If you’re an owner of rental properties, staying current with the latest real estate terms is important. Being aware of the significant changes the real estate market is experiencing can help you safeguard your investments and grow your portfolio. Having astute insight can help you negotiate with potential buyers or renters and make well-informed decisions. These six terms are critical to comprehend in a competitive market. Let’s take a closer look at each one.
iBuyer
iBuyers are real estate companies that use technology to provide straightforward and trouble-free home-selling solutions. They provide an innovative and reliable way of selling residential properties in a couple of days, requiring minimal effort from the homeowners. iBuyers assess real estate market data using advanced methods, enabling them to make fast, competitive offers in accordance with the latest market conditions.
Generally, the iBuying process requires homeowners to submit their property details to an iBuyer’s website. After assessing the property, the iBuyer offers an instant cash offer within 24-48 hours. The homeowner can arrange a closing date and receive funds in a couple of days if the offer is accepted.
One of the primary perks of iBuyers is their hassle-free selling procedure, which does away with the necessity for staging, open houses, and negotiations. Homeowners are relieved of the burden of preparing their houses for showings and waiting months to sell their properties.
Days on Market (DOM)
Becoming familiar with essential real estate terms is important when searching for a new property. One such word is “DOM,” which is “days on the market.” This metric calculates the number of days a property has been listed for sale.
A high DOM can be a warning sign if the property has been listed on the market for a long time without any offers. However, it’s crucial to keep in mind that seasonal changes in the real estate market can have an impact on the DOM. For example, springtime is when houses tend to sell faster than wintertime.
By checking the average DOM for a specific area, you can tell if the real estate market is strong (i.e., with a low average DOM) or weak (i.e., with a high average DOM). In a weak market, buyers typically have an easier time negotiating a better deal.
Real Estate Owned (REO)
An REO property, or “Real Estate Owned,” is also known as a type of property that a lender owns after a foreclosure on the property due to the previous owner‘s inability to make mortgage payments. This generally takes place when a foreclosure auction is held, and the property is not sold.
Since REO properties may be purchased below market value, they might present an enticing investment opportunity for investors. However, it is crucial to bear in mind that because the property is being sold “as-is,” these sales are typically associated with risks. The buyer will be obligated to make any necessary repairs or renovations, and financing may be hard to come by.
FHA 203k rehab loan
The federal government supports the FHA 203k rehab loan program. Its goal is to enable homebuyers to finance the purchase of a property that necessitates extensive renovations or repairs.
The loan can fund repairs and renovations, such as structural improvements, plumbing and electrical upkeeps, and the installation of new heating and cooling systems. It can also be used to improve older residences with energy-efficient upgrades such as installing new windows, doors, and insulation.
One of the selling points of the FHA 203k rehab loan is that it allows buyers to finance the cost of the repairs and improvements into the mortgage, meaning they don’t have to pay for these expenses out of pocket. In addition, the loan can be used to purchase a property needing repair and refinance an existing one.
However, you should take into account that the loan cannot be used for “luxury” upgrades like adding a swimming pool or other non-essential amenities. The loan’s objective is to assist homeowners in making the needed repairs and upgrades to their houses to live safely and comfortably in their properties.
Debt to Income (DTI)
The DTI, or debt-to-income ratio, is a financial metric that lenders use to estimate a percentage of your monthly income goes toward paying debts. DTI is determined by including your monthly mortgage or rent and other debt payments, dividing the total by your gross monthly income, and multiplying by 100. Lenders are able to ascertain how much of your income is already dedicated to paying off debts and how much mortgage you can afford based on this calculation.
Maintaining a low DTI is crucial because it might make it more challenging to qualify for a loan. In general, lenders would rather see borrowers spend no more than 28% of their monthly revenue on housing payments and 36% or less on monthly debt payments. A lower DTI increases your chances of being approved for a loan or a mortgage.
It’s worth observing that lenders may have slightly different standards for evaluating DTI ratios, depending on the type of loan or mortgage you’re applying for. For instance, some lenders may allow a higher DTI ratio for borrowers with exceptional credit scores.
In any case, it’s critical to maintain your DTI ratio low to maintain good financial health and make it more straightforward to obtain financing when needed. If your DTI ratio is high, you want to consider raising your income, reducing your debt, or speaking with a financial professional.
Earnest Money Deposit (EMD)
Earnest Money Deposit (EMD) is a deposit a buyer must make when offering a property. It is referred to as a “good faith deposit.” The buyer’s genuine desire to purchase the property is demonstrated by this deposit, which may persuade the seller to accept the offer. The amount of EMD offered fluctuates depending on the market circumstances, but it typically falls between 1% and 5%. If the deal is successful, the EMD is held in escrow and is applied to the purchase price of the home.
Familiarizing a variety of real estate terms is important for a rental property owner. Keeping abreast of the latest advancements in the sector can help you protect your investments and make wise choices when negotiating with buyers or renters. Don’t forget that having knowledge in a competitive market is an advantage.
With real estate investments in Alameda and the adjacent area, Real Property Management Pacific is prepared to help you attain financial freedom and make a passive income. Our experts can provide knowledgeable and amicable advice on property management and real estate investment issues. Contact us online or call us at 510-900-4544.
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.
