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Common Real Estate Investing Terms


Knowing your real estate investing will add credibility to your conversations and reputation as you network and grow your business.

1031 Exchange: Exchanging one piece of real estate for another to avoid Capital gains tax.

Arrears: An “account in arrears” is the state of being behind in fulfilling obligations. An unpaid, overdue debt in arrears on property means all obligations need to be fulfilled before the account would be clean to enact a purchase.

Balloon Payment: A larger payment often due at a specified length of time.

Bill of Sale: A document that transfers title to all personal property.

Blanket mortgage: Buyer offers other properties he/she owns (blanket) as security to the lender

Capital gains tax: Taxes incurred on the gain (profit) from selling property.

Closing costs: Costs paid at closing by buyer and/or seller

Closing statement: A statement given to the buyer and seller at the completion of a transaction showing the appropriation of funds for the transaction.

Contract Sale: The seller agrees to carry some or all of the loan, thus eliminating conventional financing, credit checks, etc.

Deed: A document that transfers ownership of personal property.

Deed of Reconveyance:  A document by which the lien holder releases all lien interest in a piece of real estate.

Down payment: The initial payment on a property.

Escrow:  An impartial third party that prepares documents and holds funds to facilitate the purchase or sell of property. Usually a Title Company or an Attorney.

Farming: Concentrating marketing efforts in a specific area. Becoming an expert on a specific area.

Flexible Seller: A seller very motivated to sell his/her property that they will be flexible in price or terms or both.

Hard Money Lender: Hard money lenders can be a private party or commercial real estate lending companies. They are offering a specialized type of real-estate backed loan. Hard money lenders provide short-term loans that provide funding based on the value of real estate collateralized for the loan. Typically, Hard money lenders have much higher interest rates than banks (between 15 and 20%) because they fund deals that do not conform to bank standards.

MLS: (Multiple Listing Service) Listing service that gives member realtors access to information on all properties listed.

Mortgage: A promissory note made to a lender to pay a certain sum of money according to agreed-upon terms that pledges something of value (usually the property) to back up your promise.

Motivated Seller: See Flexible Seller

Notice of Default:  A legal notice recorded against a property that begins the foreclosure process.

Notice of Sale: A legal notice announcing the sale of a foreclosed property.

Offer: Price and terms offered by the buyer to purchase a property.

REO:  (Real Estate Owned) Bank-owned property resulting usually from a foreclosure.

Title: Legal evidence of ownership.

Title insurance: An insurance policy from a title company that protects against losses arising from defects in the title.

Title search: A search of public records to determine the current ownership and the condition of the property

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