Tag: Real Estate Terms

Talking about foreclosure real estate can be hard enough without even entering the market. That’s because foreclosures tend to have their own language, employing many obscure words originating in government housing legislation and real estate law. Without a background in these areas, prospective investors won’t be able to decipher even the simplest foreclosure contract. This article lists some of the more common foreclosure-related terms as a reference for people interested in this lucrative market. 

Abandonment: Wherein a property owner has given up ownership rights without coercion and does not want to retrieve those rights or pass them to somebody else. A situation involving an unused property does not guarantee abandonment.

Acceleration Clause: A clause commonly written in a mortgage enabling the lender to demand full re-payment immediately, rather than at the end of the contracted term. The clause must also detail an occurrence that would put it into effects, such as a default on regular payments, sale of the property, or re-assignment of property rights. In most cases, the debtor must be given reasonable notice, and a chance to reverse the occurrence. The debtor is also immune from acceleration if there is no such clause written into the agreement. 

Chattel: Personal property, including household items.

Closing Costs: Expenses not related to the marketing and selling of the property, sure as loan fees and paperwork fees. Foreclosures might also involve extra-legal and escrow fees.

Deed in Lieu of Foreclosure: Property owners may deed their property to the lender if foreclosure is imminent, rather than go through the entire process. For the deeding to be official, the lender must give approval. 

Default: Failure of the borrower to make payments as required by the lender. “Default” may refer to a missed payment without any further repercussion or a series of missed payments resulting in a failed mortgage.

Equity Right of Redemption: The right of the borrower to remove all encumbrances related to the mortgage, in order to avoid foreclosure.

Federal Housing Administration (FHA): A part of the Housing and Urban Development Federal agency responsible for determining industry standards for mortgage loans by private lenders. FHA also insures mortgages by private lenders. Foreclosure investors must occasionally deal with this agency. 

Federal National Mortgage Association: Also known as FNMA, or Fannie Mae, this federal agency oversees conventional residential mortgages and will buy out loans that follow its rules. Some foreclosure investments require direct communication with this agency. 

HUD1 Statement: A form mandated by the US Department of Housing and Urban Development that specifies the costs of acquiring a foreclosed home.

Loan-To-Value Ratio: A comparison of the total loan amount and the lesser of the property’s sale price or appraised value. 

Notice of Rescission: A notice from the lender notifying the borrower that he or she is again in good standing with the loan, and payment deficiencies have been corrected. 

Short Sale: A property sale priced at or below market value, and lower than the amount of a mortgage on the same property. 

Truth-in-Lending Act: A law requiring the lender to provide the borrower with a full written explanation of the mortgage’s terms.

When youre selling your home or other real property on your own, you dont have to know everything about the process. It does help to have a practical knowledge of the terms that come up during the process.

Keep in mind, these arent intended as be all, end all, penultimate definitions. Theyre working definitions for pragmatic folks. Lets go

1) Acceptance – A legal term referring to the acceptance of a buyer’s offer by the seller. Acceptance is often preceded by a number of counteroffers between the parties.

2) Appraisal – a professional opinion of the value of real property. Most jurisdictions have careful rules defining who may call themselves an appraiser, and most lenders have a stable of approved appraisers whom they use regularly. Typically, the lender making the new mortgage loan will require that the property appraises for at least as much as the purchase price. Occasionally, a buyer will require the same thing in an all-cash transaction.

3) Bridge Loan – Short term loans used to bridge any time gap between the sale of a home and purchase of the next one. These loans can be valuable when escrow is delayed on the sale of a home and the seller has committed to the purchase of another home. Bridge loans are also known as panic loans but can be a lifesaver.

4) Coinciding Settlements – when a buyer needs the funds from the sale of his prior home (which is under contract to be sold) in order to purchase his next home, he may well make settlement under his sale a contingency for settling on the home he is purchasing. In reality, the sales don’t usually coincide. They usually take place back to back. Funds from the first are often wire transferred to the second.

5) Closing – Depending upon the state you live in, Closing can have different meanings. Generally, the closing of a real estate transaction refers to the exchange of necessary documents, execution of the same and transfer of money.

6) Comps – This term refers to the sales prices of similar properties in the area of a house in question. Comps are used to help determine the fair market value of a property.

7) Conditions – any conditions which must be met before the sale can be consummated. Some typical conditions include things like the property’s appraising for the purchase price or more, the property being in good condition when a home inspection is done, the buyer’s loan is approved.

As you can imagine, there are many real estate terms for which you have a general understanding.