There is a lot of technical terminology in Real Estate. It can be very confusing and overwhelming, especially if you are new to buying or selling a home.
🏘️ Below is a list of some of the most used real estate terms that you may want or need to know along your trek to real estate happiness.
But don’t worry, there won’t be a quiz. 😅
Frequently Asked Real Estate Questions:
What is a BPO? 🤔
A Broker Price Opinion (BPO) in real estate is a professional estimation of a property’s value.
It’s an essential tool used by real estate brokers like me, providing an in-depth analysis of market trends and comparable sales data in a specific area.
This quick and cost-effective report greatly helps financial institutions, investors or property owners make informed decisions regarding potential sales, purchases, or refinancing.
Essentially, a BPO in real estate is a comprehensive snapshot of a property’s worth in the current market.
Banks and lenders who hold REO properties often hire a Realtor to perform a BPO on those properties. It usually is the first step in managing and selling the bank owned home.
Capitalization Rate aka Cap Rate
An equation to estimate the potential return on an investment in the real estate market. Calculated by dividing net annual income by property market value.
Interested in investing in real estate? 
You’ll need to understand cap rates.
A property’s cap rate (or capitalization rate) is an estimate of its rate of return. To find a property’s cap rate, divide the net annual income you expect it to generate by its current market value.
Cap rates are a great tool for comparing properties, but they don’t tell the whole story! You also need to account for financing costs, management expenses, and more.
Are you searching for an investment property that will pay off? We can help! Contact us today for a free consultation.
The term “Principal” in real estate usually refers to the original amount of money invested or borrowed, excluding any interest or dividends.
In real estate, the term “Principal” refers to the original amount of money borrowed in a mortgage before interest is applied. It is the base amount upon which the lender calculates the interest for the loan. The principal is typically repaid over the term of the loan through a series of scheduled payments, gradually reducing the outstanding debt. When a borrower makes a mortgage payment, it typically includes an allocation for both principal and interest.
Alternatively, the term “Principal” refers to the main party involved in a transaction, which could be the buyer, seller, landlord, or tenant. In a brokerage agreement, the principal is the individual who has authorized the real estate agent or broker to act on their behalf in a transaction. This can include the selling, buying, or leasing of a property. The principal entrusts the agent or broker with certain responsibilities and makes the ultimate decision in the transaction. The term can also refer to the amount of money that is originally borrowed in a mortgage loan, excluding interest or additional fees.
What does REO stand for in real estate and what does it mean? 🤔
REO stands for Real Estate Owned. Apparently banks are not very creative. 😁
An REO, known in full as Real Estate Owned, is a class of property owned by a lender—typically a bank, government agency, or government loan insurer—after an unsuccessful sale at a foreclosure auction.
This situation occurs when a homeowner defaults (can’t or won’t pay) on their mortgage payments, leading the lender to initiate a foreclosure, which is a legal process that allows them to sell the home and recover as much of the outstanding loan balance as possible.
Upon default, the bank or lender will attempt to sell the property at a foreclosure auction, if the auction does not result in a sale—usually because the minimum bid is not met— the property is tagged as REO.
The lender now takes full control of the property. Post-foreclosure, the lender is responsible for the maintenance of the property and any necessary repairs. The lender will also cover any tax liens, evicting occupants if necessary, and settle homeowner’s association dues.
As the property is now actually costing the lender, they will often list the property for sale in an effort to recoup their investment.
The bank or lender often hires a Real Estate Agent that specializes in dealing with and selling REO properties.
REOs typically present opportunities for investors or home buyers who are in search of discounted homes and are not averse to repairs or renovations, as these properties are often sold “as is”.
A townhouse is a type of housing where several people own separate units in a larger building or complex. Each unit is owned by an individual.
A townhouse is a type of residential dwelling, typically multistoried, characterized by its shared walls with adjacent homes in the series. This form of housing offers a blend of the features found in detached single-family homes and condominiums. Like a single-family home, a townhouse owner typically owns the land the house stands on, whereas, like a condo, it offers close community living often with shared amenities such as swimming pools or gyms. It appeals to those desiring a home with less maintenance, enhanced security, and a sense of community, while still providing the ownership perks of land and building. The architectural design of townhouses often leans toward urban aesthetics, making them common choices in densely-populated areas.
