Real estate language, foreclosures, and bankruptcy-related legalities can all get a bit confusing. But you don’t need a law degree to understand, at least, the basics. Doing so will both help you better understand what you’re getting yourself into, and give you peace of mind. Here’s our take on hard money, hardest hit, and more: your guide to real estate, foreclosure, and bankruptcy terms.
Real Estate Terms
- Buyer’s Agent vs. Listing Agent: There are usually two agents involved when you buy a home: the “buyer’s agent,” who represents you, and the “listing agent,” who represents the home seller. Dual agency is when there is only one agent representing both sides of the transaction, which is something you want to avoid at all costs!
- CMA: People love acronyms, and “CMA” is no exception: it stands for “Comparative Market Analysis” (sometimes these are also referred to as ‘comps’) and is a report of similar homes in the area that were recently sold or are currently on the market. This is used to help determine an accurate value for your home.
- Fixed Rate vs. Adjustable Rate Mortgages: Conventional loans include “fixed rate” and “adjustable rate” mortgages. A fixed rate mortgage has a predetermined interest rate throughout the life of the loan; the most common are for 30 years. An adjustable rate mortgage has a variable interest rate; the most common are for 5, 7, or 10 years.
- Hard Money Loan: A hard money loan is a specific type of asset-based loan financing through which a borrower receives funds secured by real property. Hard money loans are typically issued by private investors or companies.
- The Hardest Hit Program: The Hardest Hit Fund (HHF) is a federal program that provided more than $7.6 billion to support homeowners in states hit hardest by the economic crisis, including Florida.
- The Borrower: The borrower is the individual (the homeowner) who borrows money and pledges the home as security to the lender for the loan. The borrower is sometimes called the “mortgagor.”
- The Lender: The lender gives the loan to the borrower. Sometimes the lender is called the “mortgagee.”
- The Servicer: The servicer (the company you make your monthly payment to) handles the loan account. Often the servicer is a third party that manages the account on behalf of the lender or an investor for a fee. A loan servicer’s duties include collecting and processing loan payments, as well as initiating and monitoring a foreclosure when a borrower stops making payments.
- Judicial Foreclosures: In a judicial foreclosure, an attorney files a lawsuit on behalf of the lender or investor in court to foreclose the home. You’ll receive a copy of the complaint—sometimes called a petition—which starts the foreclosure. You then get a certain number of days, like 30, to respond to the lawsuit. If you don’t file an answer in court—or if you file a response, but the court decides the foreclosure should go ahead—the court will grant a judgment of foreclosure in favor of the foreclosing party and set a sale date. The foreclosure sale is typically an auction where the public, as well as the foreclosing party, may bid on the property. The highest bidder becomes the new owner of the home.
- Non-Judicial Foreclosures: All states allow judicial foreclosures, but about half also permit non-judicial (“power of sale”) foreclosures. In a nonjudicial foreclosure, an attorney or trustee—again, on behalf of the lender or investor—completes certain out-of-court steps. Typically, a nonjudicial foreclosure involves one or more of the following steps, depending on state law:
- Mailing the borrower a notice of default that tells how much time the borrower has to reinstate (get caught up on payments).
- Recording the notice of default in the local land records office.
- Automatic Stay: An injunction that automatically stops lawsuits, foreclosures, garnishments, and all collection activity against the debtor the moment a bankruptcy petition is filed.
- Chapter 7 Bankruptcy: The chapter of the Bankruptcy Code providing for “liquidation,”(i.e., the sale of a debtor’s nonexempt property and the distribution of the proceeds to creditors.)
- Chapter 13 Bankruptcy: The chapter of the Bankruptcy Code providing for adjustment of debts of an individual with regular income. (Chapter 13 allows a debtor to keep property and pay debts over time, usually three to five years.)
- Contingent Claim: A claim that may be owed by the debtor under certain circumstances. Where, for example, the debtor is a cosigner on another person’s loan and that person fails to pay.
- Discharge: A discharge releases a debtor from personal liability for certain debts known as dischargeable debts and prevents the creditors owed those debts from taking any action against the debtor to collect the debts. The discharge also prohibits creditors from communicating with the debtor regarding the debt, including telephone calls, letters, and personal contact.
Now that you know the basics, contact the Law Offices of Patrick L. Cordero today at (305) 445-4855 to schedule an appointment for a free, no-obligation consultation.