • Mortgage Underwriting

    Mortgage Underwriting is the process where lenders assess the risk of lending money to a homebuyer. It involves evaluating the Borrower's Credit History, income, assets, and the property's value. This critical step in the Mortgage application process determines the Borrower's ability to repay the loan and the Terms of the loan, including interest rates.
  • Mortgage Wrap

    A form of seller financing where the seller creates a new Mortgage that includes the balance of their existing Mortgage, transferring it to the buyer.
  • Motivated Sellers

    Sellers eager to transact, often due to urgent circumstances, present negotiation opportunities for favorable purchase prices.
  • Multiple Listing Service (MLS)

    A database where real estate agents list properties for sale.
N
  • Notice of Default

    A formal notification issued to a Borrower indicating they have defaulted on their Mortgage, often a precursor to Foreclosure.
  • Novation

    Replacing an existing obligation with a new one, often used in real estate to change parties in a contract or alter Terms without creating a new agreement.
O
  • Offer to Purchase

    A formal proposal made by a buyer to purchase a home, including sale price and Terms.
  • Open House

    An event where a home is opened to potential buyers to view and inspect without individual appointments.
  • Owner Financing

    A property purchase arrangement where the seller provides the financing to the buyer instead of a traditional lender.
P
  • PITI

    Acronym for Principal, Interest, Taxes, and Insurance, the sum of these monthly homeowner costs, crucial in Mortgage approval. It typically should not exceed 28% of a Borrower's gross monthly income.
  • Portfolio Loan

    A Mortgage held by the lending institution's portfolio, offering more flexible underwriting standards but often at a higher Interest Rate.
  • Power of Attorney

    A legal document authorizing a person to act on another's behalf in real estate transactions, with authority ranging from specific to broad.
  • Pre-Approval

    Pre-Approval is a process where a lender evaluates a potential Borrower's financial background to determine how much they can borrow for a Mortgage. This step, typically taken before house hunting, gives buyers a clear idea of their budget and strengthens their position in negotiations. A Pre-Approval letter from a lender indicates a buyer's creditworthiness and ability to secure financing, making their offers more attractive to sellers.
  • Pre-Foreclosure

    The period after a Notice of Default is issued but before the property is foreclosed, during which the Borrower can still rectify the default.
  • Private Money Lender

    An individual or entity lending their own funds for real estate transactions, typically for short-term, high-interest loans.
  • Probate

    The legal process of distributing a deceased person's assets, including real estate, according to their will or state laws.
  • Probate Sale

    Occurs when a property owner dies without a will or designated heir, leading to the sale of the property through Probate court.
R
  • Real Estate Commissions

    The fee paid to real estate agents, typically a percentage of the sale price of the home.
  • Real Estate Owned (REO)

    Properties owned by banks or lenders, typically acquired after unsuccessful Foreclosure auctions or short sales.
  • Realtor

    A licensed real estate professional who is a member of the National Association of Realtors. Realtors adhere to a strict code of ethics and are experts in buying, selling, and renting properties.
  • Realtor Fees

    Charges paid to a Realtor for their services in a real estate transaction, often a percentage of the property's sale price.
  • Refinancing

    Replacing an existing Mortgage with a new one, typically to get a lower Interest Rate or to take out cash from the property's Equity.
  • Rentals

    Properties that are leased out to tenants for a specified period, providing a regular income stream to the Landlord.
  • Right of Survivorship

    In joint property ownership, this right ensures the surviving owner inherits the deceased owner’s property share automatically.
S
  • Sales Contract

    A Sales Contract in real estate is a legally binding agreement between a buyer and seller outlining the Terms and conditions of a property sale. This document specifies details such as the sale price, property description, payment Terms, Closing Date, and any contingencies, such as financing or inspections. Essential in property transactions, the Sales Contract provides a clear framework for the transfer of ownership, ensuring both parties understand their obligations and rights. It serves as a roadmap for the transaction, detailing each step from agreement to closing.
  • Second Mortgage

    A loan taken against a property's value, beyond the primary Mortgage. This can be in the form of a lump sum (HELOC) and is used for various purposes by the Borrower.
  • Seller Concessions

    Benefits offered by sellers to attract buyers, such as paying for Closing Costs or repairs.
  • Seller Disclosure

    A legal requirement in which the seller must disclose known issues and defects of the property.
  • Seller’s Agent (or Listing Agent)

    A real estate agent who represents the seller in the home selling process.
  • Staging

    The process of decorating and arranging a home to showcase its best features and attract potential buyers.
  • Subject To Mortgage

    Acquiring property by taking over the seller's existing Mortgage payments without changing the original Mortgage Terms.
T
  • Tenant

    A Tenant is an individual or entity who rents or leases property from a Landlord or property owner. In the real estate context, tenants are pivotal for residential and commercial property markets, occupying spaces like apartments, houses, and office buildings. Tenant agreements, typically in the form of leases, outline the Terms of occupancy, rent payments, and responsibilities. Understanding Tenant rights and obligations is essential for a harmonious Landlord-Tenant relationship and maintaining the condition and value of the rented property.
  • Terms

    In real estate, "Terms" refer to the specific conditions and agreements in a transaction. This includes the sale price, financing details, closing dates, and any contingencies like home inspections or appraisals. Terms are detailed in documents like purchase agreements and are negotiated between buyers and sellers. Understanding and agreeing to these Terms is crucial for a successful real estate transaction, as they dictate the obligations and rights of both parties involved.
  • Title Insurance

    Insurance that protects against financial loss from defects in title to real property and from the invalidity or unenforceability of Mortgage loans.
  • Title Transfer

    The legal process of transferring ownership of a property from the seller to the buyer.
  • Transfer Tax

    A tax levied on the Title Transfer of a property, calculated based on the property's value and location. Usually, the seller bears this cost, unless negotiated otherwise.
V
  • VA Mortgage

    A home loan guaranteed by the Veterans Affairs for eligible military service members, veterans, and their spouses, offering benefits like no down payment.
  • Vacant

    In real estate, a Vacant property refers to a piece of land or building that is not currently occupied or in use. This can include residential homes, commercial buildings, or undeveloped land. Vacant properties are often sought after by investors, developers, and homebuyers for their potential for renovation, development, or resale. In some real estate markets, purchasing Vacant properties can be a strategic move for long-term investment or immediate redevelopment. It's important for buyers to consider factors like location, zoning regulations, and market trends when investing in Vacant properties. Additionally, owners of Vacant properties may face specific maintenance requirements, insurance considerations, and property taxes.
W
  • Wholesale Real Estate

    The practice of securing a contract on a property and then assigning or selling the contract to another buyer for a profit.

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