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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 important for an owner of rental properties to keep up with the latest real estate terms. Being informed of the shifts taking place in the real estate market can help you secure your investments and grow your portfolio. Astute understanding will help you to make informed decisions when you are dealing with potential buyers or renters. In a competitive market, it is necessary to be familiar with the following six terms. This post will talk about each one in greater detail.



iBuyers are real estate companies that use innovative ways to deliver fast and easy home-selling solutions. They provide an innovative and reliable way of selling residential properties in a matter of days, with minimal effort from the homeowners. In order to make timely, competitive offers based on the present market conditions, iBuyers employ sophisticated procedures to evaluate real estate market data.


The iBuying procedure commonly involves homeowners entering their property details into an iBuyer’s website. After assessing the property, iBuyer makes an instant cash offer within 24-48 hours. If the proposal wins approval, the homeowner can set a closing date and receive payment in a couple of days.


One of the main perks of iBuyers is that they offer an easy selling method, removing the need for staging, open houses, and negotiations. Homeowners can avoid the anxiety of arranging their homes for showings and waiting months to sell their properties.


Days on Market (DOM)

If you’re in the market for a new property, educating yourself with basic real estate terms is a necessity. One such term is “DOM,” which is “days on the market.” This metric monitors the number of days a property has been listed for sale. 


A high DOM can be a warning sign, demonstrating that the property has stood on the market for quite a while without any offers. However, it’s important to point out that seasonal changes in the real estate market could influence the DOM. For instance, homes typically sell faster in spring than in winter. 


By analyzing the average DOM for a particular area, you can identify 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 favors buyers, who may find it easier to negotiate a better deal.


Real Estate Owned (REO)

An REO property, short for “Real Estate Owned,” refers to a type of property that a lender owns after the past owner has failed to carry on with mortgage payments and the property has been foreclosed on. Generally, this occurs when the property does not succeed in selling at a foreclosure auction


Investors may find REO properties appealing investment opportunities because of the possibility of acquiring them for below market value. However, it is important to emphasize that these sales typically have inherent risks since the property is sold “as-is.” The buyer is accountable for paying for any necessary repairs or renovations, and financing can be difficult to come by.


FHA 203k rehab loan

The FHA 203k rehab loan is a loan program backed by the federal government. It is designed to allow homebuyers to finance the purchase of a property that needs significant repair or renovation.


The loan can fund repairs and renovations, including but not limited to structural improvements, plumbing and electrical repairs, and the setting up of new heating and cooling systems. New windows, doors, and insulation are just a few examples of energy-efficient upgrades that can be made to older homes using this money. 


One of the major perks of the FHA 203k rehab loan is that it allows buyers to finance the cost of the repairs and renovations into the mortgage, meaning they don’t need to spend for these expenses out of pocket. What is more, the loan can be used to purchase a property needing repair and refinance an existing property. 


However, it is essential to note that the loan should not be used for “luxury” additions such as building a swimming pool or other non-essential amenities. The loan is created to aid homeowners in making essential repairs and upgrades 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 reveal how much of your monthly income goes toward paying debts. To calculate your DTI, add your monthly mortgage or rent and other debt payments, divide the total by your gross monthly income, and multiply by 100. This computation gives lenders an awareness of how much of your proceeds are already dedicated to paying off debts and how much mortgage you can afford.


A high DTI can make it complicated to qualify for a loan, so it’s best to keep this number low. In most cases, lenders prefer borrowers to spend no more than 28% of their monthly income on housing payments and 36% or less on monthly debt payments. If your DTI is low, you have greater odds of getting a loan or a mortgage.


It’s worth noting that lenders may have slightly varied requirements for assessing DTI ratios, depending on the type of loan or mortgage you’re requesting. For instance, some lenders may allow a higher DTI ratio for borrowers with excellent credit scores.


Regardless, a low DTI ratio is essential for maintaining good financial health and making it easier to obtain financing when necessary. If you find yourself dealing with a high DTI, consider paying down your debts, boosting your revenue, 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 also known as a “good faith deposit.” Sellers may be more likely to accept an offer that includes a deposit since it shows that the buyer is sincere about purchasing the property. Typically, the amount of EMD issued is between 1% and 5%, though this might vary depending on the market and the scenario. The EMD is held in escrow and is applied to the purchase price of the home if the agreement goes through.


As a rental property owner, it is advisable to learn various real estate terms. Staying up to date with the current industry developments can help you make wise choices when negotiating with buyers or renters and protect your investments. Take note that in a competitive market, information is power. 


Real Property Management Southern Utah is ready to assist you with making a passive earning and reaching financial freedom through real estate investments in Santa Clara and the adjacent area. Our team of professionals can provide knowledgeable and friendly advice on property management and real estate investment issues. Contact us online or call us at 435-673-4242.

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