Being familiar with the latest real estate terms is important if you’re an owner of rental properties. Being informed of the changes occurring in the real estate market can help you protect your investments and grow your portfolio. Astute awareness will help you to make informed decisions when you are negotiating with potential buyers or renters. Knowing these six concepts will give you an advantage in today’s competitive market. This post will explain each of these points.
iBuyers are real estate companies that leverage technology to deliver speedy and smooth home-selling solutions. They present an innovative and reliable way of selling residential properties in a couple of days, with minimal effort from the homeowners. iBuyers use sophisticated procedures to examine real estate market data, which allows them to make prompt and competitive offers that are based on the current market conditions.
The first step in the iBuying procedure is for homeowners to submit their property details to an iBuyer’s website. After that, the iBuyer assesses the property and delivers an instant cash offer within 24-48 hours. If the offer gets approved, the homeowner can schedule a closing date and receive payment in a few days.
iBuyers’ simplified selling procedure is a major perk because it does away with laborious steps such as staging, open houses, and negotiations. Homeowners can evade the stress of preparing their homes for showings and waiting months to sell their properties.
Days on Market (DOM)
Learning the key real estate terms is crucial while searching for a new property. One such term is “DOM,” which is “days on the market.” The number of days a property has been listed for sale is recorded by this metric.
The longer the property has been on the market without an offer, the more alarming a high DOM might be. However, it’s worth mentioning that seasonal changes in the real estate market might alter the DOM. For instance, homes commonly sell quicker in spring than in winter.
By assessing the average DOM for a certain area, you can figure out if the real estate market is strong (i.e., with a low average DOM) or weak (i.e., with a high average DOM). A weak market typically favors buyers, who may find it less difficult to negotiate a better deal.
Real Estate Owned (REO)
An REO property, short for “Real Estate Owned,” indicates a type of property that a lender owns after the prior owner has failed to sustain with mortgage payments and the property has been foreclosed on. This typically occurs after a foreclosure auction ends with no buyers.
For investors, REO properties can be an attractive investment opportunity since they have the potential to be purchased below market value. However, it is essential to note that these types of sales often come with risks since the property is sold “as-is.” Any necessary repairs or renovations will be the buyer’s responsibility, and financing can be challenging to secure.
FHA 203k rehab loan
The FHA 203k rehab loan is a loan program supported by the federal government. It is intended to allow homebuyers to finance the purchase of a property that requires significant repair or upgrade.
The loan can fund repairs and renovations, including but not limited to structural developments, plumbing and electrical upkeeps, and the putting in of new heating and cooling systems. It can also be utilized to make energy-efficient upgrades to older homes, like installing new windows, doors, and insulation.
The FHA 203k rehab loan can be helpful because it allows buyers to finance the cost of the fixes and improvements into the mortgage, meaning they don’t have to pay for these expenses out of pocket. Also, the loan can be employed to purchase a property needing repair and refinance an existing property.
However, it is vital to highlight that the loan will not be used for “luxury” projects like building a swimming pool or other non-essential amenities. The loan is planned to help homeowners make essential repairs and renovate their homes 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 employ to see how much of your monthly income goes toward paying debts. To figure out your DTI, sum up your monthly mortgage or rent and other debt payments, divide the total by your gross monthly income, and multiply by 100. Lenders can get a sense of how much of your income is already committed to paying off debts and how much mortgage you can afford.
A high DTI can make it difficult to qualify for a loan, so it’s recommended to keep this number low. Mostly, lenders prefer borrowers to spend no more than 28% of their monthly income on housing payments and 36% or less on monthly debt payments. If your DTI is low, you have a greater likelihood of getting a loan or a mortgage.
You need to keep in mind that lenders may have slightly different standards for estimating DTI ratios, depending on the type of loan or mortgage you’re asking for. For illustration, some lenders may allow a higher DTI ratio for borrowers with outstanding credit scores.
If you want to maintain good financial health and have an easier time obtaining financing when you need it, keeping your DTI ratio low is advisable. If you have problems with a high DTI, consider paying down your debts, boosting your income, or obtaining guidance from a financial professional.
Earnest Money Deposit (EMD)
Earnest Money Deposit (EMD) is a deposit a buyer must make when offering a property. It is also referred to as a “good faith deposit.” By providing a deposit, the seller may feel more comfortable accepting the offer after seeing the buyer’s seriousness and eagerness to purchase the property. In general, the amount of EMD provided is between 1% and 5%, but it can change based on the market and the scenario. The EMD is held in escrow and is applied to the purchase price of the home if the deal is successful.
Knowing the meanings of numerous real estate terms is crucial for a rental property owner. If you want to make smart judgments in negotiating with buyers or renters and secure your investments, being abreast of industry development is important. Always keep in mind that information is power in a competitive market.
If you’re interested in making real estate investments in Layton and the surrounding areas, Real Property Management Northern Utah is here to help you achieve financial freedom and generate a passive income. Our professionals can offer competent and friendly assistance on property management and real estate investment problems. Contact us online or call us at 801-546-1770.
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.