Property Management Blog

16 Terms All Real Estate Investors Should Know

System - Tuesday, September 7, 2021

If you plan to join the real estate industry as an investor, it’s to your best advantage to learn the meaning of the different terminologies surrounding the industry. You’re likely to encounter them while negotiating, discussing, and transacting with property owners and sellers. 


Onsite Property Management Services is here to provide you with the ability to put your best foot forward when making property investment deals. Here’s a rundown of some common real estate terms:

Refinancing

Refinancing is an option for borrowers to restructure their current loan with another loan. The new loan will contain different payment structures and different rates. Often, the borrowers’ goal in refinancing is to reduce their monthly payments by obtaining a lower interest rate for their mortgage. The new loan provides better terms and lowers the total debt or makes the loan term quicker to pay up.

Seller’s market

A seller’s market is advantageous to those who wish to sell off their properties. The buyers’ demand for real estate is far higher than what’s available for selling. This situation creates a better negotiating power for the sellers.

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Buyer’s market

A buyer’s market is advantageous to those who wish to purchase properties. The demand for real estate is lower making more properties available for buying. This situation creates a better negotiating power for the buyers.

Appreciation

Over time, properties tend to increase in value in comparison to cars and gadgets whose value depreciates. As a limited resource, real estate values go higher due to stronger demand and inflation factors. Given a certain time, property prices tend to go up so property owners tend to hold these assets for longer periods. This might make it beneficial to consider converting your home into a rental property.

Credit score

Lenders and landlords use the credit score to measure a borrower or prospective tenant’s creditworthiness. If the credit score is high, you can count on an approved loan or consideration as a tenant. If the credit score is low, the loan application will be turned down and the application to be a renter rejected. Credit scores are indicative of how well you manage your liabilities. If it shows that you are a responsible payor then doors to loans and tenancy will be opened to you.

Realtor

The realtors’ work function is like real estate agents. They act as official representatives of property buyers and sellers. Realtors differentiate from real estate agents since they have a membership to the National Association of Realtors. They must comply with the code and standards set by the organization, NAR.

Real estate agent

Real estate agents can act as representatives on behalf of property buyers and sellers. This is the starting career of those who wish to join the real estate industry. Often, the services of real estate agents are engaged by real estate brokers.

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Real estate broker

Real estate brokers are considered experts in real estate. They have broader technical knowledge, higher training and hold more license certificates. They can also operate a brokerage and hire real estate agents in their business.

Addendum

Changes can occur in the conditions of a current contract. Buyers and sellers may want to include specific details. They can create an addendum focusing on that specific detail of the agreement that they want to alter. The other conditions in the contract remain unchanged however despite the addition of the addendum.

Appraisal

Property appraisals are performed as an objective estimate of a home’s value. Lenders tend to require an appraisal conducted by an appraiser to ascertain the accuracy of the loan amount. If the appraised value is found to be lower than the buyer’s offer, then the difference in amount may be paid by the buyer.

Closing

Closing is the last stage in real estate deals. The decision to complete the transaction on a specific date is agreed upon. Once the closing date arrives, the transfer of property from the hands of the seller to the buyer becomes legal and binding.

Fair Market Value

Under an open market, a fair market value assessment of a property is a measurement of its accurate value. This is on the grounds that the buyers and sellers know about the real estate and are focused on their best interests absent any pressure to finalize the transaction.

Fixed-rate mortgage

Fixed-rate mortgages are prevalent. It simply means that the interest rates offered will be the same all throughout the loan’s term. This reassures the borrower that the rate will be predictable instead of monitoring the up and down of the market interest rates over a certain period. Mortgage payments can be subject to fluctuation due to property taxes. That’s why most borrowers opt for a fixed-rate mortgage for its steady rates.

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Foreclosure

When a property owner defaults on a mortgage payment, typically over a 90-day period, a foreclosure can result. This is a lawful process where the owner is stripped of the property ownership rights due to the failure in meeting the payments within the agreed timeline. If the outstanding debt is unpaid or the owner is unsuccessful in short selling the property, a foreclosure auction happens. If the property remains unsold in the auction, the lender takes back the property rights.

Home inspection

Home inspections are performed by unbiased third parties to check a property’s condition before a real estate transaction is completed. The potential home buyer will receive a report from the inspector detailing the property’s HVAC condition, stability of the foundation, and state of the interiors and exteriors. This provides more helpful data to the buyer to learn about the property’s issues before fully investing. It also provides more information about the property’s value whereby the investor can calculate and weigh the return of investment.

Homeowner’s Association

When buying a townhome, condo unit, or development property, one has to deal with a homeowner’s association (HOA). Part of the requirement of the property purchase is signing up for the HOA and being obliged to pay HOA fees every month or every year. These fees are used to maintain the common area, make repairs and maintain the state of the property. The greater the amenities provided, the higher the HOA fees tend to become.

Bottom Line

If you are interested in making a property investment, consider familiarizing yourself with the terminology of real estate transactions. If you find this list to be overwhelming, don’t fret! You can hire the services of a professional property management company, like Onsite Property Management Services.


Contact us today to find out how we can assist you with your real estate investment goals.


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