As a Back Bay rental property owner, it is essential to remain current on the latest real estate terminology. As the real estate market undergoes significant changes, maintaining awareness of these changes can help you secure your investments and expand your portfolio. You can use it to your advantage when haggling with prospective tenants or buyers. In a competitive market, it is important to know the six terms listed below. Let’s examine each of them.
An iBuyer is a real estate company that makes instant offers on homes using technology. These companies have grown in popularity in recent years as a result of their convenient and quick home selling services. Since they provide much more accessibility to homeowners, iBuyers have fundamentally changed how people buy and sell residential properties.
DOM means “days on market.” This metric measures the length of time a property has been on the market. The property’s DOM is determined by calculating from the day it is put on the MLS (multiple listing service) to the day a seller who desires to sell signs a contract. A high DOM may be a warning sign, but it may also be the result of seasonal market fluctuations (homes typically sell faster in the spring than in the winter). You can also tell if a market is strong (a low average DOM) or weak (a high average DOM), by looking at the average DOM for a specific area. In a weak market, buyers typically prevail.
“Real estate owned” is what REO stands for. This term refers to a property that has undergone foreclosure and has come under the ownership of the lender, usually as a result of it not selling at the foreclosure auction. Since many banks and lenders would prefer to sell a property than hold it, REO properties can offer investors the chance to buy below market value. It is vital to recognize that these sales are often “as-is,” which makes financing hard.
FHA 203k Rehab Loan
The FHA 203k rehab loan is a government-backed loan that lets purchasers finance the acquisition of a home that needs repairing. This type of loan can be used to finance modifications and repairs, making it a great option for investors seeking to acquire properties requiring repair. This can also be used to retrofit older homes with energy-efficient features. It is not intended for “luxury” additions like installing a pool.
DTI is the acronym for “debt-to-income” ratio. This metric is used by lenders to calculate how much of your income is being used to pay off debt. To determine your DTI, add your monthly housing payment to your total debt payments, divide that number by your gross monthly income, and multiply the result by 100. It is intended to determine the maximum mortgage payment you can make. Maintaining a low DTI is crucial because a high DTI can make it hard to be approved for a loan. Typically, a lender favors borrowers who spend 28% or less on housing and 36% or less on monthly debt payments.
“Earnest Money Deposit,” or EMD, is another term you’ll also frequently come across. This deposit is required from buyers when submitting an offer to purchase a property and is occasionally referred to as a “good faith deposit.” An EMD can help persuade a seller to accept an offer by showing the buyer’s seriousness and urgency. In most situations, the amount of EMD supplied is between 1 and 5%, although this amount can vary depending on the situation and the competitiveness of the market. In most cases, the EMD is kept in escrow and, if the deal closes, applied to the cost of buying the house.
Back Bay property managers must be conversant with a wide range of real estate terminology, as you can see. Knowledge is power when it comes to a competitive market.
In a fluctuating rental property market, your greatest asset is your team of experts. Contact us online to learn how you can gain access to insider knowledge and the best asset management services available.
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