The Ultimate Real Estate Glossary: Letter Bs
New to the real estate industry?
Knowing the right terms can help you learn faster, engage with your industry peers, and propel your real estate business further. Getting familiar with all the industry jargon usually takes some time, but this comprehensive real estate glossary makes it easy for you to walk and talk like a real estate professional in no time.
This real estate glossary is part of our ongoing series that tackles real estate terms by the letter. If there’s a specific word that you’re looking for, jump to the rest of our Real Estate Glossary series!
For this edition, we’ll go through the terms that start with the letter B.
Real Estate Terms: The letter B
Back on market (BOM): This listing status refers to properties that are back on sale after going pending or off-market. The reasons why a house would return to the market vary, but often an unfortunate stigma gets attached to properties on which a sale has previously fallen through.
Back-up offer: If you find the house of your dreams, but the seller has already accepted another buyer’s offer, you can still submit a back-up offer that’s contingent on the first buyer backing out. The seller might accept your backup offer instead, especially if they believe that the first buyer won’t follow through.
Bailment: This describes a relationship between a “bailor” (or property owner) with a “bailee”, where the bailor transfers their property to the bailee. The bailor temporarily relinquishes their possession (retaining ownership), while the bailee holds the property in a trust until a certain purpose or goal is accomplished.
Balance sheet: In real estate, a balance sheet is a statement that lists down all the assets, liabilities, and shareholders’ worth or equity, often reported at the end of a period (e.g. month, quarter, year, etc.). It’s used to compute rates of return and assess capital formation.
Balloon mortgage: This is a type of mortgage that’s paid over a short period of time and amortized over a long period of time. They often have an initial period of low or no monthly payments (with low-interest rates) and require the borrower to pay the remaining principal on the loan at the end of the term. Example: a loan with payments amortized over 20 years, but with the balance due after 5 years.
Bankruptcy: bankruptcy refers to the legal process of absolving oneself/a company of outstanding debts they cannot payback.
Beneficiary Statement: This is a recorded disclosure from the lender that notes the unpaid balance remaining on a mortgage loan, as well as other information. Beneficiary statements are used less frequently nowadays, as a copy of the borrower’s most recent loan statement will be accepted by most lenders.
Bilateral Contract: In essence, a bilateral contract formalizes a party’s agreement to perform an act in exchange for the other party’s commitment to fulfill their side of the contract. In real estate, this often refers to contracts where the buyer and seller list their conditions/agreements to buy/sell the property.
Blanket Mortgage: Compared to mortgages that cover a single piece of real estate, blanket mortgages are single mortgages that cover two or more properties. This makes it easier for investors to get funding for multiple properties while taking out fewer mortgages.
Blight: Economic blight is the physical decline of an area, often due to a combination of economic stagnation and population decline. Real estate is affected in places with blight—manifesting in vacant lots, abandoned buildings, and distressed houses, as well as other visible signs of neglect.
Blue-Sky Laws: These are state regulations that protect investors against securities fraud. They vary from state to state and typically require sellers to register their offerings in great detail. This information is made available for investors to help them decide where to invest.
Bona Fide: This is Latin for “in good faith”, which, in real estate, means that a property sale is being made without any attempts to deceive or defraud anyone. For example, a “bona fide purchaser” (BFP) is someone who acquires a property, believes that they have complete ownership, and has no reason to think otherwise. They don’t have prior knowledge of any other claims to ownership of the property by another individual, etc.
Bracketing: This is a “comparable bracketing” method, which appraisers use to determine a probable range of values for a property. Appraisers compare the property to superior and inferior properties—this process identifies a “bracket” within which the final value will fall.
Bridge Financing: This is an interim financing option where entities can hold a short-term position until a long-term option can be finalized. These arrangements often come in the form of a “bridge loan” with financing from an investment bank or venture capital firm.
Broker: A broker refers to a state-licensed individual who represents sellers or buyers in real estate deals. A “broker of record” would refer to brokers who supervise other agents or brokers who work under them at a real estate company.
Bundle of Rights: A bundle of rights is a set of privileges that are given to a buyer together with the transfer of the property title. The bundle of rights includes (but is not limited to) the right of possession, the right of control, the right of exclusion, the right of enjoyment, and the right of disposition.
Buyback: Buyback refers to a seller selling an item and buying it back again. In the real estate industry, a buyback is a provision in a contract, where a seller is given the option to repurchase the property they sold at a stated price within a specified timeframe. This agreement may or may not be documented on paper.
Buydown: This is a mortgage-financing technique where the buyer tries to get a lower interest rate by paying mortgage points at closing. Each point they pay equals 1% of the loan amount. This lowers the interest rate they pay on the loan, at least for the first few years of the loan period.
Buyer Value Sale: Also called a Buyer Value Option Transaction (BVO). This refers to a popular, company-supported home sale program that provides professional assistance to employees who are moving for work purposes and are required to sell their homes to do so. When the employee finds a buyer, the buyer’s offer amount will become the value of the home.
Buy-Sell Agreement: Also called a buy and sell agreement, buyout agreement, the business will, or business prenup. This refers to a contract that specifies any reassignment of business shares in the event of a partner dying. Oftentimes, the shares are sold to the remaining partners or to the partnership.
Conclusion
Our goal is to help you become more real estate-savvy, one term at a time. This is only the second installment to our series on real estate jargon. Stay tuned for our next batch of real estate glossary, where we’ll continue covering the next letters in sequence until we reach the letter Z.
Any other terms you want to know about? Just comment below and we’ll make sure to cover them!
Image courtesy of Andrew Wilus