Real Estate Wholesaling Terms

After Repair Value (ARV)

(AKA 're-sale value') is the estimated value of the property after renovations are made to the property. The after repair value is calculated based upon comparable sales nearby the subject property.

Buying Costs

Buying costs are costs associated with buying real estate, such as brokerage fees, title work, inspection costs & lending fees.

Closing Costs

Closing costs are costs the buyer or seller must pay at the time of closing

Asking Price

The initial selling price of a property, that the seller is asking for the property.

Counter Offer

When the seller counters an offer, the seller can change the price, dates, contingencies (conditions), or many other terms of the purchase agreement.

FHA (Federal Housing Administration)

a US agency that offers mortgage insurance for federally qualified lenders.

​REO

a commonly used acronym that stands for Real Estate Owned. REO properties are properties that are owned by a bank or lender that were generally acquired through the foreclosure process.

Brokerage

a company or firm that manages a group of real estate agents.

Title Company

a company that performs a title search and provides title insurance for a property. Title Companies also provide closing and escrow services for real estate transactions.

Contract Contingency

a condition put on a offer to buy a home

Lease

a contractual agreement between the Lessor (landlord) and the Lessee (tenant) to rent a property for a specified amount of months or years.

MLS (Multiple Listing Service)

a data service provided by a group of cooperating Real Estate Brokers that hosts & lists real estate properties for sale in a consolidated online database. The participating Real Estate Brokers share this information in a common local/regional MLS system, which is then provided to consumers on the broker's websites.

HUD Home

a foreclosed property that is owned and being sold by Federal Housing & Urban Development (HUD).

Transactional Funding

a form of Short-Term funding in which a wholesaler uses the funding to purchase of a wholesale deal, and wholesale the property to an end buyer, usually within 3 to 7 days.

Crowd Funding Lender

a lender that funds real estate deals by crowd sourcing funding from a large group of investors.

Hard Money Lender

a lender that provides short term (6 to 12 month), interest-only financing for fix-and-flip projects, with relatively high interest rates (10 to 15%)

Tax Lien

a lien imposed on a property to secure the payment of taxes. A Tax Lien can be placed on a property if a homeowner fails to pay their personal property taxes or income taxes.

FHA Loan

a loan that is provided by federally qualified lenders and insured by the Federal Housing Administration. Since FHA loans are federally insured by the FHA, it allows lenders to provide less stringent and more flexible qualification requirements, including down payments as little as 3.5%. An FHA 203k loan can be utilized to finance both the purchase and the repairs of the property

Fixed Rate Loan

a loan where the interest rate is fixed & does not change or fluctuate over the life of the loan. This allows a borrower to accurately predict future loan payments.

Amortized Loan

a loan with scheduled periodic payments that include principal and interest payments. Most Short-Term Flip Loans are Interest Only, while Long-Term Buy-And-Hold Loans are Amortized over time.

Radon

a naturally occurring radioactive gas that comes from the ground that can can cause cancer. Radon can only be detected by testing and can be mitigate by installing a radon mitigation system. Radon mitigation systems generally costs around $750 to $1,000 to install.

Private Money Lender

a non-institutional individual or company that lends money for purchasing real estate. A Private Money Lender can be a family-member, friend, colleague or local passive investor that has money to invest in your rehab projects

Warranty

a one-year service agreement that is provided by a third-party service company to repair or replace any major home system components or appliances. Generally, a Home Warranty will cost around $400 to $500 for one year coverage.

Lender

a person or entity that provides funding for your flip project

Title Insurance

a policy that protects you in case the seller doesn't have full deed and authority to the property.

HOA (Home Owner's Association)

a private association formed by a neighborhood, subdivision or condominium that creates and enforces rules (covenants) for the association. HOA's will also manage/maintain common areas, pool facilities, landscaping, utilities, trash collection, etc for the association.

Short Sale

a sale of a property in which the net proceeds of the sale will fall short of the balance owed on the property. In a Short Sale, the lender allows a homeowner to sell the property for less than the amount that is owed to the lender.

Assignment

a sales transaction with the original buyer of the property ("the assignor") allows another buyer ("the assignee") to take over the buying rights to purchase the property.

Double Closing

a strategy used by wholesalers to purchase and sell property for a quick profit. The wholesaler purchases a property from a seller at a discounted price and then resells the property to a buyer for a small profit. It is called a double closing because the wholesaler participates in two closings (the purchase & the sale).

OPM (Other People's Money)

a term commonly used to describe the strategy to utilized other people's money to fund your rehab projects, which will decrease your risk and increase your ROI.

Mortgage

a type of loan used to purchase real estate with the real estate itself being the collateral for the loan. The mortgagee (the borrower) is required to make monthly payments, with principal and interest until the borrower eventually pays off the loan balance. If the borrower stops making payments, the lender can foreclose and take possession of the property.

Selling Costs

are costs associated with selling real estate, such as realtor commissions, seller assisted closing costs & home warranties. Generally, selling costs on a typical rehab project will be around 7 to 10% of the After Repair Value.

Financing Costs

are costs incurred for utilizing outside funding to fund your flip project. A typical lender will charge financing a loan origination fee/points upfront to originate the loan and process the paperwork of 2 to 3%. The lender will also charge monthly interest for the length of the loan period

Recording Fees

are fees that are charged by your local County Recorder's Office for registering and filing the property purchase or sale records at a matter of public record. Recording fees are generally only $50 to $100.

Utilities

are holding costs that you will incur when you are rehabbing a property or holding a property long-term that include public services such as electric utilities, gas utilities, water supply/waste water services.

Homeowner's Insurance

protects against damage to your property, content's of your property, as well as liability for accident's that may happen on your property. Lender's will require that you insure your home in order to protect your and their investment in the property.

Pending Status

status of a property once an offer has been accepted on a property, and the seller no longer wants to accept back-up offers.

Property Taxes

tax assessed on real estate by the local government, which is usually based upon a property's assessed value. Generally, your property's tax amount can be found by searching the local county assessors website.

Loan Term

the amount of time a borrower makes payments on loan. A loan can be a Short-Term Loan ranging from only 6 to 12 months or be a long term loan from 10 years up to 30 years.

Underwriting and origination fees

the charge associated with evaluating, verifying and processing the loan application. These can be negotiated.

Credit Report Fees

the charge for pulling your credit history and scores.

Document Prep Fee

the cost associated with prepping your loan documents for processing. Not a required fee, and can often be negotiated or eliminated

Survey Fee

the cost for verifying a home's definitive property lines.

Maximum Purchase Price

the maximum price you can offer for a flip property to earn your desired profit. The Maximum Purchase Price is calculated as follows: MPP = After Repair Value - Repairs - Buying Costs - Holding Costs - Selling Costs - Financing Costs - Profit

Principal

the portion of a mortgage payment that is used to pay-off the loan balance.

Appraisal

the practice of determining the value of real property.

Pre-Qualification

the process of getting pre-qualified for a loan by submitting proof of income, assets and liabilities to your lender.

Survey

the process of measuring/laying-out property boundaries, easements and encroachments for a parcel of land as described in a deed.

Amortization

the process of paying off debt in regular installments over a period of time typically with a mortgage.

Staging

the process of preparing a property to sell by 'staging' the property with furniture and furnishings to make the property as appealing as possible to potential buyers.

Appraisal Fee

the professional estimate of the home's value.

Total Investment

the total investment needed to fund the project which includes the purchase costs, fixed costs, & repair costs.

Points

Loan points are fees paid to the lender upfront at closing

Discount Points

Paid at the time of the deal, discount points lower the interest rate on your mortgage.

Types of Buying Costs

Real Estate Agent Commission, Property Taxes, Homeowner and Hazard Insurance, Private Mortgage Insurance, and Utilities

Realtor

Realtors include real estate agents for residential and commercial properties, as well as salespeople, property managers & appraisers.

Buyer's Agent

The Buyer's Agent is a real estate agent that is contractually obligated to help a buyer find a house to purchase.

Escrow

Funds for a real estate transaction are 'held in escrow' in which a third-party, generally a Title Company receives and distributes the funds of the transaction.

Under Contract

A property is under contract when a buyer and a seller accept a contract for the property.

Listing

A real estate listing is a home that is 'listed' on the MLS (Multiple Listing Service).

Types of Closing Costs

Appraisal fee, Survey fee, Underwriting and origination fees, Document prep fee, Discount points mortgage, Credit report fee, Title insurance, Recording fees

SFR

Single Family Residence

Backup Status

Status of a property that is currently under contract, but is allowing backup offers to be submitted. Backup status is used when the listing agent has reason to believe the current escrow may fall through for any number of reasons.

Title Search

an examination of public records performed by a Title Company to determine and confirm a property's legal ownership, and check for any outstanding debts, liens, or judgements against the property.

Tenant

an individual or entity that leases a property from a property owner.

Bird Dog

an individual that spends their time locating properties with investment potential

70% Rule

an investor should pay 70 percent of the ARV of a property minus the repairs needed.

Septic System

an on-site waste water treatment system that are utilized in areas that do not have public wastewater treatments drainage systems.

Disclosures

any material facts or defects that a Seller must disclose on a document called the Sellers Disclosure.

Conventional Loan

any type of home buyer's loan that is not offered or secured by a government entity, such as the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA), or the USDA Rural Housing Service, but instead is available through or guaranteed by a private lender (banks, credit unions, mortgage companies)

Title Insurance

is insurance provided by a Title Company that insures the property has no debts, liens or judgements and the title is free-and-clear.

Earnest Money Deposit

money that is provided by the buyer to a seller to show good faith that they are serious about purchasing the property, usually $500-$1000

Covenants

neighborhood rules created and enforced by Home Owner's Associations

Holding Costs

costs associated with holding real estate, such as loan payments, taxes, utilities and maintenance expenses.

Easement

generally established for public access right-of-ways or utility company easements to allow utilities to pass through an individual's property.

Broker

generally has more experience and education than an agent, which allow them to work independently or manage an office of real estate agents.

Recording Fees

government fees for entering new property records.

CA State Real Estate Laws

https://statelaws.findlaw.com/california-law/california-property-and-real-estate-laws.html