A Beginners Dictionary into Real Estate Investing — Part 1

The real estate industry is one of the most fascinating in the world and like any other one, it has a unique terminology. I’m Ofir Bar and my vast experience in this field had thought me a lot of useful nouns. Are you eager to find some of the most interesting ones? This part one of the beginners’ dictionary should provide more insights.

A

ARM — stands for an Adjustable-rate mortgage and represents a loan whose interest rates float based on the movement of an assigned index or a designated market indicator (ex: the weekly average of 1Y U.S. Treasury Bills).

Appraisal — the determination of the value of an asset such as a house, stock, or jewelry.

Assumable mortgage — An existing mortgage that can be taken over by the buyer with the same terms as the original borrower.

B

BTSA — the bonus to selling agent is a compensation, aside from the sales commission, offered to the real estate agent who manages to find a buyer for a real estate transaction.

Bundle of rights — the group of rights associated with owning a real property like the right of occupancy, the right to sell in whole or in part, right to use and enjoy, right to the benefits derived from occupancy, and others.

C

Chain of title — a historical background into the conveyances and encumbrances of a property, from a starting point, whereby the present owner derives title.

Closing costs — costs the buyer must face at the time of closing, aside from the down payment, Closing costs depend from one financial institution to another.

Covenant — a restriction associated with the use of the real estate. The requirement that a property should be used for residential purposes, only. Covenants can be found in deeds or in the documents that bind everyone owning the land.

D

Debt-service ratio — a measurement of debt payments in relation to gross household income, which could include salaries of other wage earners, commissions, or bonuses, aside from the usual main wage earner’s salary.

Dual agency — an entity representing both the buyer and the seller in the same transaction. Dual agency is a risky undertaking, due to an inherent conflict of fiduciary obligations to two different principals.

E

Earnest money — a deposit made by a buyer as proof of good faith in offering to make a real estate purchase and secure performance of the contract. It’s usually held by the title company, in an escrow account.

Escrow account — a third-party account holding money safely until a sale is complete. An account used to save money for debt payments, often used by lenders to save for property taxes, hazard insurance, and others.

Easement by prescription — the right to use a property acquired by a long tradition of open and obvious use.

F

Finder’s fee — fee charged by real estate brokers and apartment-finding services for locating rental properties.

Forfeiture — The loss of property rights or privileges due to breaking the law. It can happen in case a landlord is found guilty of illegal activities (drug-dealing, IRS debts, etc.)

G

General lien — a lien including all the property owned by a debtor.

Gross lease — a commercial real estate lease that involves a tenant paying a fixed amount of rent per month or year, regardless of the landlord’s operating costs.

H

Hazard insurance — contract signed between the purchases and insurer to compensate the insured for losses generated by hazards (fire, hail damage, etc.) for a premium.

Hold harmless — a promise included in a contract to hold a party accountable if it causes damage to the other party.

I

Implied warranty of habitability — a doctrine requiring landlords to provide and maintain livable conditions for tenants. If that does not happen, tenants may legally withhold rent or take other measures.

Income approach to value — an estimate of value based on the monetary returns property is expected to generate.

J

Joint tenancy — a method to enable two or more people to share ownership of real estate or other property.

L

Landlord — the owner of a real estate (house, apartment, land, etc.) rented to another person, called the tenant.

Leasehold estate — a form of real estate allowing the tenant to construct permanent structure upon a parcel of the leased land, deriving use or income from the structures during the period of the lease. Leaseholds are very common in commercial real estate, but sometimes they can apply to residential properties, also.

Licensee — a person licensed a real estate commission to engage in real estate brokerage, as a broker or as a salesman.

Did you find all the terms useful? I’m Ofir Eyal Bar and this was the first part of the beginners’ dictionary into real estate investing. The second part will bring another interesting series of real estate terminology.

A successful businessman, digital marketing entrepreneur and Real Estate investor.

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