So, you want to buy or sell a house, or become a rental property investor? That's great to hear!
There's some industry lingo that you need to learn first. Real estate is full of jargon - with terms like PITI, HOAs, HELOCs, and PMI confusing to both buyers and sellers - and it can make an already confusing process even more complicated.
We created this guide to help you learn the vocabulary.
Real Estate Terms to Know
Be sure you have these definitions down memorized before making your first property purchase. This way, nothing can catch you by surprise.
This term describes a tenant's conduct when it appears as though he intends to forfeit his right to live in the property. Here is a good example: the tenant hires movers, removes his personal property from the home. No one has seen him in weeks.
These are both intangible and tangible features that enhance the desirability or value of the property. Things like a pool, free wifi, or good schools nearby.
This is another name for the security deposit. At the end of the tenancy, you need to return the bond in full. Unless, of course, the tenant is behind in his rent or has damaged the property.
This is similar to a Realtor. A broker is a licensed individual who purchases and sells properties for other people so that he can make a commission.
This means that through a landlord's actions (or lack thereof) a tenant has to vacate the property because it has become unfit to live in.
This means that a home adheres to the current market rates and standards of housing in its area.
This is what you call the second person to sign a mortgage or a lease. The co-signer verifies the identity of the first signer and also provides an extra level of certainty to the document, as they can also be responsible for it.
Driving for Dollars
This is a term investors use to describe the process of finding motivated sellers on vacant or distressed off-market properties. You drive around an area looking for distressed or vacant properties (based on the exterior condition of the home), and then try to connect with homeowners to see if they want to sell to you. Some real estate apps, like DealMachine, automate the process to make things easier for you.
Eviction is a court-based process through which a landlord may remove a tenant from rental property; however, only with a good cause and after due process.
The broker sets up this “safety” account during the property transfer process. Essentially, it keeps the money from the buyer safe until it is readyto be presented to the seller. By asking the buyer to place money in escrow, the seller can be sure the money is available.
Fair Housing Act
This Federal law stops discrimination in housing on the basis of race, age, color, handicap, sex, religion, national origin, and familial status.
A fixture is something the tenant installs in the rental property that cannot be removed when he leaves. An example could be a backyard deck or built-in cabinets. Sometimes, a landlord might agree to compensate the tenant when he moves out.
A lease is the written agreement between the landlord and the tenant. It grants the tenant the right to live in the landlord's unit for a specific amount of time in exchange for a specific amount of money.
A lease option is when a tenant has the option to buy the property he is currently leasing. This can happen when his original lease expires or at another time during the lease.
Property Management Agreement
This is the agreement between the landlord and the company that looks after his properties for him. It should detail the specifics of how to manage the property and all the fees involved.
You will typically find rent-controlled buildings in urban areas. Rent-control laws restrict how much rent landlords can charge their tenants. However, most laws do allow for annual rent increases, usually about 2.5% to 3%.
Rent to Own
Similar to a lease option, a rent to own property allows the tenant to have access to the option to purchase the property he is currently renting.
Right of Entry
This is the name for how often a landlord can be permitted to enter the property. There are three situations in which landlords can have the right of entry: emergencies, to show the unit to a prospective tenant, or make repairs. In most cases, advanced notice it also required.
This is when a tenant leases his unit to another tenant. This sometimes occurs when a tenant will be traveling for an extended period of time, like a college student who is away on summer vacation.
Landlords do not have to allow their tenants to sublet the space. Landlords should always note whether or not tenants can facilitate subleases in the original contract. If a tenant can sublet, he is still responsible for the terms of his original lease while he is away from the unit.
A tenant is the person who can live in a landlord's unit for a specific amount of time. He can only also live there for a specific amount of money. These terms are always set out in the original lease.
This is a clause in the lease that says whether or not a tenant can make improvements to the property while he rents it. It should explain exactly what kinds of improvements are allowed and if the tenant will be compensated for them.
Term of the Lease
These are the particulars of the lease. They state how long the lease will last (i.e. is it a month-to-month lease or fixed term) and things like if the tenant is allowed to sublet, etc.
Warranty of Habitability
This is a landlord's legal responsibility to prove a safe place for the tenant to live. Landlords must ensure that their units are fit for humans to live in them.
This means that they need to monitor the basic living conditions and see to timely repairs. In warmer climates, this could mean responding right away if the AC goes out. In places like North Dakota or Nebraska, it could mean being available ASAP if the pipes freeze.
Ready to have a Realtor walk you through these terms and more? The helpful agents at Clever are ready to walk you through the investment process. Call us today at 1-833-2-CLEVER or fill out our online form to get started.