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Define Arrears in Real Estate


"Arrears" is a term used in real estate and finance that means being behind in paying money that is owed, like when someone doesn't pay their rent or property taxes on time, or when payments are made at the end of a period instead of the beginning. When a person is in arrears, they have missed payments, or the payments are scheduled to be made later, and they might have to pay extra fees or face penalties if they are overdue.


Emily was supposed to pay her rent every month, but she missed two payments in a row. Now, she is in arrears and needs to catch up on the missed payments and possibly pay late fees. Another example is when a tenant agrees to pay rent at the end of each month instead of the beginning. The rent is in arrears, but it's not overdue since it's agreed to be paid later.

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"A Deep Dive for Real Estate Agents and Appraisers"

Here are some extra tidbits about "arrears" you might want to know. The term "arrears" pops up in different ways when dealing with real estate, and getting these can help you during your real estate professional career. Here are some important uses and stuff to think about:

Mortgages: Homeowners are often said to be "in arrears" on their mortgage if they have missed one or more payments. This situation can potentially lead to foreclosure if the homeowner doesn't catch up on their payments. As a real estate professional, you might encounter this term when dealing with distressed properties or short sales.

Rent: If a tenant doesn't pay their rent on time, they're "in arrears" on their rent. This is a common situation for landlords and property managers to deal with. If a tenant is frequently in arrears, it could potentially lead to eviction.

Property Taxes: Property owners must pay taxes to their local government. If they fall behind on these payments, they're "in arrears" on their property taxes. This situation could lead to a tax lien being placed on the property. In some jurisdictions, unpaid property taxes could eventually lead to the property being sold at a tax sale.

Payment in Arrears: This is a slightly different use of the term, which refers to when payments are made at the end of a period for which they apply, rather than at the beginning. This is common in certain types of leases or rental agreements, where rent for a given month may not be due until the end of that month. It's also a common setup for interest payments on loans.

In the context of buying and selling real estate, "arrears" most commonly comes up in relation to mortgages and property taxes. If a property is being sold, any arrears need to be settled as part of the transaction. This could affect the amount of money the seller receives from the sale, or potentially delay the transaction if there are significant arrears that need to be dealt with.

Remember, being "in arrears" can have serious consequences, so it's always important for property owners and tenants to understand their payment obligations and ensure they're paid on time. As a real estate agent or appraiser, understanding these issues can help you better serve your clients.
Illustration of Dumb Ox mascot.

"Wit & Whimsy with the Dumb Ox: Unlocking Knowledge with Rhyme:"

In the world of real estate, a word you'll come to hear,
Is arrears, my dear friend, when payments aren't so clear.

When rent or taxes due, are not paid on time,
Or scheduled at the end, of a period's climb,

You're in arrears, oh dear, and might pay an extra dime,
If overdue, be aware, and don't let payments climb.

So when you study real estate, and terms you'll need to learn,
Remember arrears, my friend, for timely payments' turn!

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