You have to know what you are doing. To be successful in identifying, acquiring, and selling real estate investment properties you need to have a system & knowledge of real estate terms of the trade. This real estate investing blog will equip you all the IMPORTANT INVESTING TERMS to set you on the path to success.
Memorize these terms and you will drastically reduce the number of times you look stupid in front of more seasoned professionals, reo brokers, or even a property owner. Nothing is worse for your business than clearly not knowing what you are talking about. Don’t be that guy! I have boiled it down to the most common and important real estate terms for you.
I know vocabulary was your favorite part of grade school, right? Well, you are in luck (at least I won’t make you spell them)! You may even want to go back and review these investing terms I share below a few times. You want them to become part of your investing vernacular. Here we go!
Real Estate Investing Terms and Definitions
APPRAISAL: Professional service provided by a registered, licensed, or certified appraiser or real estate licensee to produce an estimate of value.
ASSESSED VALUE: Worth established for each unit of real property for tax purposes by a county property appraiser.
ASSIGNEE: Person to whom a right or interest is transferred.
ASSIGNMENT: Written instrument/contract that serves to transfer the rights or interests of one person to another.
ASSIGNOR: Person who gives his or her legal rights or interests to another person.
BUYER’S MARKET: The supply of available properties exceeds the demand.
CAPITALIZATION RATE: The relationship between the net income from a real estate investment and the present value.
CLOSING: Final settlement between the buyer and seller; the date on which title passes from the seller to the buyer.
CLOUD ON TITLE: Any defect, valid claim, or encumbrance that serves to impair the title or curtail an owner’s rights.
COMMISSION: Compensation paid to a broker or sales associate for successfully concluding a real estate transaction.
COMPARATIVE MARKET ANALYSIS (CMA): An informal estimate of market value performed by a real estate licensee for the seller to assist in arriving at an appropriate listing price. Or if working with the buyer, an informal estimate of market value to assist the buyer in arriving at an appropriate offering price.
CONVENTIONAL MORTGAGE: A real estate loan that is neither FHA-insured nor VA-guaranteed.
COUNTEROFFER: A rejection of the original offer by proposing a new offer, thereby terminating the original offer.
DEED: A type of conveyance; a written instrument to transfer title to real property from one party to another.
DEPOSIT: Earnest money or some other valuable consideration given as evidence of good faith to accompany an offer to purchase or rent.
DOCUMENTARY STAMP TAX ON DEEDS, STATE: Tax required on all deeds or other documents used as conveyances. The charge is based on the total purchase price. Also called Doc Stamps.
FEDERAL HOUSING ADMINISTRATION (FHA): Insures mortgage loans made by FHA-approved lenders on homes that meet FHA standards in order to make mortgages more desirable investments for lenders
FORECLOSURE: A court process to transfer title to real property used as security for debt as a means of paying the debt by involuntary sale of the property.
FREDDIE MAC: A secondary mortgage market institution that buys and sells conventional, FHA, and VA loans
FREE AND CLEAR: Title to real property that is absolute and unencumbered, no mortgage
INTEREST: The price paid for the use of borrowed money.
LEASE: An agreement that does not convey ownership but does convey possession and use for a period of time and for compensation.
LIEN: A claim on property for payment of some obligation or debt.
LIMITED LIABILITY COMPANY (LLC): An alternative, hybrid business entity with the combined characteristics and benefits of both limited partnerships and S corporations.
LOAN-TO-VALUE (LTV) RATIO: Relationship between amount borrowed and appraised value (or sale price) of a property.
MARKET VALUE: The most probable price a property will bring from a fully informed buyer, willing but not compelled to buy, and the lowest price a fully informed seller will accept if not compelled to sell.
MULTIPLE LISTING SERVICE (MLS): An arrangement among members of a real estate board or exchange that allows each member broker to share listings with other members so that greater exposure is obtained and a greater chance of sale will result.
NET INCOME: Profit from property or business after expenses have been deducted; effective gross income less operating expenses.
NET OPERATING INCOME (NOI): The resulting amount when all operating expenses are subtracted from effective gross income.
OFFER: An intentional proposal or promise made by one party to act or perform, provided the other party acts or performs in the manner requested.
OWNER’S POLICY: Title insurance issued for the total purchase price of the property to protect the new owner against unexpected risks.
SELLER’S MARKET: The demand for available properties exceeds the supply.
32 Important Real Estate Investing Terms Conclusion
You need to jump into real estate investing full force. Tackle one obstacle at a time and take it down hard. This isn’t the fun part (that comes later when you start cashing checks), but developing a solid knowledge base is crucial to your investing success. Bust through this information, memorize it, and then move forward. You may want to check out my “4 Steps to Evaluate Real Estate Deals” YouTube training video to get you moving along quickly with a potential deal.
Matt Andrews Bio
Matt Andrews has bought, renovated, & sold hundreds of investment properties throughout the country. He is one of the most active and dynamic leaders in the Real Estate Investing world today.
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