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Essential Real Estate Terms to Know in a Competitive Market

Closeup of investor working at a laptop researching real estate terms. Being knowledgeable about the latest real estate terms is essential for an owner of rental properties. The real estate market is experiencing significant changes, and staying updated on these dynamic changes can protect your investments and grow your portfolio. When you are dealing with potential buyers or renters, keen awareness will help you make informed decisions. In a competitive market, it is essential to have a comprehensive understanding of the following six terms. Let’s review each one more closely.



iBuyers are real estate companies that use technology to provide rapid and straightforward home-selling solutions. They offer an innovative and reliable way of selling residential properties in a matter of days, requiring only light effort from the homeowners. iBuyers utilize advanced algorithms to look at real estate market data, enabling them to generate immediate and competitive offers that are based on today’s market conditions.


Typically, the iBuying process commences when homeowners input their property details onto the iBuyer’s website. The iBuyer then assesses the property and provides an instant cash offer within 24-48 hours. Once the offer is accepted, the homeowner can set a closing date and receive the funds in a matter of days.


One of the key benefits of iBuyers is their ability to supply a simplified selling procedure, eliminating the requirement for staging, open houses, and negotiations. Homeowners have the ability to avoid the frustration of getting their homes ready for showings and waiting months to sell their properties.


Days on Market (DOM)

Understanding key real estate terms is important when searching for a new property. One such word is “DOM,” which is “days on the market.” This metric displays the number of days a property has been listed for sale. 


A high DOM could potentially indicate a problem, implying that the property has been sitting on the market for an extended period without any bids. However, seasonal changes in the real estate market might affect the DOM. For example, houses often sell faster in spring than in winter. 


By evaluating the average DOM for a specific location, you can determine if the real estate market is performing positively (i.e., with a low average DOM) or negatively (i.e., with a high average DOM). Buyers often benefit from a weak market as it can make it easier for them to negotiate a better deal.


Real Estate Owned (REO)

An REO property, short for “Real Estate Owned,” is a type of property that a lender owns after the prior owner fails to meet their mortgage payments and the property undergoes foreclosure. Usually, this happens when the property does not sell at a foreclosure auction


For investors, REO properties can be an appealing investment opportunity due to their availability for purchase at below-market value. Yet, it is important to consider that such agreements often come with risks because the property is sold “as-is.” Any necessary repairs or renovations will be the buyer’s accountability, and financing can be hard to get.


FHA 203k rehab loan

The FHA 203k rehab loan is a loan program assisted by the federal government. It is intended to help homebuyers to finance the purchase of a property that needs substantial repair or renovation.


The loan can fund repairs and renovations, such as building improvements, plumbing and electrical fixes, and the installation of new heating and cooling systems. Furthermore, it has the capability to implement energy-efficient upgrades to old houses, such as installing new windows, doors, and insulation. 


One of the primary advantages of the FHA 203k rehab loan is that it allows buyers to finance the cost of the repairs and renovations into the mortgage, eliminating the need to cover these costs directly. In addition, the loan can be used to purchase a property needing repair and refinance a property that already exists. 


However, it is important to highlight that the loan cannot be utilized for “luxurious” improvements like constructing a swimming pool or other non-essential amenities. The purpose of the loan was to assist homeowners in carrying out necessary repairs and upgrades to their homes so they could live safely and comfortably in their properties. 


Debt to Income (DTI)

The DTI, or debt-to-income ratio, is a financial metric utilized by lenders to estimate the share of your monthly income that is allocated to paying debts. The DTI is calculated by summing up your monthly mortgage or rent and other debt payments, dividing the total by your gross monthly income, and multiplying by 100. The outcome of this calculation provides lenders with an idea of how much of your income is currently allocated to paying off debts and how much mortgage you can manage.


Maintaining a low DTI is crucial as it may cause difficulties with qualifying for a loan approval. Most of the time, lenders prefer borrowers to spend no more than 28% of their monthly income on housing payments and 36% or less on monthly debt payments. The smaller your DTI, the more possibility you will be approved for a loan or a mortgage.


You have to take into account that lenders may have slightly different standards for evaluating DTI ratios based on the sort of loan or mortgage you’re requesting. As an illustration, certain lenders might permit a higher DTI percentage for borrowers with excellent credit scores.


Despite this, it’s crucial to keep your DTI ratio low in order to maintain good financial health and make it easier to obtain financing when vital. If you find yourself battling a high DTI, think about cutting down your debts, enhancing your income, or getting advice 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 referred to as a “good faith deposit.” This deposit shows the buyer’s dedication and readiness to purchase the property, potentially impacting the seller’s decision to accept the offer. Typically, the amount of EMD provided falls within the range of 1% to 5%, although it may differ depending on market conditions and circumstances. If the deal is approved, the EMD is held in escrow and applied to the purchase price of the home.


As a rental property owner, you must be familiar with various real estate terms. Keeping yourself informed about the latest developments in the industry will enable you to make prudent choices when negotiating with buyers or renters and safeguard your investments. Always remember that in a competitive market, having information gives you an edge. 


Real Property Management Regions is ready to help you generate a passive income and attain financial independence through real estate investments in Caroline County and the surrounding areas. Our team of experts is available to offer knowledgeable and amiable support regarding property management and real estate investment matters. Contact us online or call us at 804-491-3348.

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