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From slang to industry terms to abbreviations...
AAI - Housing Affordability Index
AIREO – Association of Independent Real Estate Owners
ALT-A - Alternative-A mortgage is sector just above subprime
ASHI – American Society of Home Inspectors
BATNA - Best Alternative to a Negotiated Agreement
BOMA – Building Owners and Managers Association
BPO - Broker Price Opinion (Report by broker outlining the value of a property. Usually on REOs or foreclosed properties)
CC&R - covenants, conditions & restrictions (CC&Rs)
CDO - Collateralized Debt Obligation
CLTV - Combined loan-to-value ratio
CMA - Comparable Market Analysis
Comps - Comparables
COFI - cost of funds index
CPI - Consumer Price Index
CRE Commercial Real Estate
DPA - downpayment assistance programs
DPI - Disposable Personal Income
DSCR - Debt Service Coverage Ratio
ETR - equalized tax rates
FDIC – Federal Deposit Insurance Corporation
FHA - Federal Housing Authority
FHLMC – Federal Home Loan Mortgage Corporation
FNMA – Federal National Mortgage Association or Freddie Mac (used to be a government run association but is now a private corporation)
GOI - Gross operating income
GSE - government sponsored enterprises ( include Fannie Mae and Freddie Mac)
GRM - gross rent multiplier
HELOC - Home Equity Line of Credit
H.O.A - Home Owners Association (usually refering to HOA fees)
JCHS - Joint Center for Housing Studies
LIBOR - London Interbank Offered Rate (interest rate at which banks borrow money)
LIS - suit pending in latin (lis pendens)
LLC – Limited Liability Company
LTV - loan to value ratio
MAI – Member of Appraisal Institute
MBA - Mortgage Bankers Association
MBS - Mortgage-backed securities
MI - Mortgage insurance
MEW - Mortgage equity withdrawal
MSA - Metropolitan Statistical Area
NAHB - National Association of Home Builders
NAR - National Association of Realtors
NINA - No Income, No Assets (these loans were the downfall of the real estate market crash in 2003-2006; they are often called liar loans, where they're essentially asking the person to lie)
NNN - Triple Net Lease (Pays taxes, insurance, and maintenance--along with rent.)
NOD - Notice of Default
NOO - Non Owner Occupant
OFHEO - Office of Federal Housing Enterprise Oversight
OO - Owner Occupant
OPM – Other People’s Money
PITI – monthly principal, interest, taxes, and insurance payments)
PHA - Public Housing Authorities
PMI - Private Mortgage Insurance
REIT - Real Estate Investment Trust (like a mutual fund of real estate related companies - pay out dividends---usually 95% of the earnings are distributed)
REO - Real Estate Owned (After a property has foreclosed)
REX - Real Estate Equity Exchange
SA - Seasonally Adjusted
SAAR - Seasonally Adjusted Annual Rate
SAM - lender pays downpayment and offers refiancing option to buy after period of time; lender and buyer split appreciation of property over the holding period
SAAR - seasonal adjusted annual rate
SEV - State Equalized Value
SRA – Senior Residential Appraiser
SRO - Single room occupancy
TIC - Tenancy in Common
T.A.R.P. - Troubled Asset Relief Program, the $700 billion financial bailout bill
HUD - housing of urban development
VA - Veterans Administration
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z (coming soon - definitions broken down by each letter)
Additional Living Expense Insurance – coverage for a homeowner or renter to pay for costs associated with being displaced from your residence do to a fire for example – covering hotel and food costs while your not living in the residence
Adjusted Funds From Operations – AFFO - way to measure cash flow from REITs, it's usually funds from operations minus maintenance and any money spent to add value to the property (capital expenditures)
Adjustment Frequency – how often the interest rate on an ARM are adjusted. Could be once a year, once a month, or even longer; depends upon the loans stipulations
Alienation Clause - an acceleration clause where the entire loan must be paid off if the title of the mortgaged property is transferred
Alligator Property - When a property is not cash flowing since mortgage payments, taxes, insurance, and maintenance of the rental property is more than the income of the property one way to avoid this is to put a larger down payment on the property
Alt-A - risk profile of a mortgage between prime and subprime; have good credit history but might have a LTV ratio that's unfavorable to the lender or don't have clear documentation of their income
Alternative Documentation (Alt Doc) – loan approval process where the lender doesn’t require approval from a third party or the loan seeker’s employer; will accept tax returns or pay stubs; sometimes used for those without a long credit history
Accelerated Payments – making additional payments on your mortgage to reduce the principal and reduce the amount of interest you’ll be paying
Amortized loan – paying off principal and interest over the course of a loan in equal payments
Annual Mortgage Statement – year end report showing the amount of interest and principal paid – form 1098 for tax returns
Alternative Mortgage Instrument – loans that become popular in the 1980s when interest rates were high, these are loans like ARMs, no interest loans, no down payments, option arm, hybrid arm – all unique types of loans that were created to help those in the middle class get into homes
Amortization Schedule – the breakdown of payments on a loan, from the money that goes to the principal to the money that goes towards interest over a period of time
Apportionment – determining the value of a property, the land and the property itself
Arbitrage - taking advantage of small price differences on interest; assumable loan offered to a borrower for a higher interest rate
Arrearage - past due payment; leniancy is often given by the bank or the mortgage company for a period of time, where they lower the loan payment; offering a period of grace and this money is then re-paid when you sell your house or added to the monthly payment after a set length of grace
Assumable Loan - mortgage loan where the buyer takes on the existing mortgage of the owner of the property without any changes in terms; loans without Due-On-Sale Clauses, including most FHA and VA mortgages, are usually assumable
Assumptions - when a buyer takes over a seller's mortgage since rates are at a high rate or the buyer can't get a mortgage rate better than what the seller has
Back-end ratio – monthly income plus other debts (credit cards) divided by per month loan cost
Bid chilling – paying people not to bid in a foreclosure auction is illegal
Binder - preliminary agreement for property or even insurance
Blended rate loan – taking over a loan that’s just below market rate
Blind pool – money put up by a group of partners to buy property that’s not selected yet
Boot - taxable difference in a 1031 exchange
Bird Dogging -
finding potential real estate investment opportunities for investors; bring the deals to investors for a fee
Buyer’s agent – agent who works exclusively for you the buyer and not in the interests of the seller
Capital gain – profit realized on the sale of assets like stocks or real estate
Carry paper – seller financing
Case-Shiller Home Price Indices - measures the change in home prices
Cash for keys - banks paying off tenants to move out when a house is going to foreclose
Commercial paper - an IOU where there’s no capital backing up this loan, it’s only an agreement that this will be paid back with a certain interest rate; it's a short terms loan, sometimes even over night
Comparable Market Analysis -looking at the prices for property sold in the area where you want to buy property; the fresher the data the better and the property must be close to equal in terms of size, quality, amenities and features
Conforming loan - mortgage that conforms to the standards of the industry; usually less than $417,000
Covenants - rules stipulated by communities guiding what can be built in a neighborhood; used to maintain the character of a neighborhood - say you can only build this type of fence in your yard or use this type of material on your roof
Dealers – buy and sell property, also called brokers; hierarchy of real estate where you have agents and then brokers
Deficiency judgment – court judgment to pay difference between what is owed when your property forecloses
Due-on-sale clause (alienation clause) – if a property is sold then the entire loan must be paid; not assumable
Earnest money - payment in advance to hold a property or ensure an agreement
Fixer-upper - home they can be remodeled and sold at a higher rate
Flippers – property you plan on selling as soon as possible; once you’ve made repairs or enhanced the property
Forbearance - when a creditor or lender gives you a grace period; allowing a debt to go unpaid for a period of time
Front-end ratio – monthly income divided by per month loan cost
Gentrification – improvement of property by an affluent class and the pushing out of lower income groups as the property value increases and rents are raised; sections of a city that have become desirable
Hard money loan – where cash is loaned out
Housing Choice Voucher Program - (Section 8) federal assistance from HUD for low income families
Illiquidity – take times to sell a property and turn it into cash – faster the sale time the more liquid the asset or property
Installment sales – for taxes purposes, when you spread out the profit from a property sale over a number of years
Judicial foreclosures - states that use judicial foreclosure and require court notification
Keepers – property you plan on holding for the long term
Limited partner – an inactive partner who only contributes money
Liar loans - stated income loan where the lender takes the borrowers word on their income rather than looking at W-2 forms or income tax returns (also called no doc loans or no documentation loans)
Lis pendens - action pending against the mortgage holder which notifys the public of the foreclosure
Lookie loo - people who are just browsing and not seriously looking for property but go to open houses
McMansion – a house that has been built rather quickly, cheaply, in a copy cat style, and in an excessive way; a home that’s exceedingly large for a small family and in actuality more expensive to heat and cool; the name is a play on McDonald’s, which too has come under fire for its fast food and ubiquitous restaurants
Millage - rate of tax on a property; mills per dollar of value of the property
Ninja loans – no income, no job and no assets
Moratorium – not having to make loan or interest payments for a period of time
Negative amortization – amount you owe increases; payments are too low and interest increase the size of the total principal owed
Non-conforming loans - doesn't meet the guidelines of the industry standard and is often called a jumbo loan
Non-judicial foreclosures - states that use deeds of trust and
contain the power of sale clause and don't require court action
Novation – assuming a loan, asking the lender if you can take of a loan; that way you don’t incur loan cost and it’s faster than refinancing
Off plan property - buying a house or property before it's built; at the blue print stage
Old and Cold Rule - IRS not questioning the change from an investment property to a residence if you've lived there for two years
Pied-a-terre - secondary or temporary place of lodging
Pick-A-Pay loans - loans that allow borrowers to pay less than the full monthly interest payment
Points - fees the borrower pays the lender at the time of the loan and is usually a percentage of the loan total
Pre-approved - means that you already have a mortgage from a lender in place - the underwriting hasn't been done buy initial qualification is there
Prepayment penalty – many loans have an agreement for a long term payment plan, where interest accrues, often lenders will require a payment penalty if you want to pay off the loan or make larger payments
Pro forma statement - projected earnings and numbers or commitment to pay at such and such terms
Purchase money loan – where the seller of the property loans the buyer the money
Pyramiding – using cash from the refinancing of other properties to purchase more properties,
Real Estate Broker - intermediary between buyers and sellers
Reserve price – in an auction, the reserve price is the price the owner can’t sell below, and this is often set by the lender or bank
REX Agreement - cash advance payment of 12 to 17 percent of a home's current value, in exchange, REX gets half of the increase in value of the house when it is eventually sold
Rollover loan – loan that’s fixed for a period of time and then usually becomes an adjustable rate mortgage
Scheduled rents - current rental rates for the property
Spec house - a home built without a set buyer; building a house on a speculative basis - thinking you'll be able to find a buyer; not a customized house
Snowbird - a person who lives in a warm climate during the winter; say an elderly person moving to Florida during the winter
Starker Exchange - when a 1031 exchange is delayed
Stickiness - when you're selling a property and no one is buying it at the price you've set, you instead take it off the market rather than sell (you haven't lost your job or you're not forced to sell)
Straight or term loan – just paying off the interest on a loan; have set dates where total loan is due
Sub-prime lenders – lenders who loan money to those with poor credit, usually interest rates are much higher and the loans themselves riskier—ARMs and associated balloon payments
Sweat equity – doing repairs and improvements instead of making a down payment
Sweetener – a cash payment to help induce the owner to sell you to
Syndication – group of partners, usually these are limited partners managed by a general partner
Take-subject-to loan – taking over the payments of a loan but not responsible for deficiency judgment if the property forecloses
Trading On Equity – taking advantage of good financing to parlay one property into another
Triple Net Lease – paying taxes, insurance, and other costs
Unamortized loan – loans that included balloon payments
Underwater - owing more than a property is worth
Upside down - when you owe more on a loan than the property is worth
Wraparound loan – loan that covers the equity of the seller and then the remaining portion of the cost of the property is included
Laws, Codes, Acts
Americans with Disabilities Act – the requirement of commercial properties to be accessible by the handicapped
1986 Tax Reform Act
2003 Tax Relief Act
Homeowners Protection Act of 1998 - Requires that lenders to disclose certain concerns over PMI. Borrowers can call for a cancellation of PMI when the property owner has paid 80% of the purchase price.
Garn-St. Germain Depository Institution Act of 1982 – enforced due on sale clauses
Real Estate Settlement Procedures Act – had to do with the commission paid by the lender to a real estate broker if they refer a buyer to lender; broker must disclose affiliation with lenders
FHA Section 2031(k) loan
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