Common 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.
I recently came across this great article explaining 14 of the most common real estate terms and thought I’d add a few of my own to the list:
Bound Contract: This means the contract has been signed by all parties involved (usually the buyer and seller) and received by the final party with an acknowledged signature and date. This is when the contract is actually “bound” and all contract timelines are based on this important date. Until the contract is signed by all parties and bound, it is not valid or enforceable so it’s important that this final step is completed
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 there are no bidders that 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 this foreclosure 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: When a person 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 drastic falls in the market value of the property. Basically this means that the seller owes more money to the bank than the home can be sold for in today’s market. It’s a tough break for sellers, but can be a great opportunity for buyers. The downside to short sales is that they can take a very long time to close (6-12 months) and there is no guarantee they 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 email me at vrogan@villageTN.com.