Some real estate terms explained
CMA, ARM, conventional loan, HOA … are you confused yet? Don’t worry! Most people are confused by the myriad of real estate terms used by industry professionals.
Here’s a great article explaining 14 of the most common real estate terms, plus a few of my own below:
Fully Executed Contract: this means the contract has been signed by all parties involved (usually the buyer and seller). Until the contract is signed by all parties and returned to each party, it is not valid or enforceable, so it’s important everyone signs the contract quickly. We are able to accomplish through digital signatures online.
REO: Real Estate Owned or REO is a class of property owned by a lender—typically a bank, government agency, or government loan insurer—after an unsuccessful sale at a foreclosure auction. A foreclosing beneficiary will typically set the opening bid at a foreclosure auction for at least the outstanding loan amount. If no bidders are interested, then the beneficiary will legally repossess the property. This is commonly the case when the amount owed on the home is higher than the current market value of the foreclosed property, such as with a high loan-to-value mortgage following a real estate bubble. As soon as the beneficiary repossesses the property, it is listed on their books as REO and categorized as an asset (non-performing asset).
Short Sale: This is when an owner puts their home on the market and the property’s market value is less than the balance of the money owed on the mortgage. This is usually associated with a drastic drop in the market value of the property. Basically this means the seller owes more money to the bank than the home can be sold for in the current market. It’s a tough break for sellers, but can be a great opportunity for buyers. The downside to short sales is they can take a very long time to close (six-12 months), and there is no guarantee the transaction will close, as any banks involved have to agree to take less money for the house than they are owed by the seller.
Have a question about a common real estate term? Just comment below or email Steve@SoldonShawnee.com.