Real Estate For Millennials

A backup offer is a seller’s secondary option in case the first offer does not go through. Backup offers are extremely common when the housing market is thriving. Houses do not stay on the market long, and sellers typically have more than one offer submitted simultaneously. In a less-demanding housing market, sellers may still receive a backup offer. For example, two buyers may have viewed a home around the same time and one buyer submits an offer right after the other. The seller is likely to accept the second offer as a backup. Many things can cause a deal to fall through including financing, inspection or just a change of heart. This is why sellers value backup offers. It gives the seller some reassurance that the home will likely sell in the near future, unless both offers fail to go through.

A bargain sale refers to any property on the market for a price lower than market value. Some sellers will place their sale price lower to get a sale done quickly. Also, they may want to get multiple offers on the property to try to get the price up. Buyers should thoroughly inspect any property on the market for less than market value. Quite often, the property owners know of issues with the property, so they priced the house knowing they cannot get full market value due to the problem or problems. That is not a true bargain sale. Here is an example of a true bargain sale: If a home assesses at $200,000 and the property owner lists it for $180,000, that is a bargain sale due to the listed price being 10 percent below market value.

A biweekly mortgage is one that requires the borrower to make payments more often than a typical mortgage might. With a biweekly mortgage, the borrower will have to make a payment every two weeks; this is different from a typical mortgage, which requires that a borrower makes a payment once per month. Many people go with a biweekly mortgage because it lines up with their payment schedule at work. Others have found that this is a good way to pay down the loan much more quickly. Though a biweekly mortgage does allow people to pay down their loans more quickly, these loans also provide more opportunities for a person to be late on the loan. This can bring about late fees and delinquency charges. A biweekly mortgage is very risky in this way. While some people feel that the benefits outweigh the negatives, others opt for a traditional mortgage instead.

A blanket mortgage can be used for many different real estate projects. This can be quite effective with a real estate market that is booming. A blanket loan reduces the expense and time involved in negotiating numerous smaller loan packages. It is a more flexible financing option. Builders, developers and investors can buy large areas. Individual houses or condominiums can be sold under the parameters of the blanket mortgage. This blanket mortgage permits debtors to avoid the “due-on-sale” clause, which makes the entire loan payable when the property is sold. Multiple units can be covered with a blanket loan. Flexibility is increased with the blanket mortgage so that investors have more latitude in handling sales. This is important in real estate with high volatility. Developers can adjust to changing circumstances with a blanket mortgage.

Breach of contract is when one party to a lease, written or oral contract fails to fulfill their duties without a valid legal excuse. As a concrete example, take the landlord-tenant relationship. When a tenant signs a year-long lease, he or she usually agrees to live in the residence, abide by the rules and pay the rent by the due date. If a tenant fails to pay the rent according to the terms of the lease, then he or she is in breach of contract. The landlord can then take the tenant to court and recover damages. A breach of contract is also common in real estate sales because many potential buyers sign a contract as part of the sale process. If the buyer finds another property and decides to purchase it instead, he or she may be found in breach of contract and have to purchase the original property or pay some type of penalty.

A real estate broker is someone that oversees the transactions that occur during a real estate purchase. The types of transactions that brokers oversee include those relating to both residential and commerical properties. An experienced and professional broker will know his or her local area including the local schools and community functions. He or she will also have an extensive knowledge about real estate laws. Even though a broker is not a necessity, anytime a transaction takes place between a seller and buyer, it is beneficial for the transactions to be overseen by a broker. In many cases, the same broker can represent both parties involved. First-time home and real estate buyers should always obtain services from a broker as this helps facilitate any transactions that take place, and this assures a buyer that all purchasing procedures are being properly followed.

A firm that facilitates a transaction between a buyer and a seller for a commission or fee is called a brokerage. A real estate brokerage facilitates, or brokers, a real estate transaction by working with a buyer and seller to help determine the price of a piece of real property. Once the price is determined, the brokerage ensures that all legal documents are completed, necessary signatures are obtained and appropriate monies are collected. Commissions are paid when the transaction between the buyer and seller is concluded. Using a brokerage firm can save buyers and sellers time and valuable resources. A buyer doesn’t want to look at 100 homes. They want to look at 10 homes that fit their needs; a brokerage firm can help with that. A seller doesn’t want to go door to door trying to sell their home; a brokerage firm can help with that too.

Broom clean is a term that describes the condition a property should be in after it is vacated. It means that the property must be cleared of all personal items and the floors need to be swept clean. If the tenant doesn’t leave the premises clean, the owner may be able to deduct cleaning fees from the former tenant’s security or cleaning deposit. When selling a home, the contract may stipulate that the home be broom clean before the closing. Most of the time, broom cleaning also means that the property is entirely empty of items that aren’t attached to the structure, such as furniture. The exception to broom clean includes items that belong to the property, such as old storm windows or doors that are being stored in a basement or garage. These may have use for the next occupant or owner.

The building code is the set of laws and regulations that apply to different properties in a given area. The code is typically decided by local and state legislators. It is also updated on a yearly basis in many places. People who build homes must ensure that their properties fall within the rules set forth in this code. This might mean ensuring the structural sufficiency of the foundation. It might also mean keeping with the rules that define how large a building can be. In some places, the building code will mandate which building materials can be used in certain types of properties. Home buyers will want to understand the building code and what it entails. Homes that do not comply with the building code can be dangerous for buyers and their guests. Certain legal liability also exists for those people who buy and sell homes that do not comply with these regulations.

Built-ins are considered items or structures that are permanently attached to a home. Examples of built-ins include appliances, fireplaces, attached garages, art niches, columns, domed ceilings and similar structural enhancements. Some items can be considered built-ins for one home and not for another. For example, appliances can be considered built-ins and ultimately convey with the home in one sale but not for another. Essentially, the seller decides whether or not an item that is not physically attached will actually convey with the property. During the negotiation phase of the sale, buyers can ask the seller to include the appliances or other items of interest in the sale price. It is up to the seller to allow these items to stay, and he or she may adjust the selling price to reflect the value of the items.

The bundle of rights refers to the different interests and rights an owner has on his or her property. When individuals purchase a piece of property, they automatically receive certain rights to that property. Some of the rights granted to property owners include the rights of possession, control, exclusion, enjoyment and disposition. “Possession” indicates the buyer is the owner of that property, and “control” means the buyer commands how to use the property. “Exclusion” means the buyer can keep people off the property, and “enjoyment” indicates the owner’s right to use the property in any legal manner. “Disposition” means the owner can sell the property at his or her will. The bundle of rights is not always the same for everyone; some real estate contracts have provisions that inhibit certain uses of the property or require the owner to get permission to sell.

A buyer’s market is a real estate situation where buyers have exceptional power over sellers. This is usually because there are many houses in the area and only a few buyers. In this situation, the sellers are often at the mercy of the buyer. A buyer’s market might come about in an area where many people are moving out for some reason. The buyer will have four or five acceptable properties to choose from, while the seller will not have many buyers to choose from. In these cases, sellers are lucky if they get multiple offers on a home. They will often have to come off of their asking prices in order to get the home off of the market. Many sellers will simply wait this period out, opting not to sell the property at a low price just because the market is unfavorable. They will wait for a seller’s market.

A cancellation clause is the section of a contract that describes circumstances in which each party may cancel the agreement as well as other details regarding cancellation. A cancellation clause is often found in many contracts, including real estate agreements. For example, when a buyer makes an offer on a property, that agreement typically has a cancellation clause that allows the buyer to cancel the agreement within a certain number of days if the property inspection report comes back with negative results. Parties to an agreement would need to submit a cancellation notice within the time frame stipulated in the cancellation clause in order to be in compliance with the agreement terms. Before signing agreements, it is wise for parties to pay special attention to that section of the contract in order to find out what options they have if they decide to cancel.

Investors can determine the potential income of commercial or investment real estate by calculating the cap rate. To determine the number, you must divide the property’s net income by the total purchase price. The profitability is stated in terms of an annual percentage. The ratio enables an investor to compare the income of the real estate to similar investment properties in the area. A higher cap rate property is a better investment than one with a lower rate because of the estimated returns. The cap rate plays an important role in determining the income potential of a property and the price that a prospective buyer may be willing to pay. The rate does not reflect factors that affect income, such as repairs or vacancies. It also assumes that the investor is acquiring the property without financing. If you need a loan, you must factor the interest payments into your calculation.

Capital gains are the profits an investor makes when selling a capital asset. A capital asset can take the form of investments such as stocks, bonds and other similar investments or real estate. A capital gain occurs only when the purchaser of the asset sells it for a profit. For an example, say an investor bought 100 shares of a stock for $1000. The value of the stocks rises to $1100 dollars after one year, and he decides to sell them. The investor’s capital gain on the purchase would be $100. If the investor held onto the stock and never sold it, no capital gain would ever occur. The time period the investor holds the investment can be long term or short term, but any capital gains must be claimed on the investor’s income taxes. A capital loss occurs when an investor loses money on his investment.

Cash flow is the amount of money remaining after a rental property owner satisfies financial obligations related to the property. Generally, this amount can be calculated by subtracting loan payments, taxes and operating expenses from the income resulting from the current rental contract. Cash flow resulting from the rental of multiple properties is often used by investors to complete repairs and renovations on all of their rental properties, thus increasing their value. Cash flow can also be used to purchase additional rental properties, giving an investor the opportunity to grow their real estate holdings and to further increase their cash flow. The yield percentage of a property can be calculated by taking the amount of money invested into the property and dividing it by the amount of cash flow generated over one year. A $100,000 investment that generates $10,000 annually is said to produce 10% yield percentage as a result of the incoming cash flow.

Caveat emptor is a Latin phrase meaning let the buyer beware. Today, caveat emptor is mostly used in property law concerning real estate deals after the closing date. Under this principle, a buyer cannot recover damages from a seller for property defects if the property is unfit for use. The only exception occurs if a seller actively seeks to withhold or conceal information prior to the sale, amounting to fraud. In the United States today, a new trend is arising concerning new homes. It is called the Implied Warranty of Fitness. It deems that if a seller-builder sells a home to someone, then the buyer has a reasonable assumption that the home will be fit for use. In all other circumstances, caveat emptor still applies. The principle caveat venditor, or let the seller beware, suggests that a seller can be deceived in transactions as well. It encourages them to make high-quality products to guard themselves against unreasonable consumers.

Chain of title is an official record of ownership linking the original owner of property to the most recent owner. In real estate transactions, banks will usually ask for a chain of title from the buyer’s attorney to ensure that the property is free from any previous legal claims to title. During the title search, the title company or legal professional will trace the title to the property from the current owner to the original owner and generate a report showing the chain of ownership. Once the title insurance company is satisfied with the report, it will issue title insurance for the property. The title insurance basically protects the buyer from potential defects in title to real property. The report is extremely important and a critical part of real estate transactions.

In real estate, the term clear title is the definition for property that is clear from liens, encumbrances and judgments, and it belongs solely to the owner. Other terms for clear title are often used interchangeably, such as “free and clear title.” When a title is clear, no other party can make a legal claim for ownership of it. A property holder can obtain a clear title while it is under the encumbrance of a mortgage. A mortgage is specifically worded to convey a clear title once the owner pays the balance of the mortgage. A clear title is required to buy or sell any piece of real estate in the United States. During a sale of property, a title company is hired to investigate each title to ensure it is clear. Aside from financial issues, code violations may also prevent a clean title.

For the home buyer, the real estate closing is the final step into home ownership. There are usually many documents to sign, depending the type of mortgage. A cash purchase will require quite a bit less documentation. The closing agent will explain each document prior to signing and issue a copy to the buyer. The closing statement will be explained in detail so that no amount should go unaccounted for in the deal. This is the day that all money is due and payable in a cashier’s check, in most cases. For the seller, the closing is payday. There are not as many documents for the seller to sign. The closing agent will explain the closing statement and answer any questions the seller may have. Generally, the closing agent will issue a check to the seller. In some cases, the seller may ask that the funds be wired or direct deposited into their bank account.

Banks and financial institutions charge fees for creating the mortgage loan. The closing costs generally amount to about 1 to 5 percent of the mortgage but can vary widely between states and types of mortgages. These costs include fees for lawyers creating the paperwork, title insurance, assessment of the property and even mundane services such as shipping the paperwork. Sometimes, the closing costs can be rolled into the price of the mortgage loan, but they are often paid outright at the completion of the sale of the property. The financial institution must provide a list of the fees and an estimate of their costs prior to the final sale. It is important to look these over carefully and ask questions if any items seem to be listed in error or do not make sense to you.

The co-signer on a loan is a person who vouches for the signing first party in the event he or she is unable to pay. They put their name on the promissory note just like the original borrower and, in most cases, will will incur the same obligations as the original borrower. If the borrower does not make his or her payments, the co-signer can suffer the credit consequences. Both parties are jointly responsible for fulfilling the obligations under the note. People generally need co-signers when they are unable to obtain approval for credit on their own accord. Co-signers can provide the certainty that lenders desire. A co-signer will usually be a person who has a long, extensive credit history. In most cases, they will have the financial means to cover the loan if the original borrower is unsuccessful in paying it back on time or in full.

Comparative market analysis, often known by its abbreviation CMA, is a process by which individuals or agents research the sale prices of similarly situated homes sold in a given area during a recent period of time. This is sort of analysis is designed to give sellers, buyers and agents a starting price range for homes when they are put on the market. The CMA will generally look to answer one important question: When compared to the other homes in this area, how much is this particular home worth? Though looking at the prices of recently sold homes is one part of the analysis, much more can go into the equation. Most buyers, sellers and agents who conduct CMA are simply looking for a price range. It is not a process that is used to provide an exact, scientific starting point for those who buy and sell homes in the market.

Corner influence is the term used to describe the impact on the value of a home because of its position directly on a corner of the street or nearby. Various factors play into the value of a home. For example, a home that is located directly across the street from an elementary school may be priced higher than a home a few blocks away because of the convenience and quality of life that it will provide for its residents. Similarly, corner lots may be more desirable because they are often larger, and they are surrounded by only one neighbor, as opposed to two neighbors, if a home is not located on a corner. Corner influence may impact the homes that are near a corner as well. Sellers of a corner house typically market their home as such because many buyers prefer a corner lot.

A counteroffer is a response to a prior offer made on a home for sale. For example, if the buyer submits an offer for one amount, the seller can reply with a counteroffer for a different amount. Offers and counteroffers are typical in the negotiation phase of buying a home. Counteroffers do not necessarily only involve a change in selling price; the buyer or seller can add other terms to the offer while keeping the selling price the same as the previous offer. For example, a seller’s counteroffer may agree on the buyer’s selling price, but the seller may ask that the buyer pay their own closing costs. Either party has the opportunity to submit a counteroffer after receiving an offer, and the negotiation ends when the final counteroffer is agreeable and both parties accept.

When a person applies for a loan, the financier scrutinizes that individual’s credit rating. A credit rating is a score that has a basis on how a person pays his or her bills on time as well as the person’s employment status and residency. It provides finance companies an idea of how credit worthy a person is and how well that person would be able to meet the credit obligation. A majority of the rating is based on how well a person has paid past obligations on time each month. A person who has paid his or her bills on time with few or no defaults generally has a good rating. People who have defaulted on loans, credit card bills, and other expenses often have lower ratings. The length of time a person has been employed by the same employer also tends to be factored into his or her rating.

The days on the market refer to the number of days that have passed since a seller or agent listed a property. Sellers are generally concerned about this when the market is a buyer’s market. The longer that a property sits on the market, the more unlikely it is that the seller is going to get his asking price on the property. With this in mind, many sellers will set a point at some number of days on the market when they consider re-evaluating the asking price. The number of days on the market required to sell a property depends upon a number of factors. Most homes will be on the market for at least 90 days. Once a property has been on the market for 180 days, though, sellers and agents typically get very anxious. That many days on the market indicates some deficiency in either the property or the listing itself.

In corporate finance, debt coverage ratio means the cash flow available to meet principle, interest and lease payments. In personal finance, it is the formula that loan officers use to determine the borrower’s ability to pay back the debt.

The basic formula used is DSCR = (Annual Net Income + Amortization/Depreciation + Interest Expense + other non-cash and discretionary items (such as non-contractual management bonuses)) / (Principal Repayment + Interest payments + Lease payments

For example, Mrs. Sanchez wants to purchase a cafe with a net operating income of $50,000 and an annual debt service of $25,000. This gives her a debt coverage ratio of 2, which is well over the 1.15-1.35 debt coverage ratio banks like to see. When the number is less than 1, it is considered negative cash flow.

Lenders require that borrowers make payments on time each month or as agreed upon when the money was loaned. People who do not make their payments on time or who abandon their financial obligation are said to be in default on their account. Being in default on an obligation is a serious financial circumstance that could have legal ramifications. People who are not able or willing to make payments on a loan often have their wages garnished and their assets seized as a way of making repercussion for the amount of money they owe. In the most serious of circumstances, people could face fines or imprisonment for not making regular payments. If people fear that they will default on a loan, they are advised to contact their lender and see if it is possible to work out a new payment agreement. They may also ask for a forbearance of payments.

When purchasing real estate, the buyer sometimes gives money to the seller when they are executing a purchase contract. This is called a deposit. The money is a way for the buyer to communicate to the seller that they are serious about the purchase and are willing to negotiate on the contract. If the seller backs out of the deal, the buyer typically keeps the deposit unless the contract states otherwise. The amount of the deposit will vary from contract to contract. It can be as little a one dollar up to a considerable percentage of the total purchase price. Once the contract is agreed on by both parties, the deposit will be applied to the buyer’s closing costs of the loan.

The down payment is the amount of cash that a buyer of a piece of real estate has on hand to pay to the seller at the time of the closing. The down payment can range up to 20% of the purchase price, depending on the type of loan that the buyer will be obtaining in order to complete the financing. Generally, more favorable rates and terms to finance the remainder of the purchase price can be obtained with a larger down payment. Traditionally, the source of the down payment came out the buyer’s savings. Other sources of a down payment may be a gift from parents or other people, mortgage on another property or the sale of an existing home. The down payment represents the amount of the personal equity that the buyer invests in the purchase of the real estate.

Early occupancy is a term that is used to describe when a seller of a home allows the buyer to move into that home before the actual sale is closed. This type of arrangement can be a very positive selling method for a seller who needs to make a quick sale, but it can also have its drawbacks. This type of situation can also be very beneficial to the buyer if they are facing a deadline on a current lease or rental agreement that would require them to move before the home purchase is complete. However, neither party should enter into this type of situation without a formal contract that protects the interests of all parties involved. This also ensures that the buyer is committed to making the purchase of the home.

An easement is a legal agreement to give a certain part of a property to a third party for a specified purpose. Often, an easement can be given by a landowner to someone that needs to install a public service such as a sewer or power line. The third party does not own the property, they are simply given the legal right to use the property for the specified purpose. Another common example would be giving someone the right to fish in an otherwise privately owned pond. A private easement gives one specific party the right to use the land while a public easement will open up an area to be used by the general public. A homeowner can also pursue a negative easement if they want to prevent someone from performing an otherwise legal activity on a piece of property that they own.

The effective age of a building is the estimated age based on condition instead of actual age. A building in good maintenance will have a lower effective than chronological age. On the other hand, a building in disrepair will have a higher effective age than a chronological one. Effective age is important to consider when making a purchase offer on real estate. A building in good repair with a lower effective age can be a real bargain when compared to similar buildings with a higher effective age. The seller may know this and make the sale price reflect its good shape. But a building in bad repair with a high effective age can be a bad investment. Of course, the condition of the building can be used in the negotiations to bring down the price of the property.

Eminent domain is the government’s right to seize private land in order to use it for public purposes like roads, trains, and public utilities. Just compensation must be provided for the land that is taken. This means that if a government wants to build a new interstate and there is a farm in the way, it must first prove that the farm is indeed blocking the best route for the road. Then, the government will have to go through a set of procedures to enact eminent domain and purchase the land; however, the farmer does have a right to protest the seizure of property. The final decision will be made by a court of law.

An encumbrance is a financial claim or lien on a piece of real estate that complicates the titling process. Generally, encumbrances are a right or financial interest in a piece of property that diminishes its value. Encumbrances do not interfere with the passage of title from one person to another, but there is a value diminishment. A variety of different encumbrances exist, and they can be financial or non-financial. Financial encumbrances may be a lien for work that was performed on a property and never paid. Non-financial encumbrances are best seen in a concrete example. Say you have a great piece of country acreage that is in a superb location. You purchase the property, but you have to agree on an encumbrance. Because the neighbor has no access to the local road, your property is encumbered to allow them access. This simply means that your neighbor has full rights to drive across your property whenever he or she wants.

In real estate, an estate is the total amount of all of the real property and personal property that a person owned upon death. Real property refers to all land and permanent things on the land, including trees, minerals and structures. Personal property may include items such as furniture, money and vehicles. The future of an individual’s estate upon the person’s death is typically determined by a will. A person can detail what should happen to the real and personal properties upon his or her death. Often, a person leaves his or her real and personal properties to a spouse, children or other family members or close friends. A person can also leave parts of or the entirety of his or her estate to a charity. The charity can then sell the property or use it however it wishes, based on the individual’s wishes detailed in the will.

An exclusive listing is used to define an agreement between a seller and a real estate agent, which gives the agent exclusive rights to sell the home. Exclusive listings are typical and customary in the real estate business. Agents need to be assured that they will be compensated for their efforts in selling the home. Real estate agents in an exclusive listing usually perform all of the marketing and advertising efforts involved in the sale. If another agent brings the buyer, the commission is split between the two agents. The terms of the agreement between the two agents is separate and determined by what is agreed upon. An exclusive listing usually describes a duration in which the agent is going to be given the exclusive rights to sell the home. In most cases it is three months, but the agreement can be modified, depending on the market and interest in the home.

A facade is the part of the building that sets the decorative mood of the structure. It usually faces the street, and for those buildings that have courtyards, the portion of the building facing into them will have facades as well. A facade is designed to provide the building with curb appeal, drawing the eye to the architectural lines and design of the industrial building, office, or home. They are designed in a variety of materials: granite, wood, glass, concrete. Facades can be embellished with multiple columns, like those seen on many city government buildings. Others use arches and concrete railings like those found on some prominent university grounds. Many facades are enhanced with accents such as gargoyles or lions. Other accents used on facades are cornices. Think of a Hollywood set with the false fronts beautifying the location – a facade is doing the same thing for your home.

A homeowner that has fee simple ownership of his property has the highest possible level of legal interest in the estate. The owner is free to use the property in any way they see fit, as long as they comply with local ordinances. This type of ownership could still be limited by taxation or eminent domain or other governmental proceedings, but as long as the owner stays in good standing with the local authorities and abides by local zoning laws, there are few limitations on what the land can be used for. In order for a property to be considered fee simple, an owner must have full rights to resell the property at any time and also has the right to pass along the property to an heir in a will at any time. Most paid off estates are fee simple.

A finder’s fee is the compensation or reward provided to an individual or entity for working as an intermediary in successfully completing a business transaction, such as a real-estate sale. A typical example would include a friend or acquaintance selling a house who uses you to find a willing buyer for the property. The sale goes through successfully, and your friend or acquaintance may offer a small reward for helping close the deal. In that case, the reward you would have been offered is the finder’s fee. The party offering the finder’s fee may or may not be obligated to pay depending on the terms of their proposal. If the finder’s fee is a contractual agreement, then the contracting party is obligated to pay the fee. If there is no contractual agreement, the party is not obligated to pay but may do so as a gift or out of a sense of moral obligation.

It is the primary mortgage on real estate that has precedence in claiming rights to the property in the case of a default. The first mortgage is usually the home loan that was used to purchase the property. The bank that provides funds to the buyer to purchase the home holds not only the note-payable for the loan but also the first mortgage. The first mortgage is in essence a security instrument allowing the bank to make a claim against the real estate if the borrower defaults, stops making payments, on the home loan. All other mortgages or liens on the home, including home equity loans, lines of credit, and judgment liens, are secondary in the hierarchy of claiming rights to the property if the borrower defaults. First mortgage will always have precedence.

Sometimes, buying a home that’s brand new and glossy isn’t always the best financial decision. Finding a great fixer-upper is one way a family can acquire the home of their dreams while also holding on to extra money and creative freedom. A fixer-upper is a house that requires renovation before it can be considered optimum. Sometimes a fixer-upper is quite livable while others require extensive modifications and necessities, such as the installation of a toilet or wiring. The benefit of a fixer-upper is that it will likely be much lower in price when compared to similar sized houses on the market. You may be able to get a lovely home for a steal, and being able to complete it yourself will give you a great sense of accomplishment. Finishing a fixer-upper to sell is also a great way to make a profit on an investment.

Flood insurance is an insurance policy that covers damages to property caused by flooding. Flood damage is not covered by a homeowners policy. For homeowners, this type of insurance can cover not only structural damage caused by flooding but also personal property such as furniture and appliances. Renters are also able to purchase a flood policy to protect their personal property. Homeowners in high risk areas may be required to carry flood insurance by their mortgage company. A good way to know whether property damage would be covered by a homeowners policy versus a flood policy is that if the water touches the ground before reaching the home, such as rising water, the claim would be filed under flood insurance. If the water enters the home without touching the ground first, such as broken pipes or a faulty roof, the claim would be filed under a homeowners policy.

Flood insurance is an insurance policy that covers damages to property caused by flooding. Flood damage is not covered by a homeowners policy. For homeowners, this type of insurance can cover not only structural damage caused by flooding but also personal property such as furniture and appliances. Renters are also able to purchase a flood policy to protect their personal property. Homeowners in high risk areas may be required to carry flood insurance by their mortgage company. A good way to know whether property damage would be covered by a homeowners policy versus a flood policy is that if the water touches the ground before reaching the home, such as rising water, the claim would be filed under flood insurance. If the water enters the home without touching the ground first, such as broken pipes or a faulty roof, the claim would be filed under a homeowners policy.

In a for sale by owner, or FSBO, transaction, the owner of the property lists it for himself. He will act without an agent. Most people do this so that they do not have to pay the real estate agent a fee when the sale finally goes through. There are certain advantages and disadvantages to this approach. Many FSBO situations occur when the value of the house is so low that the seller does not want to lose any more of his value. In these transactions, the seller has to be very careful to list the home at the right price. Too often, for sale by owner listings end up overshooting or undercutting the market. This can scare away buyers or lead to a situation where the seller gets a tremendously bad deal. This type of deal can be easier to pull off in some instances, however.

The Georgian style of architecture originates from the English, who utilized bits and pieces of classical Greek architectural ornamentation. Many Georgian homes are square in plan, one to two stories tall and are perfectly symmetrical. Openings display classical ornamentation, such as columns and pilasters, which appear as flat arches. Windows never occur in pairs, and they are of the same quantity as those on other side of the house. The roof is hipped, meaning all sides slope down, or has a gambrel, seen most commonly on barns, with a chimney on each end of the house. A pediment, or triangular decoration glimpsed on classical columns, may be used on the second story or even over the windows.

Similar to a co-signer, a guarantor is guaranteeing the loan in cause of default of the borrower. Essentially, they volunteer their own assets and or service in the even that the original debtor cannot pay.

A half-bath is a type of bathroom found in many homes. Half-baths, or half bathrooms, include a toilet and a sink; however, unlike full baths, they do not have a bathtub or a shower. Half-baths are typically small, sometimes with just enough room for the sink and the toilet. Often, half-baths are located near a communal area, such as the kitchen or living room. Due to their location in areas frequented by guests, and because families typically don’t use them as often as full baths, half bathrooms are sometimes called “guest bathrooms.” In homes in which all the bedrooms and full baths are on the second floor, you frequently find a half bath on the first floor. Almost all homes with a half-bath will also include at least one full bath.

High density can have one of two meanings. It can mean that the number of houses available in a specific area are high in number or that a specific property, such as an condominium, has a number of housing units available. There are advantages and disadvantages to high density, but by and far the benefits typically outweigh the disadvantages. High density in an area can make for good home values, which is good news for sellers and bad news for buyers. However, these homes can make a good investment since property values are more stable than in other areas. High density can also be good for a community. There are generally more community events and community building organizations in a high density area, which can make for a good environment for families.

A high-rise is a tall building that has a large number of stories or floors, usually more than six, and that contains an elevator to access upper floors. The building can be used for commercial purposes, where a large corporation accommodates their offices or where a number of different business offices are housed within the same building. The building can also be used for residential purposes that can house apartments or condominiums. There are also some high-rise buildings that accommodate both commercial and residential properties, also known as mixed-use buildings. This takes place when the lower floor(s) are used for business purposes (usually retail businesses) and the upper floor(s) contain apartment or condominium units for residential use. This is an extremely effective building technique in cities where land is scarce. Due to building codes, high-rise buildings are constructed using steel frames to provide stability for the structure.

Prior to the purchase of a home, a thorough review of the entire house is completed. This covers all areas of the house such as the roof, mechanical and heating systems, construction and more. The inspection is generally done by a licensed professional, and a detailed report is compiled for the seller and the potential buyer. A printed document as well as online files are usually provided. Once the inspection is completed, the homeowner may use this as a tool to help finalize their decision. If there are concerns with the home, the buyer might use the inspection as a means to get improvement done or have the price adjusted. This review of the home is critical and needs to be attended by the home buyer. Otherwise, the buyer might find unexpected surprises with the new home.

Housing discrimination is the act of disallowing a person or group the right to rent or purchase a residence because of their age, race, religion, color, national origin, sex, sexual orientation, disability or status. Housing discrimination can also occur when multi-dwelling residences choose to rent only to individuals within certain demographics. This practice is not only illegal, but it also prohibits diversity within our communities. The right to purchase a home is customarily based on objective criteria such as credit rating, income, job stability and so forth. When landlords or lenders determine if an individual is qualified by using subjective data such as the traits mentioned earlier, this may be considered housing discrimination. Federal laws prohibit housing discrimination, and landlords are required to provide potential renters with certain disclosures regarding their housing rights.

Income property is any property where the owner is not living in it and is making money from it. A home that was once owner occupied can become an income property if the owner moves out and then turns a profit with it somehow. There are many different ways a property can become an income property. One of the most popular ways for a place to become what is considered an income property is for it to become a rental property. People, who are not listed on the deed, live in the home and pay a set amount of money each month to live there. Depending on the type of building and the location, it could also be rented out to a business. Of course, not all of the monies collected are profit. There could be liens against the income property and other expenses that bite away at the actual profit amount.

Inflation refers to the rise in prices of products and services over time. As prices go up, the value of currency declines, causing a unit of currency’s purchasing power to go down. While low rates of inflation are normal and even healthy for the economy, severe inflation can hurt consumers and have a negative effect on the economy. In real estate, inflation has a noticeable affect on mortgage rates. A high inflation rate may make it more difficult to secure a mortgage, or it may cause mortgage rates to rise. However, on the other hand, many economists see investment in real estate as a way to safely “hedge” against inflation. This is because the value of real estate tends to rise alongside inflation rates. Investing in property, in theory, is a way to prevent against currency deflation.

An inspection report is a written report completed by a third-party, licensed home inspector. Upon conducting a home site visit, the home inspector will survey the physical aspects of the building, including the outside areas immediately surrounding the home. Typically, the inspector will make notes on a template checklist as he/she examines various areas and systems of the house. These will include the foundation, roof, framing, gutters, chimney, outdoor shrubbery, windows and exterior and interior wall coverings and paint. The inspector will look for signs of rodent or insect infestation and water damage. HVAC systems will also be thoroughly inspected, and appliances will be tested for operating condition. Electrical wall outlets and light switches will be examined for building code compliance. The completed inspection report will be presented to the person or company who requested and paid for the report, and it is considered an official part of full disclosure for the property.

Insurance is a product that provides financial protection against damages that may be incurred. There are many types of insurance products available. Homeowners insurance protects a homeowner against damage sustained on their property. If someone gets hurt while playing in the yard, their policy will help pay for the medical bills. If the roof collapses, the policy helps pay for a new roof. Private mortgage insurance ensures that a homeowner will be able to pay homeowners insurance in a timely fashion. This policy typically must be purchased by anyone who does not make a down payment of at least 20 percent of the purchase price of their home. Policyholders pay a monthly premium in exchange for this protection. The premium is determined by a host of factors. Generally, the amount of money that it would cost to insure a policyholder is the biggest factor that comes into play.

Interest is a fee that a borrower pays to a lender for the use of assets. Usually, the asset that is borrowed is cash. In addition, interest is often earned through savings accounts and other deposits at commercial banks. The amount of interest varies and is usually referred to as the Annual Percentage Rate (APR). Interest is ordinarily paid as a percentage of the principal over a certain period of time. The amount of interest that is charged affects the total cost that a borrower pays for the use of money. In the mortgage industry, the interest rate affects the monthly payment, and there is an easy way to see how much interest actually costs the borrower. The Rule of 72 is often used in economics and shows how fast interest compounds. When an interest rate is divided by 72, the answer is the amount of time that it takes for the original principal to double.

Your interest rate is an amount of money that is added to the loan. This interest is in addition to the principal amount of the loan. It is how the lender makes a profit from the loan and is compensated for the risk taken when approving the loan. Most mortgages come with interest rates as low as 4 percent. This means that you will be charged 4 percent of any balance that you carry forward from month to month. You can see the interest you pay each month on your payment schedule. Borrowers who come with a higher risk of defaulting on the loan will be charged a higher interest rate. It is not uncommon to pay 6 percent or more for a home loan if your credit is really poor. Improving your credit profile will improve your chances of getting a loan at the lowest possible interest rate.

Real estate that is not used as a primary residence and is purchased with the intent of earning a profit can be considered an investment property. A vacation home is also considered an investment property even if it is only intended for personal use. Investors often purchase investment properties to earn income. Examples of these may include residential properties such as apartment complexes or condominiums, or commercial properties such as office buildings and shopping malls. Some investors pursue homes that are undervalued or in disrepair with the intent of making improvements and selling for a profit. Properties may be purchased directly from owners, through auctions, or publicly through registered investments known as real estate investment trusts or REITs. Investment properties have different tax treatments than primary residences, and some investments can be used to legally defer or offset taxes, depending on the opportunity.

Investment return is the percentage an investor receives on an investment. Generally, this refers to net proceeds after the sale of a property. However, it can also refer to regular income received on a property leased out to others. Their investment includes the purchase price and carrying costs for mortgage payment, insurance, and taxes, as well as any money invested to improve the property. For example, if an investor buys a property for $100,000, and he puts improvements into the property of $25,000. While making those improvements, he has carrying costs of $5,000. All told, his investment in the property is $130,000. He sells the property for $150,000. To calculate the investment return, take the amount of profit, $150,000, and subtract the investment of $130,000 to get $20,000, and then divide it by the investment amount of $130,000. In this example, the investment return is 15.3 percent.

Joint liability is a term used in reference to the contractual responsibilities of a home loan. Joint liability implies that there are two or more people who are obligated to fulfill the terms of the home loan. If a husband and wife sign the loan agreement, they are jointly responsible for repayment of the loan. As an additional example, if two family members gather their resources and invest in a home, both individuals are jointly responsible if they both signed the home loan contract. In the event that one person is not meeting his or her fair share of the monthly payments, the other person on the loan is still liable for the entire debt. In other words, both parties will be held jointly responsible for the entire amount of the loan and for the duration of the agreement unless one party is officially removed from the agreement under separate circumstances.

Joint tenancy is when two or more people own equal shares of the same piece of property. Joint tenancy is a legal definition that can be used for real estate, property or money. The owners are referred to as joint tenants, and each individual has the right to keep or dispose of the property that is owned via the joint tenancy. Because joint tenancy creates a right of survivorship when one of the owners or partners dies, the rights pass on to the surviving owner. An example of joint tenancy is when two buyers contribute equally to the purchase of a home or apartment. Both of the owners have the same rights to the property, and this approach is often used by investors who decide to lease their property. Both investors split the profits, but when one of the original partners dies, the property is passed along to the survivor.

A judgment is a legal decision rendered by a judge for or against a debtor. These cases come to court because a debtor is delinquent on an account, and the creditor wants his or her money. If the debtor cannot present substantial evidence that shows why he or she should be excused from the debt, the judge most often grants a judgment in favor of the creditor. Once a judgment is rendered, the creditor can petition the court for a lien against the debtor’s assets. Most often this lien comes in the form of a garnishment against the person’s income. The lien is upheld until the debt is paid off in full. Judgments can devastate a person’s credit rating, as it shows that the person defaulted on an important financial obligation. This decision can also stay on a person’s credit record for 7 to 10 years, thus compromising future credit applications.

Knob-and-tube wiring is an old fashioned type of electrical system that has largely been replaced by circuit breakers and fuses. Knob-and-tube electrical systems were commonly used in North American homes and commercial buildings from the 1880s to the 1930s. The type of wiring is different from today’s systems because most wires did not have a rubber insulation sleeve around the copper cables. To protect the circuits, porcelain insulators and tubes are used where wiring passes through joists or wall cavities. The system has mostly been replaced by new technologies and is only recommended for certain installations by the National Electric Code (NEC). Today’s home electrical systems are designed to meet current demand, and knob-and-tube wiring has several disadvantages. There is a safety concern because knob-and-tubes do not include a grounding conductor. They do not confine electrical switching, and some wires are exposed because junction boxes are not always used.

Before borrowers will be approved for a loan, they will learn how the lender expects them to repay it. If the terms are acceptable to the borrowers, they will take the loan and sign the contract. One of the terms the lenders will disclose is when the monthly payments will be due. When the borrowers sign the contract, they will be agreeing to make these monthly payments on or before the lender’s specified due date. If the borrowers make their payments one day after the due date, this is called a late payment. The late payment may be subject to extra fees, making the loan more expensive than it would ordinarily be. To avoid making a late payment, borrowers can ask to set up automatic payments with their banks so that their accounts will be debited on or before the due date. This eliminates the borrowers’ need to write a check and mail it and eliminates the possibility of making a late payment.

A latent defect is a potential problem that may be invisible at the time a buyer purchases a property. This is the primary reason that a potential buyer should have a thorough inspection of the property done prior to purchasing. It is advisable for the buyer to use a professional home inspection company to avoid any problems after the sale. In order to protect themselves from any latent defect such as termite damage, the buyers should insist on including a clause in the sales contract prior to purchase. This protects the buyer from any defect not disclosed by the seller and allows for recovery of damages. The buyer can only expect to recover damages if the seller knowingly misrepresents the property condition, blocks an inspection or lies about problems. If a buyer suspects problems but goes ahead and completes the transaction anyway, the seller will not be held accountable.

A lease buyout is an agreement in which a tenant or landlord pays to break the lease for the remainder of its term. For example, if a tenant has a one year lease, but they need to move out after six months, they can agree to a lease buyout with the landlord to break their lease. The amount of the lease buyout is almost always less than the added cost of the rest of the lease. Landlords may also wish to engage in a lease buyout if they wish to use the leased property for other purposes. They might buy out a tenant’s lease if they wish to refurbish a unit or live in it themselves. States and cities have different rules about the lease buyout process, so tenants and landlords should be familiar with local law before engaging in a lease buyout agreement.

A leasehold estate refers to the rights that a landlord gives to a tenant permitting occupancy of a real property for a predetermined amount of time in exchange for rental payments or another agreed-upon form of compensation.

A legal description refers to the officially recognized location and identifying factors of a property. This description must be included on a deed in order to ensure that the buyer is actually getting the property that he or she wants. This legal description might include the coordinates of the property in addition to any special landmarks that might distinguish it from similar properties.

Liabilities are the debts and financial obligations that a borrower is responsible for. In a typical home loan or mortgage situation, borrowing money to purchase property creates a liability. Usually these obligations are part of the lending process, and a mortgage note that is taken on a property is a prime example of a liability. In the case of a mortgage, the property that is purchased has a lien that must be satisfied and offsets the amount of equity that an owner has in his or her property. The borrower is liable for the total amount of a mortgage and makes payments on the balance. There are also joint liabilities when a two or more people purchase a property and have a home mortgage or other debt associated with the property. Liability insurance is also chosen by homeowners because it provides financial protection in the event of personal injury or property damage.

A lien is a financial claim by one person or company against the property of another person. Liens are commonly used in both the automotive and real estate industries and are often used by lenders to secure their property. Mechanic’s liens are a specialized type of lien that is usually field by contractors. In a mechanic’s lien, contractors create a debt against a property for their work. As an example, consider the purchase of a new home. You are approved by a local lender for a mortgage that covers the $100,000 purchase price of your new apartment. There is a small hitch because the lender needs to secure the loan. In order to do this, the lender files a lien against the property. The lien is usually filed in the local courthouse where the property is owned and creates a financial encumbrance. Before you sell your home, you must first satisfy the lien.

A limited partnership is a type of legal entity. In the real estate industry, a limited partnership may be formed by a number of investors. Generally, however, one general partner is charged with making investment decisions for the entire group. He or she oversees all of the group’s investments and is principally liable for any losses. Investments may include purchasing properties such as apartment complexes, undeveloped land and even large office buildings. The general partner may then administer the rental and upkeep of the properties. He or she may also identify the ideal time to sell the limited partnership’s investment properties. Proceeds may then be distributed to the limited partnership’s partners, or they may be reinvested in future purchases. A limited partnership may also choose to invest in other real estate partnerships and similar investing instruments.

Cash and any asset that can be converted to cash with little or no penalty or holding period is a liquid asset. These include cash in checking, savings, and money market accounts, and certificates of deposit. Stocks, bonds, and mutual funds that are held in taxable accounts are also considered liquid. Assets in retirement accounts could be considered liquid for adults age 59 or older but are otherwise generally not included as liquid assets. Annuities and cash value in life insurance may also be considered liquid, depending on how long investors have held the policies. Examples of illiquid assets include real estate, motor vehicles, collectibles and antiques. While these markets may be active at times, they have little price stability, and the assets may be difficult to convert to cash quickly as owners face delays due to appraisals or legal documents.

When you want to sell your home, you need to create a listing. A real estate agent can help with listing your home in newspapers and online sites. Before you create the listing, you need to write down everything that is included in the home when it is sold. If there is any land or furniture that will be sold with the home, it needs to be added. If you choose to list your home with a real estate agent, the agent will receive a percentage of the sale of the home.

The loan-to-value ratio (LTV) is stated as a percentage and signifies the ratio made up of the property’s value and the amount it is being financed for. Lenders prefer to keep the LTV low because a high LTV may indicate a high risk loan. For example, if a borrower defaults on the loan, and the lender is forced to resell the property, it is likely that he or she will not be able to recover funds close to the value of the home if the LTV is high and the borrower had not paid much towards the principal of the loan. When borrowers put a large down payment on a home, the LTV is likely to be low and therefore more attractive to lenders. A short-sale purchase may also offer a low LTV because it is being sold for the outstanding loan balance, which may be less than the value.

Maintenance fees refer to the cost that homeowners pay the homeowners association to maintain the common areas within the neighborhood. The maintenance fee varies between communities. Factors that may contribute to a higher maintenance fee include a large number of amenities available to residents, the geographic location and the presence of high-end facilities on the premises. During the home selection process, buyers are provided with the cost of the associated maintenance fees. Some maintenance fees are due on a monthly basis, and buyers need to add that cost to the estimated monthly home loan amount. Other maintenance fees are due on a yearly basis, and buyers can save throughout the year to pay for this annual expense. Maintenance fees ultimately help pay for the amenities and services that residents enjoy within their particular neighborhood.

A master-planned community is one that incorporates multiple features and services that would be considered desirable by the residents of that community. Master-planned communities are designed to serve a specific market segment. There may be a community planned for seniors and retirees or there may be one that is designed to suit the needs of young families and working professionals. Housing may consist of single family homes, townhouses, condominiums or rental units. Most master-planned communities have several different types of housing. A grocery store, several restaurants, a gas station, playgrounds, open spaces and schools may be part of such a community. The roads are all planned years in advance, and utilities such as water, electricity and telephone service are also incorporated into the plan. There may be association fees to help maintain the common areas and specific bylaws that prohibit certain activities. Master-planned communities offer many of the best amenities, but they also come with many rules and restrictions.

Sometimes before people enter into a legally binding agreement with another party, they may want certain differences and questions addressed before they sign the contract. When two parties cannot reach an agreement that suits both of them, they may choose mediation. Mediation is a process in which a neutral third party helps others reach an agreement and settle their differences before a contract is signed. Different entities can serve as mediaries in disputes. They often are lawyers or someone who works in a legal capacity. Other times, it can be a real estate agent, a social worker, or another professional who understands the legalities of the contract yet has no favor toward either party. Sometimes people are ordered by a judge to seek mediation for their differences. This order happens frequently when people disagree on whether or not a property should be sold or when people want to divide assets.

Sometimes before people enter into a legally binding agreement with another party, they may want certain differences and questions addressed before they sign the contract. When two parties cannot reach an agreement that suits both of them, they may choose mediation. Mediation is a process in which a neutral third party helps others reach an agreement and settle their differences before a contract is signed. Different entities can serve as mediaries in disputes. They often are lawyers or someone who works in a legal capacity. Other times, it can be a real estate agent, a social worker, or another professional who understands the legalities of the contract yet has no favor toward either party. Sometimes people are ordered by a judge to seek mediation for their differences. This order happens frequently when people disagree on whether or not a property should be sold or when people want to divide assets.

Net operating income, or NOI, is a company’s operating income. It is determined by taking a company’s gross income and subtracting operating costs. Operating costs may include taxes, payroll, rent/mortgage, utilities and other related expenses. Typically, NOI is used as an indicator of a company’s value or success in the market. For real estate investors, NOI indicates what return he or she will receive on a particular property. Reducing expenses and/or increasing cash flow is the key to increasing NOI. The net operating income of a company is always a positive number. When expenses are greater than gross income, you have a net operating loss or NOL. Net operating income or loss is used not only to determine an investment’s return but also the debt coverage ratio (DCR). A higher NOI will produce a better DCR, determining whether or not an investment venture can qualify for a commercial loan.

Net rentable area is also known as rentable area, net rentable square feet or usable area. The simple definition is that the net rentable area is the area (or square footage) for which rent can be charged. Net rentable area is determined by measuring the overall square footage of a space, floor or building and subtracting all vertical penetrations. Vertical penetrations make portions of the area unusable and include elevator shafts, stairways, heating/cooling venting and mechanical shafts. No deductions are made for necessary columns, load bearing walls or structural projections. Mechanical rooms are also not typically deducted when figuring net rentable area. An example would be a penthouse apartment with elevator service. The physical area of the elevator shaft would be deducted from the overall square footage, yielding a net rentable area.

A notice of default is a public court filing wherein a mortgage borrower is notified that his or her payments are overdue because the predetermined deadline has passed. This is an initial step toward foreclosure, and if the payments aren’t made within a certain time frame, the lender is at liberty to sell or seize the property as laid out in the mortgage contract. The borrower must then make the payments before a given deadline and additionally cover the legal costs of preparing the notice in order for the foreclosing process to be halted. The procedures for filing a notice of default vary among different lenders; some are more lenient toward borrowers while others are less so. Regardless, a notice of default filing can go on the borrower’s credit report and negatively affect their credit score, making it more difficult to refinance their mortgage and acquire other forms of credit.

Occupancy cost refers to the total cost to a tenant who occupies a space, including the total rent that he or she pays. It might also include any required maintenance fees that the person is required to pay, and parking charges, moving expenses and remodeling fees can also be a part of the occupancy cost. Many renters will want to know this total cost so that they can determine how good of a deal they are getting. The monthly rent will tell one part of the story, though extra costs may force a property out of a renter’s budget. Occupancy cost can vary widely depending upon the lease itself. The costs are typically laid out in the lease contract that the two parties will execute at the beginning of their landlord-tenant relationship. Renters aim for lower overall occupancy cost, and landlords typically look for higher costs.

In real estate, an offer to purchase is a commitment by a buyer to enter into a contract of sale for a property. The offer is often accompanied by a substantial good faith deposit, in which the buyer declares interest. It demonstrates to the seller that the buyer is seriously interested in purchasing the property and is willing to secure that interest with a deposit. Acceptance of the offer by the seller does not create a contract between the two parties. An offer to purchase real estate includes not only the price the buyer is willing to pay, but details on how he or she intends to finance the home, down payment amount and closing costs. A copy of the accepted offer must first be sent to the buyer who made the offer. The offer to purchase is the first step towards securing a sales contract for the property.

A set period of time that the Realtor opens the house to the public for viewing. Open houses are often publicized in newspapers, signage, and other means to bring in as many people as possible. Normally interested persons need to make an appointment to view the house, but all visitors are encouraged during an open house. This allows for a casual atmosphere and increases the quantity of viewers in a short period of time. Owners typically schedule the time on a weekend when it is more practical for them to be gone from the house as well as to bring in a greater likelihood of potential buyers. This marketing tool is useful for increasing the visibility of the house on the market but often needs to be used in conjunction with other tools to locate serious and quality potential buyers.

Operating expenses are any expenses that are incurred for the upkeep of a rental income. Some common expenses include maintenance, taxes and insurance. Hiring a rental management company to oversee your properties count as well. If the washing machine breaks, that would be considered an operating expense. Painting the outside of the building would be considered an expense as well. Anything that will cost money while eating away at your profit is an operating expense. Purchasing equipment for a fitness facility would be another operating expense. The lights, water and cable to keep that facility running and engaging for tenants would also qualify. It should be noted that making a mortgage payment is not considered an operating expense. However, you may be able to deduct it as a business expense for tax purposes.

A parcel is an officially described piece of land. A parcel is also sometimes referred to as a land lot. A parcel or land lot is legally considered an immovable piece of property. It is possible for a piece of land to be separated into different parcels and each parcel could have a different owner. Most parcels of land are subject to real estate tax just like the home or business that sits on the property. A parcel has defined, specific boundaries that will distinguish one parcel of land from other parcels next to it. Sometimes a professional conveyor can be used to determine where the legal boundaries are located between individual parcels of land or land lots. The conveyer will use GPS tools to map out exact coordinates for each parcel.

A patent defect is an important and tangible problem with a piece of real property. This would not include little problems with fixtures on the property; rather, it generally refers to items that can have a major impact on the property’s safety or its value. For instance, a sagging porch or a crack in the foundation of a home would be a patent defect. Likewise, any sort of structural problem would qualify as a patent defect. Such things are generally discovered during any sort of inspection that might take place before a purchase. Buyers will want to know about these things before they purchase a property. There are certain laws that require sellers to alert buyers to these problems if they are known. In many instances, the seller will not know that the home has any sort of patent defect until the buyer discovers it during the inspection phase.

The term PITI is an acronym that comes from principal, interest, taxes, and insurance. A lender will calculate these costs to give a borrower a realistic estimate of their mortgage related expenses month to month. Every month, a borrower makes a payment to their mortgage lender. That amount combines principal, interest, taxes and insurance. The principal goes to paying down the amount of the loan. The interest is the profit the lender gets from their investment. The principal and interest will vary from month to month. Taxes and insurance are a contractual requirement on most mortgages. The lender collects a portion of the annual amounts each month and places them in escrow. When the taxes and insurance come due each year, the lender pays them out of the escrow account. The insurance and taxes may vary from year to year, so this amount adjusts annually.

Possession is a term that is used in the real estate industry to refer to the time when a buyer officially signs the requisite papers and receives their new home’s keys. At this time, the buyer is said to legally take possession of the property. For example, say you are interested in purchasing a home and have seen several great properties on the market. You finally decide on the one that you want and begin the process of securing a mortgage for the home. After the mortgage is secured, and the deed is signed over to you, you are legally in possession of the home and can move in, rent the property or do what you like. The term possession is also closely related to the idea of repossession. During a home’s repossession, the lender takes back the property that was foreclosed on because of a breach of contract.

The pre-approval letter plays an important part in the home buying process. This is an unofficial letter from the mortgage lender that lets agents and sellers know the amount of money a buyer can borrow in order to buy a house. Many sellers will require that a buyer show this pre-approval letter before that seller will accept any offer. This provides an important protection for sellers as they can avoid doing business with buyers who do not have the ability to get the money to buy the home. The pre-approval letter does not constitute an official mortgage approval from the lender. The buyer will still have to go through the entire loan process before he or she can actually get the money. In some cases, mortgage lenders will deny people after they have been granted a pre-approval letter, but it is more common for the bank to adjust the amount of money it is willing to lend.

Prequalification describes the process in which a lender evaluates a borrower’s capacity for repaying a mortgage. During the prequalification process, borrowers will be asked to provide certain documentation, such as pay stubs, bank statements, income tax returns and other applicable documents that may shed light on their ability or inability to pay. Once the borrower has been pre-qualified, the lender usually gives the borrower a prequalification letter that they can show their real estate agent. The real estate agent will then have an idea of the borrower’s budget and can find homes for sale in the right price range. The prequalification process is a preliminary assessment, and borrowers may be asked for more detailed information regarding their financial position when a sales contract is submitted. The prequalification confirms to the borrower that the lender is willing to finance his or her home purchase.

When speaking of a mortgage balance, the amount of the payoff is called the principal balance. The borrower makes a payment on a schedule put in place at the time of the original loan. This is usually a monthly payment including principal, taxes, interest and insurance. The principal is reduced each time a payment is made. Some lenders allow flexible payments each month, which could reduce the principal quicker than the original term. For instance, a 30-year loan could be paid off in fifteen or twenty years by paying extra principal each month or lump sum payments each year. Paying the regular monthly amount and adding $100 extra is an excellent way to reduce the principal. Alternatively, make two payments per month at one-half the regular amount each time. Reducing the principal quicker than on the original schedule lowers the interest due in subsequent months. This will payoff the loan quicker and save thousands in interest.

Real estate is subject to taxation by the local government in the area where the property is located. Assessments are done on property at the time of purchase and periodically thereafter in order to ensure that the property is valued correctly by the taxing authority. Taxes are calculated based on a number of factors that can include the type of structure, commercial or residential; the specific location of the property; the value of the property; and any renovations performed since the last assessment. In most cases, property taxes will amount to about 1.5 percent of the property’s assessed value. In most locales, property owners reserve the right to dispute assessment results for their property, in the event that they believe the assessed amount to be incorrect. Generally, property tax is collected by the locale in which the property is located and the county as well. It is a good idea to investigate all taxing authorities prior to purchasing a property.

A quit-claim deed transfers the ownership of a piece of real property from the seller to the buyer. If ownership is transferred with a quit-claim deed, the buyer receives no warranties and accepts the property subject to any liens, taxes, assessments, covenants or encumbrances that might affect the title. When a seller signs a quit-claim deed, they can only transfer the interest they hold. For example, if a husband and a wife own a home jointly and the husband signs a quit-claim deed transferring his interest in the property to their daughter, then the daughter now owns the home with her mother. If the mother also signs a quit-claim deed conveying her interest in the property to the daughter, then the daughter would be the sole owner of the home. Quit-claim deeds are typically used between family members or where ownership of a property is clearly defined.

Real Estate is a common term used to describe any given piece of land along with anything that is permanently attached to that land, such as buildings, housing, natural resources, and other permanent structures such as fences. For example, a house, pool, and shed, along with the plot of land that they reside upon, would be considered real estate. A natural resource existing on that property, such as oil, gold, or crops, would also be considered part of that real estate. On the other hand, furniture and items inside the home or shed would not be considered real estate as they are movable, personal property. Real Estate is also used to describe the business of buying and selling land and property, including all of the facets of that business, such as appraising, renovating, constructing, managing, investing in, or leasing real estate.

A real estate investment trust is a company that primarily owns and operates income-generating real estate such as shopping malls, hotels, apartment complexes and office buildings. Some will also finance real estate as well. Many REITs are publicly traded on stock exchanges. REITs were created by Congress in 1960 to allow the average investor to buy into large-scale real estate operations by purchasing equity. For a company to operate as an REIT in the U.S., several provisions must be met under the Tax Code. These include having at least 100 shareholders, investing no less than 75 percent of its total assets in real estate, obtaining no less than 75 percent of its gross earnings from mortgage interest or rents, and paying each shareholder at least 90 percent of its annual income as a dividend. REITs offer investors certain appreciable advantages such as strong, dependable dividends, portfolio diversification and reliable long-term performance.

Refinancing is the process of paying off an existing mortgage loan using a new loan. In most case, property owners will refinance current loans when interest rates drop and they are able to realize a significant reduction in either their payment amount or the loan term. Many property owners refinance in order to receive a cash payment at the time of closing. This extra cash can be used for renovations or to assist with the purchase of another property. This is known as cash out refinancing. Refinancing loans are also common for individuals who purchased a property with an adjustable rate loan. Locking in an attractive rate can be a huge cost saver for these property owners. Loans are based on the value of the property, the owner’s equity in the property and current interest rates at the time of application.

The resale value is a term for the value of a property at some time in the future. Several factors can influence the resale value of a home, including the condition of the neighborhood, nearby amenities, potential expansion in the vicinity, quality of schools as well as the overall economy and housing market. Sellers have realized diminished resale value on their homes when the neighborhood has experienced an influx of foreclosed homes or if homes have sold for below market value. When buying a home, one should consider its resale value. Buying a newly constructed home located in a new housing development may increase the chances of a higher resale value. This is because homes will continue to be built around the property, and subsequent sales prices may go up.

Right of first offer describes the right of a tenant to be given the first option to buy a property when the owner decides to sell it. For example, the issue of right to first offer may come up is if a tenant has been leasing a home for a few years and likes the property. The tenant advises the owner of their interest in buying the property if he or she decides to sell, and the owner agrees to give the tenant the right to first offer. Before the owner places the home on the market, he or she allows the tenant to be the first person to submit an offer on the home. The right to first offer can be a good scenario for both the buyer and the tenant because it can lead to a quick and easy sale.

A second mortgage is an additional loan placed upon a piece of property. The major distinction between a first and second mortgage is that if a property goes into foreclosure, repayment of the first mortgage takes precedence over the second. For this reason, a second mortgage is taken out on a property’s equity. Let’s say that the first mortgage was for $200,000. The borrowers have been living in the home for five years and have paid $20,000 on the loan. The property has also increased in value substantially due to the recent addition of an upscale shopping mall nearby. Now the home is worth $300,000. The homeowners could get a second mortgage on the equity of $120,000 that they have in their home. If the homeowners default on their mortgages and the loan forecloses, the second mortgage is paid after the first mortgage has been satisfied.

The seller’s market is the term given to a market where the seller has the upper hand. This might happen when there are few good homes available in a certain area. It might also mean that the area is a hot one right now for potential buyers. The seller’s market is one where a seller might receive a lot of interest from multiple buyers on any given listing. The seller might be able to get multiple bids and offers on a given property. These markets usually lead to higher sale prices on homes and can be difficult for interested buyers. Seller’s markets are contrasted with a buyer’s market, which occurs when there are very few buyers and a host of acceptable properties in an area. As a buyer, you would much rather do your bidding in a buyer’s market than a seller’s market, where the seller has all of the control.

A seller take-back is a form of financing offered by the seller of the home to the buyer. It is not considered a loan because there is not any actual money involved, but it must be paid with interest just like a loan. For example, if a home that is selling for $100,000 has a $60,000 assumable mortgage, the seller can offer to assume a portion of the remaining balance as collateral in the home and have the buyer make monthly payments on the amount that is still outstanding. Sellers will require that the buyer makes a deposit, and they will hold a note on the home for the remaining balance until it is paid in full. This note is separate from the mortgage. This type of transaction has many benefits and drawbacks and should only be conducted under the supervision of an experienced real estate attorney.

A special assessment represents an additional expense, usually added to property tax, for public improvements made to benefit the property owner. For example, when a street is paved or a new storm sewer is installed underneath the street serving a property owner, the city expects those property owners to pay a share of the project’s cost. Often times, the city borrows money on the private market to make these improvements, and the loan is repaid by an assessment above and beyond real estate taxes. Special assessments are usually assessed over a set number of years and can be paid off early at the option of the property owner. When paid-off early, the property owner can usually save money since interest will not accrue as it would if paid off in due course.

A survey is a legal document prepared by a licensed surveyor that defines the exact boundary, size and features of a tract of land. It can be used to determine the exact dimensions of the tract of land that is being transferred from one party to another. A survey drawing will show property corners, adjacent tracts, easements or any other encumbrances, existing physical features such as buildings or fences, and the exact area of the tract. When preparing a survey, the surveyor will visit the site to find property corners and other physical features. They will take precise measurements of the location of everything to be shown on the drawing. Additionally, they will visit the courthouse or receive a title report that shows all easements and other legal instruments that affect the tract. Once the information is gathered, they will prepare the drawing that clearly shows all of the information so that the buyer and seller can clearly review what is being transferred.

A tax lien is an encumbrance placed against a property for unpaid property taxes. The transaction of selling a property cannot be completed until the tax lien is paid in full by the seller. The same tax lien also applies to property acquired during the entire life of the tax lien. If borrowers owe back property taxes, they are at risk of eventual mortgage foreclosure if the tax lien is not satisfied within a set period of time determined by the taxing agency. This gives the taxing authority the right to sell the home at an auction to an investor who is willing to pay off the tax lien, interest and penalties. This means that the investor is able to purchase the home without having to pay off the mortgage due on the house. This translates to an investor purchasing a home at a mere fraction of its actual value.

Tenants in common are the co-owners of a property. Any number of people can own the same property. So this means that two people can be tenants in common or 100 can be tenants in common. These people do not have to be related to each other. An interesting aspect of tenants in common is that ownership of a property does not have to be equal for each party. One person may own 50 percent of the property, while two others own 25 percent each. If one tenant in common passes away, the other tenants in common still own the same shares of the property that they did when the decedent was alive. The deceased tenant in common’s share of the property transfers to the whomever the decedent designated in his or her will. One or all tenants in common can live in a property, but none can be excluded.

A title is a document that proves legal ownership of a piece of real property. When buyers sign a contract to purchase real property, they are given what is called “equitable title.” This gives them the right to obtain full ownership of the property. The home builder, developer, seller or other party still retains legal title, which is actual property ownership. Once all the terms of the seller’s contract have been met, the legal title transfers to the buyer in the closing. The highest form of title is called “paramount title.” This gives the owner in a fee-simple, which is the highest form of ownership of land and its immovable structures, the right to quiet title. Quieting title is generally a legal proceeding to settle with missing heirs, tenants, lien holders and other people in a title-dispute lawsuit for real property. Each state has different requirements and procedures for quieting title.

Title insurance is a type of protection that is offered to lenders and buyers to prevent financial damages from disputes over property ownership. Title insurance is ordinarily a requirement of most mortgages because it protects homeowners and lenders. Titles are the legal document that grants ownership to a particular person. When you are buying a home, you need a clear and valid title. Liens and encumbrances are a few of the issues that can lead to financial problems with a home’s title. Say, for example, that a construction company builds a deck on your home before you purchased it. The company was never paid and files a lien against the property. You do not know about the lien and buy the property anyway. Because there is a lien against your home’s title, you are now responsible for the deck’s cost. Title insurance would pay the construction company to ensure a clear title.

A title search is used as part of a real estate transaction and determines the actual ownership of a property as well as the existence of any encumbrances or liens. There are three major issues that a title search addresses. The first issue ensures that the seller actually owns the property. Using a title search is essential and offers valuable protection. The second issue has to do with restrictions and encumbrances that are associated with a property’s title. For example, the home you want to buy may have encumbrances that give oil and gas exploration companies the right to drill on your property. The third issue has to do with any debts that must be paid when you close on your new home. You may buy a home that just received a new roof that was never paid for. The roofing contractor put a lien against the property that must be paid.

A trust account is an account held by attorneys, real estate brokers, and other professionals to facilitate the transfer of funds from one party to another. In a real estate transaction, rather than the buyer making a check out to the seller, the buyer deposits the money in the real estate broker’s account, and at the appropriate time, the seller is paid from the broker’s trust account. The trust account arrangement exists for the benefit of both the buyer and seller. The buyer has the comfort of knowing that their money will stay in the broker’s trust account in the case of any disputes, and the seller is assured that the buyer’s funds are guaranteed to be available at closing. The funds are guaranteed because the buyer’s check has cleared and was deposited in the trust account before closing the real estate transaction.

When you apply for a loan, the process of reviewing your application is known as underwriting. An underwriter is responsible for reviewing the a borrowers application, in addition to any supplemental information provided, in order to determine their creditworthiness and ability to fulfill the responsibilities associated with the loan product. Mortgage underwriting also takes into consideration the property in question. A lender will generally not offer a mortgage for a significant amount above what they believe a property is worth because the loan is secured by the property in the event of default. Underwriting is used in many different industries, including mortgage financing, insurance and investing. The principe of underwriting is the same for every industry. Your application is reviewed to determine whether or not you meet the criteria set forth for the product you are seeking.

Upgrades are enhanced items that go into the design of a new construction home. Typically, builders will offer a base price for a new construction home, and any upgrades that the buyer chooses to include will increase the base price. Each upgrade comes with an associated charge. For example, buyers can choose to upgrade to ceramic tile throughout the entire home instead of carpeting. The builder will advise the buyer as to how much the base price of the home will increase by choosing the upgrade. If buyers are interested in various upgrades, one option is to start with a pre-sold home that already offers some of the upgrades that they are looking for. This may save them money or it may average out to the same as adding multiple upgrades to a basic home price.

Mortgage interest rates are either fixed or variable. Variable interest rates fluctuate based on several external factors, while fixed rates stay the same for the life of the loan regardless of external factors. A variable interest rate can increase or decrease multiple times throughout the life of the loan. For example, if there were a great catastrophe and the economy started to decline, variable mortgage interest rates may fluctuate as well. If a borrower chooses a variable interest rate loan, they may save money when rates are low. However, there is always a risk of a sudden increase in interest rates, which may cost the borrower money in the end.

The term variable rate refers to a specific type of mortgage. A variable rate mortgage can be clearly contrasted with a fixed rate mortgage, and, as the name suggests, it can see its interest rate vary on a yearly basis. While the fixed rate mortgage is set in stone, the variable rate changes when any number of indices changes. Some loans will be indexed to the rate paid by the government on treasury bills; others might change based upon the rate paid by banks on their notes. This depends upon the terms of the specific mortgage. People who go with variable rate mortgages usually do so because they are comfortable with the risk or because they have some reasonable expectation that rates will be lower in the future for one reason or another. Many financial advisers do not recommend these loans because they make financial planning difficult for home buyers.

A variable rate mortgage is one with an interest rate that is not automatically set in stone. While a traditional mortgage will have a defined rate over the term of the loan, the variable rate mortgage is indexed to some external indicator. When those rates go up or down, the rate on a person’s mortgage will go up or down accordingly. A variable rate mortgage is more of a financial gamble than a traditional mortgage. It can be a good investment for people who believe that interest rates are going down in the coming years. Many people are critical of these loans because they make it difficult for homeowners to do a lot of legitimate budgeting or financial planning for the future.

Signing a waiver indicates that you are giving up certain rights that may be contractually granted to you. An example of a waiver would be foregoing your legal rights in the event of a foreclosure. Waivers can also be used by lenders and other agents to protect themselves against lawsuits and other claims. Always read carefully before signing any sort of waiver. These are legal documents that will be accepted in a court of law should a dispute arise. The only time a waiver is invalid is if it is signed under duress or it otherwise violates the law. For example, a waiver could not be signed that says a tenant is not able to recoup their security deposit. State law would trump that in the majority of cases.

Walk-through is the general term for the final walk through a home that a buyer does before finalizing the deal to purchase the home. The purpose of the final walk-through is to allow the buyer one last look at the home before they close the deal to buy it. This is the buyer’s chance to make sure the home is in suitable condition, with any repairs performed that were agreed upon. It is also a chance to make sure nothing new has gone wrong with the home since the last time the buyer has visited. Some things that a buyer may check when performing their final walk-through include checking to make sure lights work and that plumbing is not clogged, testing all appliances for functionality, making sure doors and windows open and close properly, testing the heat and air conditioning of the home and ensuring all debris are removed.

When people purchase products or services, they often want to know that their purchases will be worth their money. If an item breaks or malfunctions, or the service is substandard, people typically want the situation to be corrected. Consumers can be protected from such circumstances when they purchase a warranty. A warranty is often valid for a year or longer after a person has purchased an item. Warranties commonly are attached to electronics, such as televisions, music players, and more, as well as services such as roofing, carpeting, and other home improvement services. This guarantee promises that the good will be repaired or the money for the service will be refunded if the good breaks or the service provided is substandard. Without a warranty, people often are reluctant to spend money for such purposes. Once a warranty expires, people have the option to renew it in most cases if needed.

A will is a document made by one person that states who their belongings should go to after they have passed away. The will can be made by the person and signed by an attorney, or an attorney can help the person write the will so that it is fair to all parties involved. If someone owns a home, he or she has a few options when it comes to their will. The home can be sold, and the money from the sale divided between family members. The person who owns the house can also state in the will who they want to own the house. If there is only one child, the belongings would normally go to that child. A spouse can also take control of the home after the person passes away.

Wraparound mortgages are typically done by allowing the person who is selling a home to provide a mortgage to the person buying the home. These loans are most commonly used when the first mortgage on the home is an assumable loan. However, in some cases, they may be used on non-assumable loans with the original lenders permission. The total wraparound mortgage amount is the full amount of the existing loan plus the new amount that is borrowed. One payment is made by the borrower to the seller and the seller then makes the payment on the original loan. Typically, the interest rate is higher than the interest rate that is on the existing mortgage. For sellers, the higher-yield on the mortgage makes this an attractive option when selling their home. When the primary mortgage is a non-assumable loan, the lender must agree to this scheme or there is a risk they will call the loan requiring the loan to be paid in full.

A yield rate is the amount calculated from dividing the yearly net income from a property by its market value. This number is expressed as a percentage. Let’s say that a house has a market value of $350,000, and the yearly net income obtained from this property is $80,000. The yield rate is then calculated through dividing $80,000 by $350,000. In this particular scenario, the yield rate is 22.86 percent. Imagine a particularly large piece of property that includes several different houses, condos and apartments. The market value is the total assessed value of the properties combined. The yearly net income would be all of the rent that is paid toward the owner of the properties throughout the course of one year. This standard applies to commercial properties as well.

Zoning is type of regulation put on land in order to dictate what can be done with the land. There are many types of land zones such as agricultural, residential, commercial, open space, and industrial. Knowing what types of zones lie around your house is very important when selling a house. A house surrounded by residential and open space zones is much more likely to be valuable than a house surrounded by an industrial zone. No one wants to live next to a chemical plant. Zoning is even more than this though. A type of zone can be broken into multiple types to further protect the value of a property and limit how it is used. For instance, it can be used to prevent a 20 story condo from being built in the middle of a suburban neighbourhood.