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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. It is vital to stay updated on the latest real estate terms as an owner of rental properties. The real estate market is undergoing significant changes, and being aware of these changes can help you safeguard your investments and grow your portfolio. Astute familiarity will help you make informed decisions when negotiating with potential buyers or renters. In a competitive market, it is vital to be familiar with the following six terms. Let’s take a closer look at each one.



iBuyers are real estate companies that employ technology to deliver fast and uncomplicated home-selling solutions. They provide an innovative and reliable way of selling residential properties within a few days, with little effort from the homeowners. iBuyers utilize advanced algorithms to evaluate real estate market data, which enables them to make immediate and competitive offers that depend on the latest market conditions.


The iBuying process normally begins with homeowners uploading their property details to an iBuyer’s website. The iBuyer then assesses the property and makes an instant cash offer within 24-48 hours. If the offer gets approved, the homeowner will be able to schedule a closing date and receive money within a matter of days.


One of the major benefits of iBuyers is that they provide a simple selling procedure, removing the necessity for staging, open houses, and negotiations. Homeowners can avoid the stress of arranging their homes for showings and waiting months to sell their properties.


Days on Market (DOM)

Knowing crucial real estate terms is important when you’re looking for a new property. One example is “DOM,” which is “days on the market.” This metric indicates the number of days a property has been listed for sale. 


A high DOM can be a warning sign that the property has been on the market for a long period without any proposals. However, it’s vital to keep in mind that seasonal changes in the real estate market might have an impact on the DOM. For example, homes often sell quicker in spring than in the winter. 


By evaluating the average DOM for a particular region, you can decide whether 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 often benefits purchasers, who may be able 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 previous owner has been unable to make mortgage payments and the property was foreclosed on. This usually occurs when the property fails to sell at a foreclosure auction


For investors, REO properties can be an appealing investment opportunity because they are possible to buy below market value. However, it is critical to highlight that these types of sales can involve risks because the property is sold “as-is.” Any necessary repairs or renovations will be the buyer’s burden, and financing can be difficult to get.


FHA 203k rehab loan

The FHA 203k rehab loan is a federal government-backed financing program. It was created to enable homebuyers to finance the purchase of a property that requires extensive repair or renovation.


The loan can fund repairs and renovations, including but not limited to structural improvements, plumbing and electrical repairs, and the installation of new heating and cooling systems. It can also be used to make energy-efficient upgrades to older homes, such as installing new windows, doors, and insulation. 


One of the important perks of the FHA 203k rehab loan is that it allows buyers to finance the cost of the repairs and upgrades into the mortgage, eliminating the need for these expenses to be paid out of pocket. The loan can also be utilized to purchase a property needing repair and refinance an existing property. 


However, it is advisable to clarify that the loan will not be used for “luxury” improvements such as building a swimming pool or other non-essential amenities. The loan is intended to aid homeowners in making necessary repairs and modifications to their homes so they can live safely and comfortably in their properties. 


Debt to Income (DTI)

The DTI, or debt-to-income ratio, is a financial metric that lenders use to assess how much of your monthly income goes toward paying debts. DTI is calculated by adding your monthly mortgage or rent and other debt payments, dividing the total by your gross monthly income, and multiplying by 100. This assessment informs lenders about how much of your earnings are already devoted to paying off debts and how much mortgage you can manage.


A high DTI can make it difficult to qualify for a loan, so it’s critical that you maintain this number as low as possible. Lenders typically request that borrowers spend no more than 28% of their monthly income on housing payments and 36% or less on monthly debt payments. The lower your DTI, the better your chances of getting a loan or a mortgage.


It’s necessary to bear in mind that lenders may have somewhat distinct criteria for considering DTI ratios, depending on the kind of loan or mortgage you’re looking for. For illustration, some lenders may allow a higher DTI ratio for borrowers with outstanding credit scores.


In any event, keeping your DTI ratio low is vital for maintaining good financial health and making it quicker to obtain financing when requested. If you have a high DTI, you should consider cutting down your debts, boosting 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 often referred to as a “good faith deposit.” This deposit demonstrates the buyer’s earnestness and desire to purchase the property, which may persuade the seller to accept the offer. The amount of EMD supplied is typically between 1% and 5%, but this can vary depending on the market and the situation. The EMD is held in escrow and is applied to the purchase price of the home if the agreement goes through.


It is critical for rental property owners to know different real estate terms. Staying current on industry developments can help you make informed judgments when negotiating with buyers or renters and protect your investments. Keep in mind that in a competitive market, knowledge is power. 

Real Property Management Richmond Metro is ready to help you generate passive earnings and achieve financial independence through real estate investments in Henrico County and the areas nearby. Our property management and real estate investing professionals can provide competent and personable assistance. Contact us online or call us at 804-823-8882.

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