Today's Real Estate Buzzwords

With the current economy, the real estate industry is always in the news. While we live and breathe it everyday, we also know that new terminology can be confusing or intimidating. We thought it might be helpful to give you a vocabulary primer so you aren't caught off guard at the office water cooler or next cocktail party.

Underwater: When the current mortgage exceeds the actual home value. Also referred to as having "negative equity" in your house or being "upside down" on your mortgage.
Usage example: They are so underwater on that house, they won't be able to sell it for what they originally paid.

Strategic or Rational Default: When a homeowner who is current on their mortgage payments makes a conscious decision to stop making their payments because the value of their home is so far below the amount owed on their home loan.
Usage example: They decided to strategically default on their home and just turned the keys into the bank.

Please note: We are not recommending this - a foreclosure will be listed on your credit report for up to 7 years and a financial institution may not lend you money for up to 5 years after a foreclosure.

Contagion Discount: The discount attributed to surrounding properties per nearby foreclosed property. The discount is typically 1% per foreclosure.
Usage example: The value of their home has decreased due to the contagion discount of the neighboring foreclosed property.

Short Sale: When a homeowner contracts a sales price below the amount owed on their mortgage and the bank agrees to accept the shortfall.
Usage example: They are going to negotiate a short sale on their house because they are underwater on their mortgage.

REO Properties:REO is an acronym for Real Estate Owned. Property that is in the possession of a lender as a result of foreclosure or forfeiture.
Usage example: With a higher inventory of REO properties, there are some good buys in today's market.