Decoding the Jargon
It’s a little bit like high school chemistry. It starts out with words you can understand, like “beaker” and “safety rules.” By day three, however, you’re drowning in a landslide of acronyms from the periodic table, and your only hope for salvation lies in a stack of flashcards as thick as Mt. Everest. Real estate research comes with its own share of acronym avalanches. The difference? This time, there’s more at stake than a grade (and possibly a hole in your favorite pair of Jordache jeans, courtesy of that dripping bottle of hydrochloric acid).
For those nibbling at the housing market for the first time, the sheer volume of abbreviated terms in any given paragraph of real estate lingo can be enough to overload the system. To keep you from reaching for the margaritas, we’ve put together a list of the most common of these caps-locked foes to help you ace the test.
HOA: Homeowners Association. Created by developers, HOAs are the marketers, sellers, and managers of that shiny subdivision lot you’ve been eyeing.. They’re the ones who mow the lawn and trim the primroses along your street – and they’ve been known to charge a pretty penny for it. “How much are the HOA fees?” should be a permanent fixture on your Ask-the-Real Estate Agent checklist.
FSBO: For Sale by Owner. No brokers! No agents! It’s just you and the guy who owns the place…and possibly that guy’s lawyer. Often discovered in online listings, FSBOs are usually a homeowner’s attempt at avoiding agent fees, which tend to be around 6 percent of a sale.
NAR: National Association of Realtors. Every Realtor, including yours, is a member of NAR. How do we know? Because the National Association of Realtors has trademarked the term “Realtor.” And it might not be a bad thing. All members of NAR are required to stick to a strict code of ethics designed to protect you (and them) when things get ugly. Not a bad deal to have in place when the market goes dog-eat-dog on you.
REO: Real Estate Owned (Other Real Estate Owned). A REO is a property that has been repossessed by a bank or lender, usually after the home fails to sell at a foreclosure auction. Although some REOs are maintained by the lender that repossesses them, buyer beware: many others are often in shabby shape.
BPO: Broker’s Price Opinion. Often seen hovering in the shadows of the REO, the BPO is real estate’s drive-by appraisal. Banks order BPOs in order to give them an idea of what they can expect to get out of a house they’re about to foreclose on. Cheaper and faster than full appraisals, the key thing to remember about BPOs is that they are ballpark estimates of a property’s market value, not official numbers.
CMA: Comparative Market Analysis. A CMA is a bit more reliable than a BPO in that it’s better researched. It’s still not as accurate as a full property appraisal, however, because it takes the asking prices of similar properties in the area into account. If a few of those dominoes happen to be off for whatever reason, then the whole line is going to go down fast.
MLS: Multiple Listing Service. This portal is a free internet service for homebuyers that lists real estate listings for sale by agents and other realty professionals who are MLS members. The database and software are also used by real estate brokers to facilitate sales transactions. Everyone has access to the same database of properties on the market. “You-scratch-my-back” plays out when one broker has a property to list that he can’t sell, and another has a client in need of just such a property. The duo join forces, sell the house, and split the difference on the broker fees.
S&L: Savings and Loan Association. Also known as a “thrift,” a savings and loan association is basically like a bank, except the bulk of its deposits go toward giving people mortgages, and it’s mutually held (both the people who make deposits and the people who borrow money get voting rights in the company). They’re usually created with the specific purpose of helping you own a home.
1031 Exchange: In a 1031 exchange, you sell one property and buy another one. Exciting, right? More so than you might think, actually. That’s because in order to pull this little beauty off, you not only have to find a pair of properties that are qualified, you also have to handle the whole massive transfer in a squeaky-tight timeframe. The payoff? If you play your cards right, this deal goes from a humdrum buy-and-sell transaction to a newly minted “exchange” – one that you don’t have to pay taxes on. How about them apples?
Chemistry? Perhaps not. But a good mix of acronym-angled know how is sure to get you the top grade.