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Frequently Asked Questions

And a Helpful Glossary of Real Estate Terms

 

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Glossary

  • Armchair investment: An investment where the owner sits back and see’s their investment work for them without have to do any substantial amount of work.
  • Amortization: Repayment of debt in installments.
  • Capital Gain: The profit earned from the sale of a house.
  • Cash flow: The net operating income of a property minus debt servicing.
  • Closing (or Settlement): The formal process of transferring title from seller to buyer and the payment from buyer to seller. The transfer is usually conducted at the offices of the closing attorney, escrow, or title company.
  • Closing Costs: Fee’s associated with completing a real estate transaction, often equal to about 1% of the home’s value.
  • Earnest Money Deposit (EMD): Funds paid by the buyer(s) of a property to secure the purchase. It is the deposit you will have to pay at the time of selection, allowing you to proceed with your due diligence.
  • Fannie Mae/Freddie Mac: These are the former government lenders with foreclosures on their books. They are often looking at selling for discount prices.
  • Foreclosure: A process where a mortgage holder forfeits the title to their home to their lender because they have defaulted on their loan.
  • Private Lender: A lender who will lend to foreigner investors when US banks will not. They will charge higher fees at a higher interest rate than the local banks.
  • Gross Yield: The annual return from a property before expenses, usually expressed as a percentage of the purchase price.
  • HUD Statement (HUD-1): A form used by a settlement or closing agent itemizing all charges imposed on a borrower and seller in a real estate transaction. This form gives a picture of the closing transaction and provides each party with a complete list of incoming and outgoing funds.
  • Leverage: The use of borrowed funds to increase purchasing power.
  • LLC: A limited liability company, the preferred investment vehicle for a foreign investor.
  • Loan to Value Ratio (LTV): The amount, expressed as a percentage that a lender is prepared to loan against a property. In the case of a $200,000 Single-Family home, a LTV of 60% would see the lender loan $120,000 leaving the borrower to come up with the remaining $80,000.
  • Net Income: Gross income minus expenses.
  • Net Yield: The annual return from a property after the deduction of taxes, insurance, management fees and other costs expressed as a percentage of the total purchase price. It is net income divided by total purchase price expressed as a percentage.
  • Short Sale: A sale in which a lender agrees to sell the property for less than the outstanding value of the mortgage against it.
  • Title Company: A firm that examines land titles to make sure that they are free of liens or other encumbrances.
  • Title insurance: a policy issued by a title company guaranteeing clean and unencumbered tittle. This is a recommended protection mechanism for the purchase of property in the US.
  • Turnkey: A house with a tenant signed to with no renovation required.
  • Rehab: Is the renovation and development of a property to get it up to rental standard.
  • EIN: Employer identification number. It is a number that identifies taxpayers who are required to file various business tax returns.
  • ITIN: International Tax Identification Number. It exists for the purpose of assisting foreign nationals in complying with federal reporting or filing requirements.
  • Tax Certificate: A certificate of claim against property that has a lien placed upon it as a result of unpaid property taxes. Tax lien certificates are generally sold to investors by most counties and municipalities in the United States through an auction process. Subsequent to a winning bid made by an investor for a specific tax lien certificate, a lien is placed on the property and a certificate is issued to the investor detailing the outstanding taxes and penalties on the property.
  • Registered Agent: Receives important legal and tax documents on behalf of your LLC. This is a valuable service that we provide for our international investors, free of charge.
  • Notice to Vacate: A document addressed to the tenant to vacate the property.
  • Title deed: A legal deed or document constituting evidence of a right to ownership of a property.
  • Form 1040NR: A form that must be filed with the IRS by a non-resident who is conducting a business or investing in the US.
  • Foreclosure: A foreclosed home is one in which the owner is unable to make his mortgage loan payments and the bank repossessed the home. These homes are usually not for sale until the entire foreclosure process is complete and the bank lists the home in the local Multiple Listing Service (MLS).
  • Short Sale: A home that is listed for sale at a price lower than the amount owed on the mortgage. Homeowners hope to sell their home as a short sale to avoid penalties associated with going into foreclosure.
  • Lien: A lien is a legal claim or a hold on some type of property. A lien usually exists in situations like second mortgages, loans against a vehicle title, or money loaned against any other substantial item owned by a borrower. It may keep the borrower from selling the property, or at least keep him or her from transferring title of the property. Any property that carries a lien can be forced into sale by the lender in order to collect what is owed if the loan is in default. If the borrower decides to sell the property, the lien holder must be paid before the title will be cleared for transfer to the buyer.
  • Escrow Account: It is a legal trust account used as a temporary pass through account held by a third party during the process of a transaction between two parties.
  • Realtor: Licensed Real Estate Agent.
  • IRS: The IRS is the U.S. government agency responsible for tax collection and tax law enforcement.
  • Transfer Tax: It is a tax on the passing of title to property from one person (or entity) to another. It is essentially a transaction fee imposed on the transfer of title to property.
  • Closing: Settlement of a property.
  • HOA: Home Owners Association
Contact Information
Corporate Office
2800 Livernois Rd., Ste. D220
Troy, MI  48083
t. +1.586.482.8156
f. +1.586.482.8159
info@buildgreystone.com

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