Today we are going to talk about 12 common real estate terms used by real estate investors.
When you are just starting out, some of the terms and abbreviations seasoned real estate investors use in their conversations can be confusing. Did you ever find yourself sitting at a table at your local REIA meeting with some of these seasoned real estate investors wondering what the “heck they are talking about”?
For instance, if someone said “I need to know the ARV and the cost of the repairs before I can figure my MAO”, would you know what they were taking about? If not, there is a short list of some of the terms real estate investors commonly use below.
Before you can even begin to think about making offers on properties, you have to understand the process of making offers.
12 Common Real Estate Terms and Abbreviations
1. ARV – After repaired value.
This is what the property is worth after it is repaired or renovated.
2. MAO – Maximum allowable offer
The most you can offer for a property.
3. POF – Proof of funds
Banks often call for a “proof of funds letter” when you place an offer on a bank owned property.
4. PMI – Private Mortgage Insurance
This is insurance that your lender is requiring you to pay the premiums for in your monthly mortgage payment. It is an insurance policy that partially reimburses them should you default on your mortgage.
5. FMV – Fair market value
Fair market value is an estimate of the market value of a property, based on what a knowledgeable, willing, and unpressured buyer would probably pay to a knowledgeable, willing, and unpressured seller in the market. In other words, what you should be able to sell the property for.
6. SFH – Single family home
A single detached residence.
7. L/O – Lease option
There are two components to a lease option. The first is a lease for the property. The second part gives the person the “option” to buy the property at a later date for a predetermined amount of money.
8. RTO – Rent to own
Rent to own is similar to a lease option. It is a type of legally documented transaction under which tangible property is leased in exchange for a weekly or monthly payment, with the option to purchase at some point during the agreement. Like a lease option, the person is under no obligation to purchase the property.
9. POA – Power of Attorney
The POA is the legal authority to act for another person in legal and business matters.
10. MLS – Multiple Listing Service
The MLS is a centralized database that lists real estate for sale in the United States.
11. HOA – Homeowners Association
An HOA is an organization in a subdivision, planned community or condominium that makes and enforces rules for the properties in its jurisdiction. HOA’s also collect monthly or annual dues or fees.
12. REO – Real Estate Owned
REO refers to real estate owned by a bank typically as a result of foreclosure. These properties are also referred to as being “bank owned”.
I hope this list helps!
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