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I am writing a new book on the basics of buying and selling houses. While writing the book, I have been putting together a glossary of real estate terms. I have tried to include any term that might be unfamiliar to those who are not in the real estate business, or even those who are. I had been a real estate investor for 10 years before I knew what ARV meant. I decided to make the glossary free for those that ever have a question about real estate terms and what they mean. I will continuously add to it, and if you see something not listed leave a comment below. I have also included links to articles for many of the terms with more detailed information.
For those wondering about the book, it should be out in the next month or two. If you want to get a copy of it for free send me an e-mail and I can tell you exactly how to do that. [email protected]. Amazon also has my best-selling Build a Rental Property Empire and Fix and Flip book on sale right now. You can find those here as well as my other real estate books.
Glossary of real estate terms:
Active Status: Most MLS systems use specific status to show if a home is available. Active means the home is available and has no accepted offers on it. Active/backup means the home has an accepted offer, but the seller is accepting backup offers. Pending means the home has an accepted offer and the seller is not accepting backup offers. The status meaning can vary by MLS.
Active/backup status: See above
Most lenders require an appraisal
on homes to confirm they are worth what the buyer is paying. The appraisal is conducted by a licensed appraiser.
ARV: After repaired value. This is the value of a property once it has been remodeled and marketed.
Attached home: Any property that is attached to another property. This could be half of a duplex, a condo or town home, which is attached to another unit.
Backup Offer: A backup offer can be accepted by the seller but will not go into effect unless the current offer terminates.
Broker: A real estate broker has different definitions in different states. Usually a broker has more experience and education than an agent, which allow them to work independently or manage an office of agents. In most states real estate agents who are not brokers must work under a broker.
Building Codes: See Code violations
Buyer’s Agent: A real estate agent
who is contractually obligated to help a buyer find a house. Agents also work with buyers without a contract, but do not have as much responsibility towards helping that buyer find a house.
Closing: When a home is sold. This usually occurs at a title company or attorney’s office.
Code Violations: Each city, county or state creates or adopts municipal codes. There are codes for building, landscaping, and more. If a property violates these codes it could be in violation, which allows the city to fine the property owner until the violation is fixed. If the property was once in adherence to the codes, but the codes changed a property may be grandfathered in. When a property is grandfathered in, they may not be in violation of codes as long as the use of the property does not change.
Commercial Real Estate
: Properties that are used for commercial purposes
: stores, offices, etc.
Condo: A condo is like an apartment, but you own the space. A condo may have neighbors above, below, or beside you. The space in the building is owned, but not the land in most cases. Condos will have association dues that cover exterior maintenance, landscaping, and common amenities.
Contingency: A clause in the contract that allows the buyer or seller to back out based on certain conditions (inspection, appraisal, etc.).
Consignor: If a buyer cannot qualify for a loan, they may be able to use a consignor. If a consignor signs for a loan, they are responsible for that loan and it can count against their debt to income ratio.
Counter Offer: The seller can accept, reject or counter an offer. When they counter an offer, the seller can change the price, dates, contingencies, or many other terms. Any changes the seller wants must be listed in the counter.
have covenants which are rules the properties within the HOAs must follow. They could cover parking, size of the home, outbuildings and much more.
Credit: Credit is how lenders, banks, and other financiers judge a person’s ability to pay back a loan. The higher your credit is, the better chance you have of getting a loan. Late payments, judgments, foreclosures, and short sales all hurt credit scores. If you never have loan payments, it can also hurt your credit score.
Due on Sale Clause: A clause in most mortgages that states when the owner of the home sells the property, the mortgage must be paid off.
Earnest Money Deposit:
The money needed for a deposit to buy a property. This can be refundable under certain circumstances based on inspection, loan approvals, appraisal and other contingencies.
Escrow (held in escrow): Funds pertaining to a real estate transaction can be held in Escrow. That means the title company, a real estate office or another party can collect funds and hold them until they are ready to be released. Earnest money, money to repair a house after closing, and much more can be held in escrow.
Escrow (house in escrow): Some states call a house “in escrow” when someone has a contract to buy and the price is accepted by the seller. This is similar to a house going “under contract.” Once the buyer and seller have signed a contract on a home, the seller cannot accept another contract from a new buyer (except a backup offer) unless the current contract terminates.
If a homeowner stops making payments on their loan, the bank can take the home back. The foreclosure process
is different in every state in regards to how the bank takes possession of a home.
A loan typically used for fix and flips that is short (6 months to 18 months usually). Hard money loans normally
have interest rates from 10 to 16 percent.
HOA: Home Owners Association
. HOAs are present in most newer subdivisions and regulate neighborhood ordinances or covenants. They may also take care of yard maintenance, common utilities, trash service and other services for a monthly, quarterly or yearly fee.
Homeowners Insurance: This protects against damage to a home. Lenders require that homeowners have homeowner’s insurance against a home to protect their investment. If your house burns down, homeowners insurance will rebuild your house. It also protects against roof damage from storms, water damage from plumbing leaks, wind damage, and vandalism. However it may not protect against actual floods unless you have separate flood insurance.
Most contracts allow a buyer to conduct an inspection on a home
, which allows the buyers to look for problems or code violations.
Landlord: Someone who owns a property that they rent out to a tenant.
Lender: A lender is someone who works for a bank or mortgage company and is the direct contact for the buyer of a home.
Listing: A home that is put up for sale.
Lot: A parcel of land that a house, duplex or multi-unit property is located on.
Mixed Use Real Estate: Properties that are used for a variety of uses, usually residential and commercial.
A type of loan used to buy houses with a portion of the payment going towards interest and principal each month. Money may also be collected every month for property taxes and homeowner’s insurance.
A mortgage broker is a lender who can shop loans from multiple banks
. Sometimes a mortgage broker can get a better deal for buyers by checking with different banks. In other cases a lender can get a better deal because they work directly for the bank and there is no middle man.
A multifamily or multi-unit property
has more than one unit on the same property. An apartment complex or a duplex could be multifamily if they are on the same lot.
Offer to buy:
A buyer makes an offer to buy a house
with a contract. The contract lists all the terms, financing, and contingencies. The offer means nothing unless the seller accepts it by signing the contract.
Patio Home: A patio home is usually a free-standing home, but the landscaping and exterior is maintained by an association.
Pending status: When a home goes under contract and the seller does not want to accept a backup offer.
Principal: The portion of a mortgage payment that goes towards paying off the balance of a loan. Part of your payment will also go towards interest.
When a landlord uses a company to manage
their rental property instead of doing it themselves.
Residential Real Estate: Properties that are zoned for residential use. You may not be able to legally run a business out of them.
REI: Real Estate Investors
Senior Living: Some subdivisions are designated for seniors only, usually 65 or older. Only people who are seniors are able to buy or rent properties in those areas.
SFR: Single Family Residence
. This is a home that is zoned for one family to live (It is possible that zoning may allow more unrelated people to live in the property). The home can be detached (stand alone) or attached (a neighbor connected), but the property comes with land ownership rights.
Short Sale:A short sale
is when the mortgage company allows a homeowner to sell a house, but pay less to the mortgage company than what they are owed. Mortgage companies allow this in some cases when the homeowners are behind on payments because it is faster and cheaper than a foreclosure.
Tax exempt: Some organizations like churches and non-profits are exempt from paying property taxes. In some areas, seniors pay fewer property taxes. In some areas locals pay less taxes than those who live out-of-state.
When Homeowners stop paying property taxes, the state can place a tax lien against the home or even sell the home at a tax sale
. If you have a mortgage on the home, the mortgage company will usually pay the taxes if the homeowner does not.
Tenant: Anyone who leases a property instead of purchasing it.
Title Company: A company that provides title insurance and many times provides closing services as well for real estate transactions.
Title Insurance: Insurance provided
that guarantees a property has no debts or liens against it when sold.
Townhouse: A townhouse is like a condo but there aren’t any neighbors above or below the unit.
Under Contract: A home goes under contract when a buyer and seller accept a contract. A new buyer cannot buy a home that is under contract unless the accepted offer terminates.
Zoning: How the city, state or county classifies the use of land.
More real estate terms coming!
I will update this page as much as possible and you can find on the tabs on the blog under Resources.