Real Estate Investing Glossary

This real estate investing glossary is a resource tool to quickly understand key terms in REI.

1. Foreclosure = it is either the actual house or the name of the property by which a house is repossessed from owners who are not paying the agreed upon mortgage.

2. REO = an abbreviation that stands for "Real Estate Owned" by the bank. REO is the same as a foreclosure house

3. Tax lien = a type of IOU that is attached to a property because the owners did not pay the yearly real estate taxes

4. Probate = This is what happens when a person dies without leaving a will or trust and the leftover belongings must be disbursed or distributed.

5. Escrow = The time after a purchase agreement is accepted and the following process of how a property officially changes from one owner to another

6. Mortgage = A giant IOU attached to a property. The loan on a house or property. The agreed upon amount that a property owner has to pay back to a bank or lender.

7. Commercial property = any building or property that has more than 4 separate living units in it.

8. Residential property = any building or property that has less than 5 separate living units in it. A house, condo, or townhouse are residential properties because each has only 1 living unit in it.

9. Duplex = a residential property that has 2 separate living units in it

10. Triplex = a residential property that has 3 separate living units in it

Real Estate Investing Glossary (cont.)

12. Purchase contract = a piece of paper establishing a specific piece of property to be purchased by whom, from whom, for a specified amount and the time period for this to occur.

13. Title = the official record stating the name of the owner of a piece of property

14. Pre foreclosure = the time when a bank is not receiving payments on the mortgage from the home owner but has not officially repossessed the home

15. Lease = a piece of paper establishing that a specific piece of property will be used/rented from one person by another

16. deed = a piece of paper that proves that a property was officially transferred from one owner to the next

17. principal = the head of a school (just kidding, wanted to see if you were paying attention); The principal is the amount of money that the bank lent to a person to purchase a piece of real estate

18. grantor = a person who deeds a property to another

19. grantee = a person who receives a deed from a grantor

20. appraiser = a person who estimates the value of a property

Real Estate Investing Glossary (cont.)

22. FSBO = an abbreviation standing for "For Sale By Owner" and means when a home owner wants to sell their property without using the help of a real estate agent

23. appreciation = when a property increases in value

24. depreciation = when a property decreases in value

25. good faith estimate = a list of charges, fees, and amounts associated with getting a loan for the purchase or refinance of a property

26. LTV = an abbreviation standing for "Loan-to-value" ratio. This means that you divide the mortgate by the appraiser's estimate and multiply by 100 to determine a percentage which is used by banks and lenders to see if loan is at risk of not being paid off

27. interest = a fee that a bank or lender charges for the privilege of borrowing their money

28. interest-only loan = a mortgage that only requires the regular payment of the interest fee without the regular payment of the principal

29. capital gain = the profit made on a property when it is sold for more than what was paid for it

30. PCF = an abbreviation standing for "Positive Cash Flow". This means all the leftover money after all the expenses are subtracted from the income.

Real Estate Investing Glossary (cont.)

32. agent = a licensed salesperson who gets paid to act on the behalf or home owners to buy or sell their property. This person must work under a broker

33. home inspector = a professional who is paid to physically examine and present a list of findings on a specific piece of real estate

34. EMD = an abbreviation for "Earnest Money Deposit". This is money submitted with a purchase contract by a person who wants to buy a property from another person. It is held in escrow until the contract is complete and ownership is transferred from the seller to the buyer.

35. comparables = Also known as "comps". These are similar properties that an appraiser looks at to help him determine the value of a piece of property.

36. CMA = an abbreviation for "Comparative Market Analysis". This is an estimate of the value of a property using a few indicators such as price per square foot.

37. balloon payment = the final payment on a loan that is greater than the individual regular payments for that loan

38. land contract = an agreement between a buyer and seller whereby the seller lets the buyer utilize a property without receiving a deed until agreed upon sale conditions and payments occur

39. property management = when a property is taken care of by another person or organization for a fee. Property managers deal with the renting, rental collection, and maintenance of a property usually for an 8-10% fee which is taken out of the amount of rent collected

40. Quit Claim Deed = a deed that conveys the grantor's rights or interest in a property without stating the nature of those rights and with no warranties of ownership

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