As with many industries, real estate has its own “language.” When real estate phrases and terms are used in conversation or data sets, they may be hard to decipher from context alone. In addition, when an agent puts information about a listing into the MLS, they’re only allowed a certain number of characters, so sometimes this shorthand can be cryptic for home buyers and sellers.
Here are a handful of acronyms and terms that you'll likely see if you are keeping an eye on the real estate market:
%OLPSP: Original list price to sale price is the percentage above the listing price that a property sells for. Red Oak often uses this statistic in a given neighborhood to determine demand, provide guidance to buyers, and when discussing pricing tactics with sellers.
Appraisal: An appraised value is the fair market value of a home expressed by a real estate appraiser. Appraisers typically look at comps, location and any visual defects or special attributes that the property has to offer.
Closing: A home sale is finalized at the closing. The buyer signs the mortgage, pays closing costs and receives title to the home. The seller pays closing costs and receives the net proceeds from the home sale.
Comps: “Comps” or comparables in real estate, are recently sold homes in the same or similar neighborhood, similar in size and condition. Agents and appraisers will often look at comps when pricing, appraising or putting in an offer on a property. Good comps are especially important in the East Bay given the differences among our many neighborhoods.
Contingencies: Contingencies, often included in a buyer’s offer, are conditions that must be fulfilled before the contract is binding; loan contingencies and appraisal contingencies are just two examples.
DOM: Days on market are the number of days a property has been listed for sale before an offer is accepted. This can be important when assessing the demand for a particular property, especially in the East Bay. In some areas around the country, it’s typical to see a home sell in a matter of months. In the East Bay that timeframe is closer to weeks, and often, days.
Earnest Money: Earnest money is the buyer’s deposit to the seller which goes into escrow during the closing process. It’s typically refundable to homebuyers in the event a contingency cannot be met.
Escrow: The phrase “in escrow” means the holding of documents and money by a neutral third party prior to closing.
HOA: Homeowners associations are composed of condo or home owners within a defined development or designated area. The HOA is responsible for maintaining the common areas of a community and collecting dues to cover the costs.
PUD: Planned unit development is a real estate development where individual properties share a governing HOA, amenities, and spaces.
REO: Real estate owned is property that has been foreclosed on and is now available to buy from the lender.
TIC: Tenancy in Common is a form of property ownership where multiple individuals have an undivided interest in the property. These are unusual in the East Bay, but they do pop up on occasion.
Even if you're not investing yet, these income property terms might be helpful:
ARV: After repair value is the estimated value of a property after it has been repaired or renovated. It may be used to secure financing, so this is an important number if you're buying a fixer-upper or have flipper aspirations.
NOI: Net operating income is the total income generated from a property after deducting operating expenses, but before considering debt service or taxes.
CAP Rate: Capitalization rate is the rate of return on an investment property, calculated by dividing the property's net operating income by its current market value.
GRM: The gross rent multiplier is a ratio used to evaluate income-producing properties by dividing the property's price by its gross rental income.
1031 Exchange: A 1031 exchange is a tax-deferred exchange allowing investors to sell a property and reinvest the proceeds in a similar property, deferring capital gains taxes. Our agents are well-versed in 1031 exchanges as they are common in the East Bay.
Your agent's business card may include one (or more) of these designations indicating that they have completed training in these specialties:
CPM: Certified property managers work with owners, investors, tenants, builders, developers, and the public.
A National Association of Realtors Green Designation indicates that your agent is environmentally aware and advocates for sound practices in housing.
GRI: As a Graduate, Realtor Institute, your agent has completed rigorous coursework in legal issues, government regulation, technology, professional standards and the entire sales process.
SRES: Seniors Real Estate Specialists are agents who specialize in working with buyers and sellers over the age of 50.
Navigating the world of real estate can be tricky enough in the East Bay without having to look up all of the industry’s jargon. We just touch upon some definitions here, so if you’re curious about any of these terms or need additional information, reach out, we’d love to help.