Commercial Mortgage Glossary of Terms

 
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ABANDONMENT
Voluntary giving up of rights of ownership or another interest (such as an easement) do to failure to use the property, coupled with an intent to abandon (give up the interest).
 
ABATEMENT
Reduction or decrease often used to describe a decrease of assessed valuation of property for ad valorem taxes. In regards to wills, it refers to a reduction of gifts to one or more beneficiaries when the assets left in the will are insufficient to pay all creditors and beneficiaries. There is usually a different formula used for debts than for priorities of gifts.
 
ABC SOIL
Soil having distinct soil horizons: A (upper), B (middle), and C (lower) horizons (layers of soil).
 
ABSCISSA
Horizontal axis of a curve; the vertical axis being the ordinate. The terms are used in connection with charts and graphs.
 
ABSORPTION
Usage of space, such as the rental of units or sale of a tract. The time or rate must be estimated and considered as a portion of the owner's (usually the builder) costs.
 
Absorption Rate
The rate (speed) at which vacant space is either leased (to tenants) or sold (to buyers) in the marketplace. This rate is usually expressed in square feet per year, or in the case of multi-family housing, in the number of units occupied per year.
 
ABSTRACT
Summary; an abridgement. Before photostatic copying, public records were kept by abstracts of recorded documents.
 
ABSTRACT OF JUDGEMENT
Summary of the essential provisions of a court judgment, which when recorded in the county recorder's office, creates a lien upon the property of the defendant in that county, both presently owned or after acquired.
 
ABSTRACT OF TITLE
Written summary of the title history of a piece of real estate.
 
ABSTRACTER'S CERTIFICATE
Certificate contained in an abstract which shows the time period and scope of the search of public records done by the abstracter.
 
ABSTRACTION
Way of appraising a site (land) by estimation of the depreciated value of the improvements and deducting that amount from the total value (improved value) of the property. Also See: Allocation.
 
ABUTMENTS
Vertical members (walls or heavy columns) which support the load or pressure of the cross member, such as an arch, pier, or similar structure.
 
ABUTTING OWNER
One whose land is contiguous to (abuts) a public right of way.
 
ACCELERATED COST RECOVERY SYSTEM (ACRS)
Portion of the Economic Recovery Act of 1981 which allowed shorter depreciation of both real and personal property, did not distinguish between new and used property, and disregarded salvage value.
 
ACCELERATED DEPRECIATION
General term including any method of depreciation greater than straight line depreciation  
 
ACCELERATION
Immediate right to possession of a remainder interest upon the failure of a life estate.
 
ACCELERATION CLAUSE
Provision of a mortgage or note which provides that the entire outstanding balance will become due and payable in the event of default.
 
ACCEPTANCE
Voluntary agreement to a given offer. (1) Real property acceptance must be unequivocal AKA Mirror Image Rule (2) Acceptance for goods, according to the Uniform Commercial Code, and need not be unequivocal. Offer, acceptance, and consideration form a contact.
 
ACCESS RIGHT
Expressed or implied right to ingress and egress to and from one's property.
 
ACCESSIBILITY
Location of a site in terms of the ease at which it may be reached by customers, employees, carriers, and others necessary to the intended use of the property.
 
ACCESSIBLE
2 unit + residential building which can be entered and utilized by people who are physically handicapped.
 
ACCESSION
Right of a property owner to an increase in his property by natural means (such as a riparian owner's right to an abandoned river bed, rights of alluvion and reliction, etc.) or artificially, by property improvements.
 
ACCESSORY BUILDINGS
These are buildings used for the benefit of a central or main building, such as a tool shed, garage, or similar structure.
 
ACCOMMODATED ROOM NIGHT DEMAND
Yearly number of hotel or motel rooms occupied in a given market area.
 
ACCOMMODATION PARTY
Person who lends his name to help secure credit for another, by signing a note or other obligation without receiving consideration.
 
ACCOMMODATION RECORDING
Recording of documents with the county recorder by a title insurance company, without liability (no insurance) on the part of the company, but only as a convenience to a customer.
 
ACCOMMODATOR
One who acts to facilitate an exchange under the rules of Section 1031 of the Internal Revenue Service Code. The proper terminology is a Qualified Intermediary, but accommodator, facilitator or intermediary are the common terms used.
 
ACCORD
Agreement by which one accepts something different (usually less) than what is owed as full satisfaction. The amount owed may be in dispute or simply accepted as full satisfaction by the creditor or claimant. The agreement and acceptance is called "Accord and Satisfaction".
 
ACCORD AND SATISFACTION
Agreement (accord) and acceptance (satisfaction) by creditors of less than the entire amount owing on a debt.
 
ACCRETION
Gradual addition to the shore or bank of a waterway. The land generally becomes the property of the owner of the shore or bank, except where statutes specify otherwise.
 
ACCRUAL ACCOUNTING
Accounting method under which income and expenses are charged to the periods for which they are applicable, rather than when payment is received or made. The method calling for income and expenses to be based on payment being received or made is cash accounting.
 
ACCRUE
To grow or mature.
 
ACCRUED DEPRECIATION
Accumulated depreciation. Also See: Depreciation.
 
ACCRUED INTEREST
Interest on a note, bond, etc. which has been earned but not yet paid. Since interest is usually paid in arrears, accrued interest does not necessarily indicate a delinquency in payment. See also: Accumulated Interest.
 
ACCRUED ITEMS
Expenses owing but not yet payable. An example is mortgage interest which is paid at the end of the month or property taxes which may be paid after the tax year begins. On a closing statement for a sale, the buyer would be credited with these amounts and would be responsible for their payment.
 
ACID SOIL
Soil with an acid rather than an alkaline base. This can determine its suitability for farming.
 
ACID TEST RATIO
Formula used by lending institutions to determine if a business can meet its current obligations. The formula adds cash plus receivables plus marketable securities and then divides by liabilities. A ratio of one to one is considered acceptable.
 
ACKNOWLEDGEMENT
Written declaration by a person executing an instrument, given before an officer authorized to give an oath (usually a notary public), stating that the execution is of his own volition.
 
ACOUSTICAL MATERIALS
Materials which absorb sound. Usually installed in walls and ceilings and composed of fiberglass, cork, special plaster, or similar materials.
 
ACOUSTICAL TILE
Tile which absorbs sound.
 
Acquisition and Development Loan (A&D Loan)
A loan for the purchase and preparation of raw land for development. Usually a construction loan or land sale is the source of repayment.
 
ACQUISITION AND IMPROVEMENT LOAN
Loan for the dual purpose of purchasing and improving or repairing property.
 
ACQUISITION APPRAISAL
Appraisal to determine market value of a property to be taken by eminent domain, in order to justly compensate the owner.
 
ACQUISITION COSTS
Costs of acquiring property other than purchase price: escrow fees, title insurance, lenders fees, etc.
 
ACRE
A 2-dimensional measure of land equaling 160 square rods, 10 square chains, 4,840 square yards, or 43,560 square feet.
 
ACRE FOOT
Volume of water, sand, coal, etc., equal to an area of one acre with a depth of one foot (43,560 cubic ft.). If a liquid, 325,850 gallons.
 
ACRE-INCH
Cubic measure of one acre in area with a depth of one inch.
 
ACREAGE
Most commonly refers to vacant land, but may refer to any parcel which may be measured in acres. The term is also used to describe land which has not been subdivided.
 
ACREAGE CONTROL
Federal control setting the number of acres which may be planted with crops which have federal price supports.
 
ACT OF GOD
Damage caused by nature (floods, winds, etc.) rather than by people.
 
ACTION TO QUIET TITLE
Modernly used to describe any court action to establish ownership or remove a cloud on title.
 
ACTIVE CAPITAL
Capital used on a regular basis for profit-making activities.
 
ACTUAL EVICTION
Removal of an occupant or real property through legal action. See also: Constructive Eviction
 
ACTUAL NOTICE
Notice actually and expressly, or by implication, given and received. See also: Constructive Notice; Statutory Notice.
 
ACTUAL RECEIPT
Direct receipt of funds from the sale of a relinquished property in a 1031 exchange. The taxpayer will lose the tax free benefit if the funds are received rather than directly reinvested in the replacement property.
 
AD VALOREM
"According to value". A method of taxation using the value of the thing taxed to determine the amount of tax. Taxes can be either "Ad Valorem" or "Specific". Example: A tax of $5.00 per $1000.00 of value per house is "Ad Valorem". A tax of $5.00 per house (irrespective of value) is "Specific".
 
ADD-ON INTEREST
Method of computing interest by adding the total interest for the life of the loan to the amount borrowed (principal) and then deducting the full amount of each payment as made. This method creates a higher yield than computing interest on the declining balance of principal.
 
ADDENDUM
Something added. A list or other material added to a document, letter, contractual agreement, escrow instructions, etc. See also: Amendment.
 
ADDITION
(1) portion of a building added to the original structure. (2) A synonym for subdivision in certain legal descriptions.
 
ADDITIONAL DEPOSIT
Buyer of real property will generally give a small deposit with an offer, and a more substantial deposit after the offer has been accepted. The second deposit is the "additional deposit".
 
ADDITIONAL PRINCIPAL PAYMENT
Payment of principal above the required amount. Some loans limit the amount that a borrower may pay and impose a penalty for reducing the principal balance in too short a time.
 
ADJACENT
Close to. May or may not be contiguous (touching).
 
ADJOINING
Touching or contiguous to.
 
ADJUDICATION
Judgment or decision by a court.
 
ADJUSTABLE MORTGAGE LOANS (AML'S)
Mortgage loans under which the interest rate is periodically adjusted to more closely coincide with current rates. The amounts and times of adjustment are agreed to at the inception of the loan. Also called: Adjustable Rate Loans, Adjustable Rate Mortgages (ARM's), Flexible Rate Loans, Variable Rate Loans. See also: Indexing, Rate Index.
 
ADJUSTABLE RATE LOANS
Mortgage in which the interest rate is adjusted periodically, based on the movement of a financial index. Also See: Adjustable Mortgage Loans.

ADJUSTABLE RATE MORTGAGE          
A mortgage with an interest rate that changes periodically according to an index that is selected when the mortgage is issued. The initial interest rate is lower than that of a fixed-rate mortgage, but monthly payments can go up or down as the rate is adjusted.

ADJUSTMENT INTERVAL   
The period of time between changes in the interest rate for an adjustable-rate mortgage. Typical adjustment intervals are 6 months and 1 year.
 
ADJUSTABLE RATE MORTGAGE (ARM)
Mortgage in which the interest rate is adjusted periodically, based on the movement of a financial index. Also See: Adjustable Mortgage Loan's (ARL'S).
 
ADJUSTED GROSS INCOME
Total income of property if fully rented, less an adjustment for estimated vacancies and uncollectible rent.
 
ADJUSTED MORTGAGE
Mortgage released after a company has undergone reorganization.
 
ADJUSTED SALE PRICE
Appraisal term used when a comparable property's sale price is adjusted to reflect the value of the subject property.
The adjustment is made based on the differences between the subject property and comparable property in time of sale, terms of sale, location, and physical characteristics.
 
ADJUSTMENT PERIOD
Time between adjustment dates for an adjustable rate mortgage. If the rate adjusted monthly, for example, one month would be the adjustment period.
 
ADMINISTRATOR
Person given authority by a proper court to manage and distribute the estate of a deceased person when there is no will. See also: Administrator C.T.A..
 
ADMINISTRATOR C.T.A. - Administrator when there is a will but no executor is named or the executor named is unable or unwilling to serve. The C.T.A. stands for Cum Testamento Annexo (with the will attached).
 
ADMINISTRATOR'S DEED
Conveyancing instrument used by an Administrator to transfer property from an estate. Also See: Administrator.
 
ADMINISTRATRIX
Refers to a female administrator.
 
ADOBE CONSTRUCTION
Structure built of adobe blocks. Adobe blocks are made from adobe mud mixed with straw or a straw-like substance, and then baked. Considered a very good but expensive material.
 
ADVERSE LAND USE
Use which causes surrounding property to lose value, such as an industrial development in a residential area.
 
ADVERSE POSSESSION
Method of obtaining ownership rights by the open, notorious, exclusive, and hostile possession of private real property for a statutory period which varies from state to state (from 5 to 30 years). Some states have additional requirements, such as payment of property taxes by the adverse possessor. The true owner is then barred (statute of limitations) from asserting his/her rights. The adverse possessor has no evidence of title without court action.
 
AEOLIAN SOIL
Soil composed of materials deposited by the wind.
 
AERATION ZONE
Surface soil to a depth from which plants draw moisture.
 
AFFIDAVIT OF TITLE
Affidavit by a seller of real property that, as of a certain date, no defects of title exist except those which have been disclosed in the sales contract or deed.
 
AFFIRMATIVE EASEMENT
Easement described from the benefited estate (dominant tenement). Also called a parcel 2 easement. The same easement described from the burdened estate (servient tenement) would be a negative easement.
 
AFFORDABILITY ANALYSIS
Method to determine the right purchase price and mortgage for a potential home buyer. The price of the home and its future expense, cost to obtain the loan and its future expense, as well as buyers income, expenses and assets are used to determine the financial feasibility of the purchase.
 
AFFORESTATION
Growing of a forest where none previously existed, as opposed to reforestation (the replanting of a harvested or destroyed forest).
 
AFTER ACQUIRED PROPERTY
As applied to a judgment lien, it means that the lien will attach to property of the debtor acquired after the judgment. See also: After Acquired Title.
 
AFTER ACQUIRED TITLE
Legal doctrine by which property automatically vests in a grantee when the grantor acquires title to the property after the deed has been executed and delivered.
 
AGREEMENT OF SALE
Has two separate meanings, depending on area of the country. In some states it is synonymous with a purchase agreement (Also See: Purchase Agreement). In other states, it is synonymous with a land contract. Also See: Land Contract.
 
AGRICULTURAL LIEN
Lien against crops (only), to secure money or payment for materials used to grow the crop.
 
AGRICULTURAL PROPERTY
(1) Land which is zoned agricultural, (2) Land used for growing of agricultural products or raising of livestock.
 
AIR LOT
Any bounded air space which has been legally subdivided into a lot, such as a condominium.
 
AIR RIGHTS
Right to the use of the air space above property without the right to use the surface of the property. However, air rights may restrict surface rights, especially height of improvements.
 
ALCOVE
Recessed part or addition to a room.
 
ALIAS
Latin for "otherwise". Commonly meaning that a person is known by more than one name. In some states, indicated by the letters AKA (also known as).
 
ALIENATION
Transfer of property from one owner to another.
 
ALIENATION CLAUSE
Type of acceleration clause, calling for a debt under a mortgage or deed of trust to be due in its entirety upon transfer of ownership of the secured property. Also called a "due-on-sale" clause.
 
ALKALI
Chemical opposite of acid. Heavy concentrations of alkaline salts in soil may damage crops.
 
ALKALINE SOIL
Soil which has an alkali, rather than an acid base.
 
ALLEGATION
Assertion or statement of a party to an action, setting forth that which the party expects to prove.
 
ALLEY
Narrow right of way, either public or private, used for access (usually to garages, loading platforms, etc.).
 
ALLEY INFLUENCE
In appraising, the effect upon value of a property, because of an adjoining side or rear alley.
 
ALLODIUM
Land owned by individuals, as opposed to the feudal system of ownership of all land by a king or ruler.
 
ALLOTMENT
Small parcel of land, sold or given to a farm worker for cultivation as a supplementary source of income. Popular in the 1900's before World War II.
 
ALTERATIONS
Changes in the interior or exterior of a building, but without changing the exterior dimensions.
 
AMENDMENT
Change, either to correct an error or to alter a part of an agreement without changing the principal idea or essence.
 
AMENITIES        
Noted in the appraisal, the non-monetary benefits derived from property ownership.
 
AMORTIZATION PERIOD    
The period, or length of time, over which the principal portion of a mortgage loan is scheduled to be paid down through periodic payments.
 
AMORTIZE
To reduce a debt by regular payments of principal and interest. Modernly, the word has been qualified as fully amortized, partially amortized, and negatively amortized. Also See: Balloon Note; Straight Note; Negative Amortization.
 
AMORTIZED LOAN
Loan repaid in periodic (most commonly monthly) payments of principal and interest. See also: Amortize, Interest Extra Note, Interest Included Note.
 
ANCHOR BOLTS
Bolt set (anchored) in concrete or other masonry foundation and then attached to the superstructure to prevent movement (anchor it).
 
ANCHOR TENANT 
Mmost reliable, and usually the largest, tenant in a shopping center. The strength of the anchor tenant greatly affects the availability of financing for the shopping center. The term may also be used to describe a tenant in an office building, industrial park, etc.   
 
ANCHORS          
A long term, credit-worthy tenant. The presence of one or more anchors enhances the value and the ability to obtain financing for a shopping center.
 
ANNEX
To add or attach. Usually to join a smaller or subordinate thing to a larger or more dominant thing.
 
ANNEXATION
Permanently affixing to real property, such as a city adding additional land to increase its size.
 
ANNUAL DEBT SERVICE
Yearly amount of principal and interest payments of debt service.
 
ANNUAL MORTGAGE STATEMENT
Yearly statement sent to a borrower showing the remaining loan balance and the interest paid over the year. Used primarily for income tax purposes.
 
ANNUAL PERCENTAGE RATE (A.P.R.)
Yearly interest percentage of a loan, as expressed by the actual rate of interest paid. For example: 6% add-on interest would be more than 6% simple interest, even though both would say 6%. The A.P.R. is disclosed as a requirement of federal truth in lending statutes.
 
ANTICIPATORY BREACH
One party to a contract informing the other of his or her intent not to perform before performance is due. A legal action may be brought even though the original contract (not yet due for performance) has not been breached. Example: The buyer informs the seller before the closing date of his or her intent not to buy.
 
ANTITRUST LAWS
Laws enacted to promote free competition by prohibiting agreements to limit competition. In real property businesses, for example, setting a "standard" commission for all brokers to charge would be a violation.
 
APARTMENT
One or more rooms of a building used as a place to live, in a building containing at least one other unit used for the same purpose. Usually has, at least, cooking facilities, a bathroom, and a place to sleep. Those who live in these units pay rent for their use, usually on a monthly basis.
 
APARTMENT HOTEL
Building combining the features of an apartment building and a hotel. The units are furnished and may offer hotel facilities such as maid service, a restaurant, etc., but whose residents may stay for months or years, paying on a weekly or monthly basis.
 
APARTMENT HOUSE
Building containing two or more separate residential units, which is under one ownership. The residents of the units pay rent.
 
APPRAISAL       
An estimate of the value of a property made by a qualified professional called an appraiser. (Brian Brinkley Commercial Capital typically requires the appraiser to be MAI certified.)
 
APPRAISAL FEE
Amount of money charged by an appraiser. There is no set amount since the work necessary varies with each property.
 
APPRAISAL INSTITUTE 
Trade organization designed to establish standards of competency in the appraisal industry. The designations MAI (competent by the institute's standards to appraise all types of real property) and SRA (competent to appraise residential property) are prestigious and heavily relied upon by real estate agents, lenders, governments and others who utilize appraisers. The American Institute of Real Estate Appraisers and the Society of Real Estate Appraisers combined in 1991 to form the Appraisal Institute.
 
APPRAISAL METHODS
Generally, three major methods of appraisal: Cost Approach, Income Approach, Market Value (comparables) Approach.
 
APPRAISAL REPORT
Written report by an appraiser containing an opinion as to the value of a property and the reasoning leading to this opinion. The factual data supporting the opinion, such as comparables, appraisal formulas, and qualifications of the appraiser, will also be set forth.
 
APPRAISED VALUE
Opinion of the value of a property at a given time, based on facts regarding the location, improvements, etc., of the property and surroundings.
 
APPRAISER
One who is trained and educated in the methods of determining the value of property through analysis of various factors which determine said value.
 
APPRECIATION
Increase in value to real property due to positive changes or the elimination of negative elements in the surrounding area. Although not within the original meaning, the word has been incorrectly used so often that it is now acceptable to describe an increase in value for any reason, including inflation.
 
APPROPRIATION
Private taking and use of public property, such as water from a river or lake. Not to be confused with condemnation or expropriation.
 
APR
Also See: Annual Percentage Rate. The annual percentage rate refers to the total cost of the loan, expressed as a yearly rate.
 
APRON
Any structure resembling the shape of the apron worn as clothing, such as a protruding lower inside part of a window, the portion of a driveway which connects it to the street, the entrance to a loading dock, and similar structures.
 
AQUATIC RIGHTS
Individual rights to the use of the sea and rivers, for the purpose of fishing or navigation, and to the soil in the sea and rivers.
 
AQUEDUCT
Large pipe, conduit, or trench to bring water or carry it away.
 
ARABLE
Land capable of being cultivated for farming.
 
ARBITRARY MAP
Map drawn by a title company to be used in locating property in areas where legal descriptions are difficult and complex. Areas are arbitrarily subdivided usually by ownership at a given time, into lots which are numbered. Recorded documents are then posted to these arbitrary lots by the same "arb" number.
 
ARBITRATION CLAUSE
Clause in a lease calling for the decision of a third party (arbiter) regarding disputes over future rents based on negotiation. Also used in construction contracts, disputes between brokers, etc.
 
ARCH
Concave curved span which may be over a doorway or an entire room or building, such as an arched ceiling or roof.
 
ARCH BIB ROOF
Roof used primarily in industrial buildings, and having the shape of an arch or crescent. It is supported by a bow-string truss which spreads the roof load evenly.
 
ARCHITECTURE
Design and construction plans for a structure. Recently the design for landscaping has become known as landscape architecture.
 
ARCHITRAVE
Surrounding molding of a doorway or similar wall opening.
 
AREA
Surface (plane) space of land or a building. Also describes a neighborhood, or large land section (such as the Southern California area). The term may also indicate a use, such as a work area, living area, play area, etc.
 
AREA ZONING
Mainly residential zoning which regulates the ratio of improvements to land, setbacks, etc. Also called bulk zoning.
 
AREAWAY
Old term referring to a cellar or room under the sidewalk.
 
ARM'S LENGTH
Legal slang meaning that there existed no special relationship between the parties involved in any manner which would taint the result.
 
ARM'S LENGTH TRANSACTION
Transaction without collusion or duress between the parties involved.
 
ARREARS
(1) Payment made after it is due is in arrears. (2) Interest is said to be paid in arrears since it is paid to the date of payment rather than in advance, as is rent. Example: A rental payment made July 1 pays the rent to August 1. An interest payment made July 1 pays the interest to July 1.
 
ARTERIAL HIGHWAY
Any major highway or thoroughfare.
 
ARTESIAN WELL
Well bored into a subterranean body of water, which, being under pressure, rises naturally to the surface without artificial pumping.
 
AS IS CONDITION
Premises accepted by a buyer or tenant in the condition existing at the time of the sale or lease, including all physical defects.
 
ASBESTOS
Fire and heat resistant material used in insulation, roofing, etc.
 
ASBESTOS CONTAINING MATERIALS
Environmental term referring to any material containing more than one percent asbestos.
 
ASHLAR (ASHLER)
Stone which is cut in squares and used both as a facing for masonry walls, and in foundations.
 
ASKING PRICE
Price at which the seller is offering property for sale. The eventual selling price may be less after negotiation with a buyer.
 
ASPECT
Position or direction. Exposure.
 
ASSEMBLAGE
Acquisition of contiguous properties into one ownership for a specific use.
 
ASSEMBLAGE COST
Cost above the value of individual properties because of assemblage rather than periodic individual sales.
 
ASSESS
To fix a value; to appraise. Most commonly used in connection with taxes.
 
ASSESSED VALUE
Value placed on a piece of real estate by the taxing authority for the purpose of taxation. Also called an assessment.
 
ASSESSMENT
(1) estimating of value of property for tax purposes. (2) A levy against property in addition to general taxes. Usually for improvements such as streets, sewers, etc.
 
ASSESSMENT BASE
Total assessed value of all property in a given assessment (tax) district.
 
ASSESSMENT DISTRICT
Area, the boundaries of which are set for tax assessment purposes only; these boundaries may cross city boundaries.
 
ASSESSMENT PERIOD
Taxable period. The period during which the tax assessment must be completed.
 
ASSESSMENT RATIO
Assessed value of a property expressed as a fraction in comparison to market value.
 
ASSESSMENT ROLL
List of taxable persons and property in a given area as compiled by the assessor.
 
ASSESSOR
One who estimates value of property for tax purposes.
 
ASSETS
Everything owned by a person or corporation which can be used for the payment of debts.
 
ASSIGN
To transfer property, or an interest in property.
 
ASSIGNEE
One who receives an assignment (pl. assigns).
 
ASSIGNMENT
Transfer to another of any property, real or personal, or of any rights or estates in said property. Common assignments are of leases, mortgages, deed of trust, but the general term encompasses all transfers of title.
 
ASSIGNMENT OF LEASE
Transfer by a lessee to a third party of the exact interest of said lessee. Differs and should not be confused with sublease (see which). A lease may legally contain certain restrictions of assignments and/or subleasing.
 
ASSIGNOR
One who makes an assignment.
 
ASSISTED LIVING      
A type of senior-housing that usually includes independent-living and limited-assistance to its renters.
 
ASSUMABILITY   
A mortgage loan which can be transferred to another person without a change in the terms of the loan. This typically requires a flat-fee to be paid to the lien-holder for transferring.
 
ASSUMPTION CLAUSE
Part (clause) of an assumable mortgage making it assumable. Also See: Assumable mortgage.
 
ASSUMPTION FEE
Lender's charge for paperwork involved in processing records for a new buyer assuming an existing loan.
 
ASSUMPTION OF MORTGAGE
Purchaser takes over mortgage payments for the balance of the loan, assuming primary liability. Unless specifically released by the lender, the seller remains secondarily liable.
 
ATRIUM
Interior court, centrally located in a structure, which is either uncovered or covered with a transparent or translucent material to admit light.
 
ATTACHMENT
Act of seizing persons or property by judicial order to bring them within the custody of the court. Most commonly the seizure of property to furnish security for a debt in connection with a pending action.
 
ATTEST
To witness, to certify, to affirm to be true or genuine
 
ATTESTATION CLAUSE
Clause in a document (deed, mortgage, etc.) in which the witnesses certify that the document has been properly executed.
 
ATTIC
Space under the roof of a structure but before the top story. May be simply an air space or improved and used.
 
ATTORN
To turn over; to transfer to another. To agree to recognize a new owner of a property and pay rent to him. See also: Letter of Attornment.
 
ATTORNEY'S OPINION OF TITLE
Statement placed in an abstract of title giving the opinion of the condition of title by an attorney who has examined the abstract. The attorney may be personally liable for mistakes he or she has made. Most abstract examination has modernly been replaced by title insurance.
 
ATTORNEY-IN-FACT
One who is appointed to act (as agent) for another (principal) under a power of attorney. The scope of the agent's authority is limited to that given by the power of attorney, which may be limited to one specific act or may be broader. See also: Power of Attorney.
 
ATTRACTIVE NUISANCE
Anything on a property which may attract small children and is dangerous to them. Reasonable care must be used to prevent injury to children.
 
AUCTION
Public sale of land or goods to the highest bidder.
 
AUTOMATIC EXTENSION
Clause in a document such as a lease or listing agreement stating that the terms are extended beyond the expiration date unless cancelled by one of the parties. The clause is usually required to be in large or bold type and, with regard to listings, is not enforceable in some states.
 
AVERAGE DAILY BALANCE
Sum of the daily balances in a bank account over a monthly period divided by the number of days in a month.
 
AVERAGE DAILY TRAFFIC
Number of vehicles passing a given point in one day. Usually obtained by finding the number for several days and averaging.
 
AVIGATION EASEMENT
Easement over private property abutting an airport runway, which limits the height of crops, trees, structures, etc., in the aircraft's take off and landing path.
 
AVULSION
Sudden and substantial tearing away of land by water and the deposit of said land as an addition to the land of another owner. The original boundaries apply and ownership of the land in questions remains in the original owner.
 
AVAILABLE SF  
The square footage available for lease.
 
AVERAGE ANNUAL OCCUPANCY        
The percentage of currently-rented units in a building, city, neighborhood or complex.
 
AVERAGE DAILY RATE      
A hotel rate used to evaluate the average daily rate of a hotel inclusive of vacancy and seasonality.
 
AWARD
In condemnation, the amount paid for the property taken.
 
AWNING
Canvas, metal or other material, which protrudes out over a window or doorway to provide protection from the sun, rain, etc.
 
AZIMUTH
Distance in degrees from North to an object, or, in the Southern hemisphere, from South to an object. A surveying term.
 
AZONAL SOIL
Soil which does not contain distinct horizons (layers). 
 
 
 
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 - B -    
 
B HORIZON
Layer of soil that lies beneath the top layer. The action of percolating water changes the composition of the B horizon.
 
BACKFILL
Used to brace a foundation or structure, it replaces the ground that is removed during the construction.
 
BACKUP OFFER
A second or "backup" offer to purchase a property, in the event that too many problems arise and the first offer doesn't work out.
 
BALANCE SHEET
Statement of the company' assets and liabilities that determine its equity (net worth).
 
BALANCED EXCHANGE
Under Section 1031 of the Internal Revenue code, a tax-free exchange of real estate properties that must be invested by the taxpayer.
 
BALLOON
A payment or final installment that is larger than the preceding ones in an installment or term loan.
 
BALLOON MORTGAGE 
Sshort-term mortgage that carries small payments until the end of the term when the balance is due in whole.
 
BALLOON NOTE
Note calling for periodic payments which are insufficient to fully amortize the face amount of the note prior to maturity, so that a principal sum known as a "balloon" is due at maturity.
 
BALLOON PAYMENT  
One large payment of the remaining principal balance of a mortgage, due at a time specified in the contract (i.e. a 5-year balloon would have periodic payments made through 5 years and then a lump-sum payment made on the 60th month.)
 
BASE MAP
Map that contains "base" information, such as city boundaries, city, county, and state.
 
BASE RENT
A minimal amount that is used as the minimum in rent payment of a lease.
 
BASE TITLE
Result of an examination of title for an internal use of a title insurance company. Usually covers a large area and is done in anticipation of future sales or subdividing of the area.
 
BASE YEAR
Year upon which a direct expense escalation of rent is based upon.
 
BASIS FOR DEPRECIATION
Value of property for purposes of depreciation. An example is a purchased asset. The basis is cost, whether fully paid for or not. The method for determining the basis is different for gift, inheritance, etc.
 
BASIS POINT (BP)       
1/100th of 1% usually expressed as a margin over an index rate.
 
BATTURE LAND
Land between a riverbank and the edge of the water when the water level is lower than normal.
 
BAY
Opening between two columns, walls, etc., which forms a room-like space. May be industrial space, parking space, barn space, or other use. Also, a bending or curving of the shoreline so as to form a partially enclosed body of water.
 
BAY WINDOW
Window that projects in a curve outwards from a wall, giving a bay- like effect to the interior.
 
BEARING VALUE
In construction, the ability of soil to bear the weight of the structure to be built.
 
BEARING WALL
Wall that supports the weight of a part of a structure in addition to its own weight.
 
BEDROCK
A solid rock beneath the soil, distinguished from rocks or boulders.
 
BEDROOM COMMUNITY
Area primarily residential. The people living there commute to work.
 
BEFORE AND AFTER METHOD
Appraisal method used in both condemnation and modernization. In condemnation the method is used in a partial taking. In modernization, an appraiser may take the value of property before and after remodeling to determine if the value increased from than modernization costs.
 
BENCH MARK
A surveying mark made in some object that is permanently fixed in the ground, showing the height of that point in relation to sea level.
 
BERM
Bench, ledge, or other resting place part way up a hill or slope. Also, a mound used to control drainage by diverting all or part of the flow.
 
BILATERAL (RECIPROCAL) CONTRACT
Contract that is formed by an exchange of promises. Performance of the contract takes place at a later date or time.
 
BLANKET MORTGAGE
Mortgage that covers more than one property of the owner of the mortgage, such as a mortgage covering all the lots of a builder in a subdivision. Also, a mortgage covering all real property of the owner of the mortgages, both present and future. When used in this meaning, it is also called a "general mortgage".
 
BLENDED RATE
Interest rate that is higher than the original loan but less than the current market rate.
 
BLIGHTED AREA
A term used in urban renewal, referring to an area that is run-down.
 
BLUEPRINT
Plan of a building in such detail as to enable workmen to construct it from the print. The name comes from the photographic process that produces the plan in white on a light blue background.
 
Bond Market
Usually refers to the daily buying and selling of thirty year treasury bonds. Lenders follow this market intensely because as the yields of bonds go up and down, fixed rate mortgages do approximately the same thing. The same factors that affect the Treasury Bond market also affect mortgage rates at the same time. That is why rates change daily, and in a volatile market can and do change during the day as well.
 
BREACH OF CONTRACT - Failure to perform a contract, in whole or part, without legal excuse.
 
BREACH OF WARRANTY
In real property, the failure of the seller to pass title as either expressed or implied (by law) in the document.
 
BREAK EVEN POINT 
In income property, the point where there is neither a positive nor a negative cash flow.
 
BREAKDOWN METHOD
Estimating accrued depreciation by using all three reasons (physical deterioration, functional obsolescence, economic obsolescence) for a loss in value.
 
BRIDGE LOAN
Short-term loan secured by the equity in an as-yet-unsold house, with the funds to be used for a down payment and/or closing costs on a new house. There is no payment of principal until the house is sold or at the end of the loan term, whichever comes first. Interest payments can or cannot be deferred until the house is sold.
 
BUFFER STRIP (BUFFER ZONE)
Parcel of land that separates two other parcels or areas, such as a strip of land between an industrial and residential area.
 
BUILDING CODE
Comprehensive set of laws that control the construction of buildings, including design, materials used, construction, use, repair, remodeling, and other similar factors.
 
BUILDING CODE
Comprehensive set of laws that control the construction of buildings, including design, materials used, construction, use, repair, remodeling, and other similar factors.
 
BUILDING RESIDUAL TECHNIQUE
Appraisal technique by which building value is determined by first determining the net return attributable to the land only, and deducting it from the total return to the property (may be estimated). The residual amount is capitalized to find the building value. Best used when land value is easy to estimate and building value difficult to estimate.
 
BUILD TO SUIT
Method of leasing property whereby the lessor builds to suit the tenant (according to the tenant's specifications). The cost of construction is figured into the rental amount of the lease that is usually for a long-term.
 
BUILDING PERMIT     
A document issued by a government regulatory authority that allows a builder to construct or modify a structure.
 
BUILDING SF     
The usable square footage of the building.
 
 
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CALL
In metes and bounds description, the angle and distance of a given line or arc. Each call is usually preceded by the word "then" or "thence". Example: N 22% E 100' (1st call), thence N 80% E 100' (2nd call). (2) To demand payment due to default. Also used when a loan payment is not large enough to amortize the loan. Example: A mortgage payment requiring 20 years to pay in full but for a term of 5 years would be referred to as a 20-year amortization with a 5- year call.
 
CALL OPTION
Clause in a note and mortgage allowing the lender to demand full payment of the loan before the full term.
 
CAP
The maximum amount an adjustable-rate mortgage may increase by, regardless of index changes. An interest rate cap limits the amount the interest can change, while a payment cap limits the increase in monthly payment to a specific dollar amount.
 
CAPITALIZATION
Determining a present value of income property by taking the annual net income (either known or estimated) and discounting by using the rate of return commonly acceptable to buyers of similar properties. For example: Net income of a property is $10,000 per year. Capitalizing at a rate of 10%, the property would be worth $100,000.
 
CAPITAL EXPENDITURES   
Line items on a Profit and Loss statement that would not be expensed on an annual basis. This category would include replacement of major building systems, such as roofs, etc.
 
CAPITALIZATION RATE     
The ratio of the first-year NOI to the asking price (NOI/Asking price). This is used by appraisers and lenders to reflect the supply and demand rate for like-properties in the immediate market area. This is not the rate of return.
 
CARVE OUT      
The definition used for the inclusion of recourse in loan documents for fraud and misrepresentation.
 
CASH EQUIVALENCY ANALYSIS
Appraisal technique by which the price of comparable properties selling at different financing terms are adjusted to find market value. The theory is that terms less advantageous to the seller will cause a higher sale price; cash being most advantageous to the seller.
 
CASH-ON-CASH
Amount of cash received compared to the amount of cash invested. Also called the Equity Dividend Rate, Cash Flow Rate or Equity Capitalization Rate.
 
CASH OUT REFINANCING   
When the principal amount of a new mortgage involved in refinancing is greater than the principal amount outstanding on the existing mortgage being refinanced, and all or a portion of the equity is converted to cash.
 
CENTRAL ASSESSMENT
Assessment of property under one ownership but located in more than one assessment district. Used for railroads and public utilities to stabilize the assessment value.
 
CENTRAL BUSINESS DISTRICT (CBD)
The downtown section of a city, generally consisting of retail, office, hotel, entertainment, and government land-uses with some high-density housing.
 
Chain of Title
 An analysis of the transfers of title to a piece of property over the years.
 
Clear Title
 A title that is free of liens or legal questions as to ownership of the property.
 
CLEARANCE      
The distance between the buildings floor and effective storage ceiling.
 
CLIMATE-CONTROLLED    
An industrial and self-storage term that represents temperature-controlled commercial space.
 
CLOSING  
The meeting between the buyer, seller and lender (or their agents) where the property and funds legally change hands.
 
CLOSING COSTS        
The costs and fees associated with the official change in ownership of the property and obtaining the mortgage, if any, that is assessed at the closing/escrow part of the transaction.
 
CLOUD ON TITLE
Invalid encumbrance on real property, which, if valid, would affect the rights of the owner. For example: A sells lot 1, tract 1, to B. The deed is mistakenly drawn to read lot 2, tract 1. A cloud is created on lot 2 by the recording of the erroneous deed. The cloud may be removed by quitclaim deed, or, if necessary, by court action.
 
CMBS
(Commercial Mortgage-Backed Security)    A bond or other financial obligation secured by a pool of mortgage loans.
 
Collateral
In a home loan, the property is the collateral. The borrower risks losing the property if the loan is not repaid according to the terms of the mortgage or deed of trust.
 
Combined Loan-To-Cost (CLTC)
The amount of the loan (first-position and mezzanine combined) compared to the total cost of the purchase/project.
 
Combined Loan-To-Value (CLTV)
The amount of the loan(s) including all secured liens compared to the estimated value of the property.
 
Commercial Bank
A financial institution authorized to provide a variety of financial services, including consumer and business loans (generally short-term with full recourse to the Borrower). Commercial banks may be members of the Federal Reserve System.
 
COMMERCIAL LAND
Development and transitional land acquired for investment use: land for lots, site-selection and assembling of parcels.
 
COMPARATIVE MARKET ANALYSIS   
An estimate of the value of a property based on an analysis of sales of properties with similar characteristics in the immediate marketing area.
 
COMMUNITY REINVESTMENT ACT
Federal legislation of 1977 (and subsequent amendments) for the purpose of encouraging banks and thrifts (savings and loans) to make more loans in their local areas. The act created the National Consumer Cooperative Bank to make loans to local banks and thrifts for community investment (loans) and also to guarantee certain loans made in the local community.
 
Commitment Fee
A charge required by a lender to lock in specific terms on a loan at the time of Commitment.
 
Commitment Letter
An official notification from a Lender to a Borrower indicating that the Borrower's loan application has been approved. It will state in detail the terms and conditions of the prospective loan.
 
Comparable Sales
Recent sales of similar properties in nearby areas and used to help determine the market value of a property. Also referred to as "comps."
 
Condominium
A type of ownership in real property where all of the owners own the property, common areas and buildings together, with the exception of the interior of the unit to which they have title. Often mistakenly referred to as a type of construction or development, it actually refers to the type of ownership.
 
Condominium Conversion
Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.
 
Condominium Hotel
A condominium project that has rental or registration desks, short-term occupancy, food and telephone services, and daily cleaning services and that is operated as a commercial hotel even though the units are individually owned. These are often found in resort areas like Hawaii.
 
CONDUIT   
The financial intermediary that sponsors the link between the lender(s) originating loans and the ultimate investor. The conduit makes or purchases loans from third-party correspondents under standardized terms, underwriting and documents and then, when sufficient volume has been obtained, pools the loans for sale to investors in the CMBS market.
 
CONDITIONAL COMMITMENT
Loan commitment given before a borrower (buyer) is obtained, and subject to approval of the buyer by the lender.
 
CONFORMING LOAN
Mortgage loan that follows the requirements for sale in the secondary market to FHLMC or FNMA.
 
CONFORMITY, PRINCIPLE OF
Appraisal term stating that general uniformity of structures in an area produces highest value.
 
CONGRUOUS
Suitable or appropriate. In appraisal, a property which conforms to the area.
 
CONGREGATE CARE
A type of senior-housing that usually involves a central eating facility, smaller rooms, and a higher level of care for its tenants.
 
CONSTANT MATURITY TREASURE (CMT)   
An index based on the U.S. Treasury that is used in the pricing of debt for banks.
 
CONSTRUCTION LOAN      
A short-term loan to pay for the construction of commercial buildings. These loans typically provide periodic disbursements to the builder as each stage of the building is completed. When construction is completed, a take? out or permanent loan is used to pay off the construction loan.
 
CONSTRUCTION TYPE       
The type of construction used for a commercial building (i.e. concrete tilt-up, etc.).
 
Consumer Price Index
The most widely known measures of price levels and inflation that are reported to the U. S. government. It measures and compares, on a monthly basis, the total cost of a statistically determined "typical market basket" of goods and services consumed by U. S. households.
 
CONTINGENCY
An element of an agreement that must be satisfied before the total agreement can be consummated.
 
CONVERTIBILITY CLAUSE
Provision in a convertible adjustable rate mortgage giving the borrower the option of changing to a fixed rate at specified times during the term of the mortgage.
 
CONVEY
To transfer real estate from one person to another.
 
CONVEYANCE
Transfer of title to land. Includes most instruments by which an interest in real estate is created, mortgaged, or assigned.
 
CORRELATION
Use of different appraisal methods to reach an estimate of value of a property. The methods must be weighed as to relative value in each specific appraisal.
 
Correspondent
A specialized type of mortgage banker whose function is limited to the origination of mortgage loans which are sold to other mortgage bankers or investment bankers under a specific commitment.
 
COST APPROACH
Appraisal method, estimating the replacement cost of a structure, less depreciation, plus land value.
 
Cost of Funds Index (COFI)
One of the indexes that is used to determine interest rate changes for certain adjustable-rate mortgages. It represents the weighted-average cost of savings, borrowings, and advances of the financial institutions such as banks and savings & loans, in the 11th District of the Federal Home Loan Bank.
 
COUPON   
The coupon on U.S. Government securities expressed as an annual percentage of face value, is the interest rate the U.S. Government promises to pay to the holder on an ongoing basis until maturity.
 
CREDIT TENANT        
A tenant who has obtained a debt-rating by S&P or Moody's of BBB- or better.
 
CREDIT-TENANT NET LEASE      
A lease with a tenant that has a credit rating of BBB- or better.
 
Cross-Collateralization
Net income shortfalls on one property are offset by excess cash flow from other properties in a pool of crossed loans. Significantly enhances a transaction from the viewpoint of investors and rating agencies.
 
Current Yield
A measurement of investment returns based on the percentage relationship of annual cash income to the investment cost.
 
CUTS
In construction, the excavation of land into a terrace or terraces, to control flooding, locate a highway, building, or affect the grade for some other purpose.
 
 
 
 
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DEBT SERVICE  
The periodic payments (principal and interest) made on a loan.
 
DEBT SERVICE COVERAGE RATIO (or DEBT COVERAGE RATIO)   
Measures a mortgaged-properties ability to cover monthly payments defined as the ratio of net operating income over the periodic payments (principal and interest) made on a loan. A DSCR of less than 1.0 means that there is insufficient cash flow generated by the property to cover required debt payments. Typically a lender requires a DSCR of 1.25 or better depending on the property type.
 
DEED IN LIEU OF FORECLOSURE
Deed given by an owner/borrower to a lender to prevent the lender from bringing foreclosure proceedings. The validity of the deed depends to some degree on "fairness" under the circumstances, and adequacy of consideration will be considered.
 
DEFAULT JUDGMENT
Judgment entered against a party who fails to appear in court at the scheduled time.
 
DEFEASANCE    
A clause in a mortgage that gives the borrower the right to prepay a commercial mortgage by purchasing US Treasuries in an escrow account to pay off ongoing debt service.
 
Delinquency
Failure to make mortgage payments when mortgage payments are due. For most mortgages, payments are due on the first day of the month. Even though they may not charge a "late fee" for a number of days, the payment is still considered to be late and the loan delinquent. When a loan payment is more than 30 days late, most lenders report the late payment to one or more credit bureaus.
 
DEFICIENCY JUDGMENT
Commonly, the amount for which the borrower is personally liable on a note and mortgage if the foreclosure sale does not bring enough to cover the debt. Actually the judgment is for the total amount and not for the deficiency, the recovery from the foreclosure sale being deducted from this amount.
 
DENSITY  
The number of buildings or persons occupying a certain area of land, generally an acre.
 
DELAYED RECONVEYANCE
Reconveyance of a deed of trust which is issued and recorded after transfer of title and issuance of title insurance (not showing the deed of trust). Usually occurs when the lender is in another state and will not issue the reconveyance until paid in full.
 
DEPTH CURVE
Appraisal graph showing the increase or decrease in value of lots of equal front footage, as the depth increases or decreases (depth factor).
 
Depreciation
A decline in the value of property; the opposite of appreciation. Depreciation is also an accounting term which shows the declining monetary value of an asset and is used as an expense to reduce taxable income. Since this is not a true expense where money is actually paid, lenders will add back depreciation expense for self-employed borrowers and count it as income.
 
Discount Rate
The rate of interest charged to banks that buy money from the Federal Reserve System. An increase in the rate not only discourages the banks from borrowing, but it also serves as a signal that interest rates are probably going to increase. Also, a compound interest rate used to convert expected future income into a present value income.
 
DISPOSITION OF REAL ESTATE STATEMENT
Statement that the buyer will occupy the property being purchased even though the buyer owns other property. The buyer states that the other property will be sold or rented. Particulars must be given as to any loan on the property and the equity or rent to payment amounts.
 
DISTRIBUTION WAREHOUSE      
(also called Light Industrial) Generally is considered the least intense industrial use. Office-use is limited to management tasks for the distribution or warehouse facility, or about 15 percent of total space.
 
DOCK HIGH       
Existence and/or number of dock level doors.
 
DUE-ON-SALE-CLAUSE
Clause in a mortgage which gives the lender the right to require immediate repayment of a mortgage balance if the property changes hands.
 
DUE DILIGENCE         
The legal definition: a measure of prudence, activity or assiduity, as is properly to be expected from, and ordinarily exercised by, a reasonable and prudent person under the particular circumstances. In CMBS, due diligence is the foundation of the process because of the reliance securities-investors must place on the specific expertise of the professionals involved in the transaction
 
 
 
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Easement
A right of way giving persons other than the owner access to or over a property.

EBITDA
EBITDA stands for earnings before interest, taxes, depreciation and amortization. It is an accounting convention designed to arrive at an earnings figure that presents results on an operating basis. Basically, it encompasses revenue minus wages, utilities and other expenses needed for day-to-day operations.
 
EFFECTIVE GROSS INCOME        
Gross income of a building if fully rented, less an allowance for estimated vacancies.
 
Eminent Domain
The right of a government to take private property for public use upon payment of its fair market value. Eminent domain is the basis for condemnation proceedings.
 
ENCROACHMENT
Generally, construction onto the property of another, as of a wall fence, building, etc.
 
ENCUMBRANCE, INCUMBRANCE
Anything that affects or limits the title to a property, such as outstanding mortgages, easement rights or unpaid property taxes.
 
ENGINEERING REPORT      
Report generated by an architect or engineer describing the current physical condition of the property and its major building systems (i.e., HVAC, parking lot, roof, etc.). The report also determines an amount for calculating replacement reserves, if needed.
 
ENTITLEMENTS          
A right to benefits specified especially by law or contract.
 
ENVIRONMENTAL IMPACT STATEMENT (EIS)
Report of the probable effect of a development on the surrounding area (environment). The report is prepared by an independent company to federal, state, or local guide lines.
 
ENVIRONMENTAL LIEN
Lien to secure payment for removal of contaminants. Example: Superfund money is used for cleanup. The lien is then filed as well as a lawsuit to recover the money from the responsible parties.
 
ENVIRONMENTAL REPORT         
Report generated by qualified environmental firms to determine potential environmental hazards in a buildings region or within the building itself. These reports are typically called a Phase I, Phase II, etc and subsequent reports are only required if the preceding report expresses any concerns as to the suitability of the property.
 
ENVIRONMENTAL RISK      
Risk of loss of collateral value and of lender liability due to the presence of hazardous materials, such as asbestos, PCBs, radon or leaking underground storage tanks on a property.

Equal Credit Opportunity Act (ECOA)
A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

 
EQUITY    
The difference between the fair market value and current indebtedness, also referred to as owners interest.
 
EQUITY LOAN   
A loan for an equity position which represents an ownership position in a property or a loan for the participation in the profits of the commercial property.
 
Equity Participation
The right of a Lender to a share in the gross profits, net profits or net proceeds in the event of a sale or refinance of a property on which the Lender has made a loan. Also known as an equity kicker.
 
ESCHEAT
Reversion of property to the state in the absence of an individual owner. Usually occurs when a property owner dies intestate, and without heirs.
 
ESCROW  
1. A special account set up by the lender in which money is held to pay for taxes and insurance. 2. A third-party who carries out the instructions of both the buyer and seller to handle the paperwork at the settlement.
 
Expense Ratio
A comparison of the operating expenses to potential gross income. This ratio can be compared over time and with that of other properties to determine the relative operating efficiency of the property considered.
 
EXTENDED STAY       
A hotel that caters to a business traveler on an extended lodging period.
 
 
 
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FAIR MARKET VALUE         
An appraisal-term for the price which a property would bring in a competitive market, given a willing seller and willing buyer, each having a reasonable knowledge of all pertinent facts, with neither being under any compulsion to buy or sell.
 
FARM        
Land used for agricultural purposes for crop and livestock farming.
 
FEASIBILITY SURVEY
Study of an area before construction of a project, to determine the probable financial success of the project.
 
FEDERAL FUNDS (FED FUNDS)   
Fed Funds is the interest rate charged by those banks with excess reserves on hand (reserves over and above the minimum required by the Federal Reserve) to those banks in need of overnight loans to meet reserve requirements. Since it is set daily, the Federal Funds rate is the most sensitive indicator of the direction of interest rates.
 
Fannie Mae (FNMA)
The Federal National Mortgage Association, which is a congressionally chartered, shareholder-owned company that is the nation's largest supplier of home mortgage funds. For a discussion of the roles of Fannie Mae, Freddie Mac (FHLMC), and Ginnie Mae (GNMA), see the Library.
 
Fee Simple
The greatest possible interest a person can have in real estate.
 
Firm Commitment
A lender’s agreement to make a loan to a specific borrower on a specific property.
 
FIT-OUT   
Tenant improvements within a commercial property.
 
FIXED-RATE MORTGAGE   
A mortgage with an interest rate that remains constant for the life of the loan.
 
FIXTURES          
Personal property which for some reason, such as the manner of attachment, has become realty. Such property is also referred to as chattel real.
 
FLOATING SLAB
Concrete slab foundation where the slab and supporting beams are poured separately.
 
FLEX SPACE      
An industrial property, which has both an office and an industrial component.
 
FLOOR-TO-AREA RATIO (FAR)   
The relationship between the total amount of floor space in a multi-story building and the base of that building. FARs are dictated by zoning laws and, in effect, stipulate the maximum number of stories a building may have.
 
FORECLOSURE
The process by which a lender takes back a property on which the mortgagee has defaulted. A loan servicer may take over a property from a borrower on behalf of a lender. A property usually goes into the process of foreclosure if payments are more than 90 days past due.
 
FORWARD COMMITMENT
Provides the borrower with a locked-in loan rate. Used to allow owners of property to know their mortgage obligation before renting the property and builders to have the same knowledge before construction.
 
FRACTIONAL APPRAISAL
Appraisal of a portion of a property, such as the value of a leasehold interest, value of an improvement without land, etc.
 
FOUNDATION   
The concrete slab beneath the property, which holds the property in place.
 
FRANCHISE       
A business arrangement undertaken for the purpose of marketing a product or service. One party (the franchiser) provides marketing and selling expertise for a fee to another party (the franchisee) who in turn sells the product or service in the marketplace.
 
FRANCHISE FEES       
The fee is usually an initial purchase requirement plus an ongoing percentage of gross sales of the business.
 
FREESTANDING RETAIL     
A building which contains only one retail business. Fast-food franchises and retail stores are often freestanding buildings.
 
FREESTANDING         
One commercial building meant to be occupied by a single user.
 
FRONT FOOT COST
Determination of the value of real property based on a value per foot as measured along the frontage of a parcel. Usually used with commercial property.
 
FUNCTIONAL OBSOLESCENCE
Type of depreciation (loss in value) to improvements because the design and/or materials are outdated. When economically feasible to correct, it is called "curable", when not "incurable".
 
FULL-SERVICE  
A hotel definition that represents services provided to its guests outside of lodging (i.e. room service, concierge services, and restaurant).
 
Fully Amortized Mortgage Loan
A loan that is fully repaid at maturity by periodic (monthly) reductions of the principal. The first part of each monthly payment covers interest on the outstanding debt as of the payment due date and the remainder of the payment goes to reduce the outstanding debt.
 
 
 
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 - G -
 
GAP FINANCING
(1) Interim financing. (2) A loan between the floor amount and full amount of a take out loan
 
GENERAL PARTNERSHIP   
In a partnership, a partner whose liability is not limited. All partners in an ordinary partnership are general partners. A limited partnership must have at least one general partner.
 
GOOD FAITH DEPOSIT       
A deposit made by a purchaser of real estate to evidence an honest intent of executing a purchase or lease agreement.
 
GOVERNMENT-SUBSIDIZED        
Rents that are partly paid by the government (e.g. Section 8 residential subsidies).
 
GRADE LEVEL DOOR     
A door at the ground level of the foundation.
 
GROUND LEVEL         
Existence and/or number of ground level doors.
 
Gross Lease
A lease of a commercial property whereby the landlord (lessor) is responsible for paying all property expenses, such as taxes, insurance, utilities, and repairs.
 
 
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Hazard Insurance
Insurance coverage that in the event of physical damage to a property from fire, wind, vandalism, or other hazards.
 
Hedging
The purchase or sale of mortgage future contracts by a mortgage banker or lender for the purpose of protecting cash transactions made at a future date.
 
HARDPAN
Compacted layer of soil, usually containing clay, through which it is difficult to drain or dig.
 
HECTARE
French unit of measurement, equaling 10,000 square meters (2.471 acres).
 
HETEROGENEOUS
Appraisal term describing an area composed of buildings of varied styles or uses. Not as desirable as homogeneous property.
 
HIGHEST AND BEST USE
Use of land which will result in its highest value. In appraisal this cannot be merely theoretical but must be realistic in that the use must be legal (proper zoning, etc.), physically achievable and financially feasible.
 
HIGH-RISE OFFICE       
A commonly-used expression referring to an office building that is high enough to require an elevator. Typically greater than 3 stories.
 
HUD-1 settlement statement
A document that provides an itemized listing of the funds that were paid at closing. Items that appear on the statement include real estate commissions; loan fees, points, and initial escrow (impound) amounts. Each type of expense goes on a specific numbered line on the sheet. The totals at the bottom of the HUD-1 statement define the seller's net proceeds and the buyer's net payment at closing. It is called a HUD1 because the form is printed by the Department of Housing and Urban Development (HUD). The HUD1 statement is also known as the "closing statement" or "settlement sheet."
 
HUMUS
Organic portion of soil, formed by partially decomposed animal and vegetable matter.
 
 
 
 
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 - I -   
 
 
INDEX       
An economic indicator, which is usually a published interest rate.
 
INCOME AVERAGING
Method of figuring income tax by paying tax on the average income per year for the past five years. For example: A, a real estate salesperson, earns $10,000 taxable income for 4 years. In the fifth year, A sells a shopping center and earns $100,000 taxable income. A could take the total income for 5 years ($140,000), divide by 5 ($28,000), and pay tax on $28,000 for the past 5 years, less what A has already paid.
 
Income Approach
A method of appraising property based on the properties anticipated future income. Once the net income is established, it is then divided by the estimated capitalization rate to arrive at a fair market value
 
INCOME CAPITALIZATION APPROACH
Estimating value (v) by dividing Net Operating Income (N.O.I.) by an overall capitalization rate R0. N.O.I. ÷ R0 = v. Also See: Overall Capitalization Rate.
 
Index
A published interest rate, such as prime rate, LIBOR, T-Bill rate or the 11th District COF. Lenders use indexes to establish interest rates charged on mortgages or to compare investment returns.
 
Ingress and Egress
Applied to easements, meaning the right to go in and out over a piece of property but not the right to park on it.
 
Interim Financing
A loan, including a construction loan, used when the property owner is unable or unwilling to arrange permanent financing. Generally arranged for less than 3 years, used to gain time for operations and or market conditions to improve.
 
INDUSTRIAL      
Property used for industrial purposes, such as factories.
 
INDUSTRIAL FOR LEASE    
Industrial space available.
 
INTEREST
The sum paid for borrowing money, which pays the lenders costs of doing business.
 
INTEREST RATE         
The sum charged for borrowing money, expressed as a percentage
 
INTEREST RATE CAP
Limits the interest rate or the interest rate adjustment to a specified maximum. This protects the borrower from increasing interest rates.
 
 
 
 
 
 - J -
 
 
Joint Tenancy
A form of ownership or taking title to property which means each party owns the whole property and that ownership is not separate. In the event of the death of one party, the survivor owns the property in its entirety.
 
JOINT VENTURE           
An agreement by two or more individuals or entities to engage in a single project or undertaking. Joint ventures are used in real estate development as a means of raising capital and spreading risk. For all practical purposes a joint venture is similar to a general partnership. However, once the purpose of the joint venture has been accomplished, the entity ceases to exist.
 
Judicial Foreclosure
A type of foreclosure proceeding used in some states that is handled as a civil lawsuit and conducted entirely under the auspices of a court. Other states use non-judicial foreclosure.
 
 
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 - K -
 
 
 - L -  
 
 
LANDLOCKED PARCEL
Parcel of land surrounded entirely by privately owned land, with no access to a public right of way (road). Condemnation for a limited access highway is a major cause of such parcels.
 
LEASE ASSIGNMENT
An agreement between the commercial-property owner and the lender that assigns lease payments directly to the lender.
 
LEASE TYPE      
Gross, Triple Net (NNN), Net Net (NN), Hybrid, etc. These terms convey which of the operating costs the tenant assumes responsibility for. Gross Triple Net is the most favorable to a lender.
 
Lease Abstract
A detailed recap of office and retail leases including tenant name, suite #, square footage, current rental rate including increases, lease start date, term, CAM requirements, extension options and rates.
 
Lease Option
An alternative financing option that allows home buyers to lease a home with an option to buy. Each month's rent payment may consist of not only the rent, but an additional amount which can be applied toward the down payment on an already specified price.
 
Leasehold Estate
A way of holding title to a property wherein the mortgagor does not actually own the property but rather has a recorded long-term lease on it.
 
LEASEHOLD IMPROVEMENTS     
The cost of improvements for a leased property, often paid by the tenant.
 
LEASING COMMISSIONS    
An amount earned by a real estate broker or leasing agent for his services.
 
LESSEE     
Tenant in a building.
 
Leveraged Buy-out
The acquisition of a company, financed primarily with borrowed money, using the acquired company’s assets to collateralize the loan.
 
LIBOR (London Interbank Offered Rate)    
The rate that the most creditworthy international banks dealing in Eurodollars charge each other for large loans. Rates are quoted in monthly increments out to 1 year.
 
LIMITED LIABILITY COMPANY (LLC)  
The restriction of ones potential losses to the amount invested, thus the absence of personal liability, usually provided to stockholders in a corporation and limited partners of a limited partnership.
 
LIMITED PARTNERSHIP      
One in which there is at least one partner who is passive and limits liability to the amount invested, and at least one partner whose liability extends beyond monetary investment.
 
LIMITED SERVICE      
A hotel that offers lodging services only.
 
Loan-To-Cost Ratio (LTC)
The loan-to-cost ratio (LTC) is a ratio used in commercial real estate construction to compare the amount of the loan used to finance a project to the cost to build the project. If the project cost $1 million to complete and the borrower was asking for $800,000, the loan-to-cost (LTC) ratio would be 80%.
 
LOAN-TO-VALUE RATIO (LTV)   
The ratio between the principal amount of the mortgage balance, at origination or thereafter, to the current value of the underlying real estate collateral. The ratio is commonly expressed to a potential borrower as the percentage of value a lending institution is willing to finance. The ratio is dynamic and varies by lending institution, property type, geographic location, property size, etc.
 
Lock-In-Period
The time period during which the lender has guaranteed an interest rate to a borrower.
 
Locked-In Interest Rate
The rate promised by a lender at the time of loan application or commitment. On income property loans, a lock-in generally requires a commitment fee or rate lock fee from the loan applicant.
 
LOCK-OUT PERIOD    
A period of time after loan origination during which a borrower cannot prepay the mortgage loan without paying the interest the loan would have incurred during the lock-out period.
 
LOT SIZE  
Total square footage of the land.
 
LOW-RISE OFFICE       
A commonly-used expression referring to an office building that is too low to require an elevator.
 
 
 
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 - M -
 
MALL        
(also called a Super-Regional Center) An enclosed shopping center with three or more major department stores which typically draws from a large trade area of 12 or more miles.
 
MANAGEMENT FEE   
The agreed-upon compensation paid to a property-management company for managing a real estate project. The fee is usually based on a percentage of effective gross income.
 
MANUFACTURING     
(also called Heavy Industrial) Auto-making, textiles, steel, chemicals, and food-processing are typical uses of such properties. Typically zero to five percent office space.
 
MARGIN   
The amount that is added to an index rate to determine the total interest rate.
 
MARKETING EXPENSES     
Expenses accrued to market commercial properties.
 
Market and Feasibility Study
A detailed analysis of activities in a market with regard to such influences as location, demand and competition, which may or may not affect the value of property. Includes an analysis of a real estate project to determine the most profitable use and the likelihood of the proposed use being a financial success. The study is often used by the promoter or developer to encourage would-be investors to participate in the venture and to assist lenders in making their decision whether or not to loan the necessary funds.
 
Market Approach
A method of appraising property by analyzing sales prices of similar properties (comparables) recently sold.
 
Market Rent
The rental income that a property is likely to command in the under current market conditions. Market rent, also referred to as economic rent, and may be either higher or lower than what the property is actually renting for under the terms of a lease.
 
MAT
Monthly Average Treasury.
 
Maturity
The date on which the principal balance of a loan, bond, or other financial instrument becomes due and payable. 
1. The termination period of a note (e.g., a 25-year mortgage has a maturity of 25 years). 2. In sales law, the date a note becomes due.
 
MAX CONTIGUOUS SF        
The amount of available connected square feet.
 
MAX LEASE RATE      
The highest asking lease rate.
 
MEDICAL OFFICE       
An office space which offers medical services.
 
MEZZANINE/SECOND LOAN        
A loan secured by a mortgage or trust deed in which the lien is junior, or secondary, to another mortgage or trust deed.
 
MAI
Designation conferred by the Appraisal Institute upon member appraisers who are qualified to appraise all types of property as well as give real estate investment advice
 
MARGIN
In an adjustable rate loan, the difference between the index rate and the interest rate of the loan. Example: The borrower's interest rate is 2 points (percent) over the prime rate. The 2 points is called the margin.
 
MARKET DATA APPROACH
Appraising the value of a property by comparing the price of similar properties (comparables) recently sold. The degree of similarity (physical characteristics and locations) of the properties and the circumstances of the sale (time and terms) are the important considerations.
 
MASTER LEASE - lease controlling subsequent leases. May cover more property than subsequent leases. For example: "A" leases an office building, containing ten offices, to "B". "B" subsequently leases the ten offices individually. The ten leases from "B" as lessor are controlled by the lease from "A" to "B" (master lease).
 
Merged Credit Report
A credit report which reports the raw data pulled from two or more of the major credit repositories. Contrast with a Residential Mortgage Credit Report (RMCR) or a standard actual credit report.
 
Mezzanine Loan
A second mortgage. It usually bears interest at a higher rate than secured loans and sometimes carries the option to give the lender a stake in the equity.
 
Mixed-Use Commercial Project
A real estate development that contains two or more different uses all intended to be harmonious and complementary. An example would include a high-rise building with retail shops on the first two floors, office space on floors three through ten, apartments on the next ten floors, and a restaurant on the top floor.
 
Modification
Occasionally, a lender will agree to modify the terms of your mortgage without requiring you t refinance. If any changes are made, it is called a modification.
 
Mortgage Banker
A financial middleman who, in addition to bringing borrower and lender together, makes loans, packages them, and sells the packages to both primary and secondary investors. Usually the mortgage banker continues to service the loan (collect debt service, pay property taxes, handle delinquent accounts, etc.) even after the loan has been packaged and sold. For this management service a small percentage of the balance paid to the investor goes to the mortgage banker. Quite often the loan origination fee or finder's fee charged the borrower is more than offset by a lower interest rate from a lender not directly accessible to the borrower.
 
MORTGAGE POOL
Group or "pool" of mortgages, an interest in which can be purchased through a securities dealer. Because of market changes in interest rates and points (discounts), early payoffs, and foreclosures, pools have different returns and, therefore, different investment values. The rate of payoffs and foreclosures is called the "speed" of the pool.
 
Mortgagee
The lender in a mortgage agreement.
 
Mortgagor
The borrower in a mortgage agreement.
 
MID-RISE  
A commonly-used expression referring to an office building that is high enough to require stairs but too low to require an elevator.
 
MILITARY CLAUSE    
A clause included in a lease of a property (most commonly found in residential leases), which allows the tenant to terminate the lease without penalty if and when the tenant is transferred to another location.
 
MIN LEASE RATE       
The lowest lease rate available.
 
MIN. DIVISIBLE SF     
The smallest amount of available square feet.
 
MIXED USE        
A real estate development that contains two or more different uses all intended to be harmonious and complementary. An example would include a high-rise building with retail shops on the first two floors, office space on floors three through ten, apartments on the next ten floors, and a restaurant on the top floor.
 
MOBILE HOME PARK
A parcel of land zoned and developed for use by occupants of mobile homes.
 
MONEY MARKET       
The market for short-term debt instruments.
 
MULTI-FAMILY PROPERTY CLASS A  
Properties are above-average in terms of design, construction and finish; command the highest rental rates; have a superior location, in terms of desirability and/or accessibility; generally are professionally-managed by national or large regional management companies.
 
MULTI-FAMILY PROPERTY CLASS B   
Properties frequently do not possess design and finish reflective of current standards and preferences; construction is adequate; command average rental rates; generally are well-maintained by national or regional management companies; unit sizes are usually larger than current standards.
 
MULTI-FAMILY PROPERTY CLASS C  
Properties provide functional housing; exhibit some level of deferred maintenance; command below-average rental rates; usually located in less desirable areas; generally managed by smaller, local property-management companies; tenants provide a less-stable income stream to property owners than Class A and B tenants.
 
 
 
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N -  
 
 
NARRATIVE APPRAISAL
Most detailed of the appraisal reports in which conclusions are supported and explained. The requirements for reaching said conclusions, however, do not differ from the shorter letter report of any properly done appraisal.
 
NEIGHBORHOOD CENTER (including Community Center)
A shopping center anchored by a supermarket and/or drugstore, that provides convenience goods and services to a neighborhood. It is usually between 30,000 and 100,000 square feet, and draws from a one to three mile radius.
 
NET ACRE
Acre which may be used for building of structures. For example: A builder buys ten acres of raw land on which to build houses. Three acres are used for streets, sidewalks, and other off-site improvements. The remaining seven acres are the net acres of the ten acre site
 
NET EFFECTIVE RENT        
Rental rate adjusted for lease concessions.
 
NET OPERATING INCOME (NOI)
Total income less operating expenses, adjustments, etc. but before mortgage payments, tenant improvements and leasing commissions.
 
NET-NET LEASE (NN)
Usually requires the tenant to pay for property taxes and insurance in addition to the rent.
 
NON-RECOURSE        
A mortgage or deed of trust securing a note without recourse allowing the lender to look only to the security (property) for repayment in the event of default, and not personally to the borrower. A loan not allowing for a deficiency judgment. The lenders only recourse in the event of default is the security (property), and the borrower is not personally liable.
 
Nonconforming Use
A use that violates zoning regulations or codes but is allowed to continue because it began before the zoning restriction was enacted.
 
Note
A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.
 
Note Rate
The interest rate stated on a mortgage note.
 
NOTICE OF DEFAULT (NOD)        
To initiate a non-judicial foreclosure proceeding involving a public sale of the real property securing the deed of trust. The trustee under the deed of trust records a Notice of Default and Election to Sell (NOD) the real property collateral in the public records.
 
 
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- O -
 
 
OBSOLESCENCE
Appraisal term meaning that the age of a structure may cause it to become undesirable in use or appearance (old fashioned) and consequently lose income and value.
 
OFFICE     
A structure used primarily for the execution of business transactions.
 
OIL AND GAS LEASE
Lease giving the lessee the right to extract oil and gas from land. More like a mining lease than a land lease, in that the lessee has ownership interest in a portion of the property (the oil and gas) rather than just the use of the property. The lessor is generally paid based on the oil and gas taken.
 
100% PRIVATE PAY    
An assisted-living designation where senior-housing residents pay 100% of the rent versus paying by welfare or government subsidies.
 
OPERATING EXPENSE        
Periodic expenses necessary to the operation and maintenance of an enterprise (e.g., taxes, salaries, insurance, maintenance). Often used as a basis for rent increases.
 
ORIGINATION   
Securing a completed mortgage application from a commercial (or residential) borrower.
 
 
 
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- P -  
 
 
 
Partial Payment
A payment that is not sufficient to cover the scheduled monthly payment on a mortgage loan. Normally, a lender will not accept a partial payment, but in times of hardship you can make this request of the loan servicing collection department.
 
PARTIAL RELEASE
Release of a portion of property covered by a mortgage. A subdivider will obtain a partial release as each lot is sold, upon payment of an agreed upon amount. In areas where the subdivider is not usually the builder, it may be necessary to sell groups of lots to obtain a partial release. In areas where deeds of trust are used instead of mortgages, a "partial reconveyance" is the document used.
 
PARTICIPATION
Lender involvement in property whereby the lender receives a portion of profits or income from the property as well as interest. Usually occurs when money is tight or the risk is unusually high.
 
PERCENTAGE LEASE
Commonly used for large retail stores. Rent payments include a minimum or base rent plus a percentage of the gross sales overage. Percentages generally vary from 1% to 6% of the gross sales depending on the type of store and sales volume.
 
PHASE I    
(see environmental report) An assessment and report prepared by a professional environmental consultant who reviews the property - both land and improvements - to ascertain the presence or potential presence of environmental hazards at the property such as underground water contamination, PCBs, abandoned disposal of paints and other chemicals, asbestos and a wide range of other potentially damaging materials. This Environmental Site Assessment (ESA) provides a review and makes a recommendation as to whether further investigation is warranted (a Phase II Environmental Site Assessment). This latter report would confirm or disavow the presence of an environmental hazard and, should one be found, will recommend additional review and/or mitigation efforts that should be undertaken.
 
PHASE II ENVIRONMENTAL SITE ASSESSMENT
Further assessment after "Phase I" to verify the presence (or absence) of contaminants in the water or soil at the site. Samples are taken.
 
PHASE III ENVIRONMENTAL SITE ASSESSMENT
Assessment after "phase I" and "phase II" to determine the extent of contaminants in the water and/or soil at the site, both as to the depth and breath of the contamination. Samples are taken.
 
Physical Condition Report
A comprehensive report required by most Lenders and produced by an independent company that details the current physical condition of a property. Typically includes specific items that require immediate repair as well as those items that should be replaced over the life of the loan. Basis used to establish the annual Replacement Reserve Escrow for the property.
 
PLANNED (UNIT) DEVELOPMENT
Subdivision of five or more individually owned lots with one or more other parcels owned in common or with reciprocal rights in one or more other parcels. The lots are generally small, being the exact size of the improvements, or slightly larger.
 
POINTS (LOAN DISCOUNT POINTS)     
Each point is equal to 1% of the total amount of a mortgage. Typically charged in connection with originating or funding a loan.
 
PORTFOLIO LENDER
Lender who makes and holds loans rather than making loans and selling them in the secondary market.
 
POTENTIAL GROSS RENT  
Gross income of a building if fully rented.
 
Potential Gross Income
The amount of income that could potentially be produced by a real estate property assuming there are no vacancies or collection losses. Does not include miscellaneous or other income.
 
PLAT (PLAT MAP)
Map of a piece of land showing boundary lines, streets, actual measurements and easements.
 
PROPERTY RESIDUAL TECHNIQUE
Appraisal technique whereby land and building are valued as a single unit. The income (net operating income) is capitalized (divided) by an overall capitalization rate to reach estimated value
 
PRE-LEASED PERCENT       
To obtain lease commitments in a building or complex prior to its being available for occupancy.
 
PREPAYMENT PENALTY    
Fees paid by borrowers for the privilege of retiring a loan early.
 
PRIME RATE      
The rate at which banks lend to their most creditworthy customers.
 
PRINCIPAL        
1. The amount of debt, not including interest, left on a loan. 2. The face amount of the mortgage.
 
Pro-forma
A financial or accounting statement using estimates and assumptions to project income and the performance of real property over a period of time.
 
PROPERTY ADMINISTRATOR     
Person in broker's employ who is responsible for updating and renewing a property listing, if it is different from the contact name.
 
PROPERTY GRADE    
A stratification of property type that is indicative of the properties ability to command rental rates.
 
PROPERTY SUBTYPE          
A property description that provides additional information to the lender.
 
PROPERTY TAX         
Taxes based on the market-value of a property. Property taxes vary from state to state.
 
 
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- Q -  
 
QUADRANT
(1) quarter section of a circle. (2) One of the quarters created by two intersecting roads or streets.
 
QUARTER SECTION
One quarter of a section. A quarter section (commonly called a quarter) contains 160 acres.
 
QUITCLAIM DEED
Deed operating as a release; intended to pass any title, interest, or claim which the grantor may have in the property, but not containing any warranty of a valid interest or title in the grantor.
 
 
 
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- R -
R & D        
These facilities are generally used in high technology markets and are broadly defined to include wide variations in markets across the country. R & D properties could have lab facilities, offices, warehouse facilities, or services such as carpentry or machine repair. Typically, each property allows a variable combination of office and other uses. The percentage of office space ranges from 20 to 100 percent, depending on the market and individual needs of the user.
 
RAIL-SERVED    
Whether the building is served by railroad.
 
RANCH     
Land devoted to raising livestock under range conditions with forage grass as main source of feed.
 
RATE INDEX      
An index used to adjust the interest rate of an adjustable mortgage loan (e.g. the change in U.S. Treasury securities (T-Bills) with 1-year maturity. The weekly average yield on said securities, adjusted to a constant maturity of 1 year, which is the result of weekly sales, may be obtained weekly from the Federal Reserve Statistical Release H.15 (519). This change in interest rates is the index for the change in a specific Adjustable Mortgage Loan.
 
Real Estate Investment Trust (REIT)
A real estate mutual fund, established by income tax laws to avoid the corporate income tax. It sells shares of ownership and must invest in real estate or mortgages. It must meet certain other requirements, including minimum number of shareholders, widely dispersed ownership, and certain asset and income tests.
 
RECOURSE        
Personal liability.
 
RECREATIONAL LAND       
Land devoted to commercial outdoor sporting activity and relaxation.
 
REFINANCE       
To replace an old loan(s) with a new loan(s).
 
REGIONAL CENTER   
A shopping center with one or two department stores and a variety of smaller stores. It is larger than 300,000 square feet and draws from an eight mile radius or more.
 
RENT ROLL       
A list of tenants leasing a property, which details terms of lease, area leased, and the amount of rent being paid.
 
RENT STEP-UP  
A lease agreement in which the rent increases every period for a fixed amount of time or for the life of the lease.
 
RENTABLE SQUARE FEET (same as Net Leasable Area)      
In a building or project, floor space that may be rented to tenants. The area upon which rental payments are based. Generally excludes common areas and space devoted to the heating, cooling, and other equipment of a building.
 
REPLACEMENT RESERVES          
An amount set aside from net operating income to pay for the eventual wearing out of short-lived assets. Monthly deposits that a lender may require a borrower to reserve in an account, along with principal and interest payments for future capital improvements of major building systems; (i.e., HVAC, parking lot, carpets, roof, etc.)
 
RESERVE FUNDS        
In CMBS, portion of the bond proceeds that are retained to cover losses on the mortgage pool. A form of credit enhancement (also referred to as reserve accounts).
 
RETAIL     
A property type which sells goods to consumers.
 
Right Of First Refusal
A provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others.
 
Right Of Ingress Or Egress
The right to enter or leave designated premises.
 
Right Of Survivorship
In joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant.
 
RV (REVERSIONARY VALUE)      
The value of property at the expiration of a certain time period. In transportation, recreational vehicle.
 
 
 
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- S -
 
 
SALE-LEASEBACK
Sale and subsequent lease from the buyer back to the seller. Although the lease actually follows the sale, both are agreed to as part of the same transaction.
 
Sales Comparison Approach
A method of estimating the value of real property by comparing recent sales of comparable properties to the subject property after making appropriate adjustments for any differences. The comparable properties chosen should be substantially similar to the subject property and should be arms-length transactions.
 
SBA (SMALL BUSINESS ADMINISTRATION)
Federal agency authorized to make loans to small businesses, including loans for land purchase and construction.
 
SEASONED
Term referring to a land contract or mortgage, indicating that payments have been made regularly over a period of time, and that the contract or mortgage is not a new one.
 
SECOND MORTGAGE          
A mortgage that is second in priority because of the time of recording the mortgage or of the subordination of the mortgage.
 
SECONDARY MORTGAGE MARKET    
The buying and selling of first mortgages or trust deeds by banks, insurance companies, government agencies, and other mortgagees. This enables lenders to keep an adequate supply of money for new loans. The mortgages may be sold at full value (par) or above, but are usually sold at a discount. Not to be confused with a second mortgage.
 
SECTION
Division or parcel of land on a government survey, comprising one square mile (640 acres). Thirty-six sections comprise a township.
 
SECTION 8 HOUSING
Government subsidized program under which low income tenants pay a portion of their rent and the government pays the balance. Landlords must place their property in the program and agree to certain restrictions on rent amounts and increases as well as eviction procedures.
 
SELF-STORAGE          
(also called Mini-Storage) Provides personal storage for lease by consumers.
 
SELF-AMORTIZING MORTGAGE
One that will retire itself through regular principal and interest payments. Contrast with balloon mortgage or interest-only loan.
 
SENIOR HOUSING      
(includes Assisted-Listing, Congregate-Care, Senior Apartments and Skilled Nursing Centers) Multi-residential property specifically designed for care of senior citizens and/or physically-disabled persons.
 
SET BACK ORDINANCE
Part of a zoning ordinance. Regulates the distance from the lot line to the point where improvements may be constructed.
 
SHADOW ANCHORED         
An unanchored shopping center located near an anchored shopping center.
 
SHORT SALE
Sale of property which includes some forgiveness of debt by the lender under a mortgage or trust deed. The amount of debt forgiven may be considered income to the seller and taxable.
 
SINGLE WIDE    
A mobile home consisting of one unit.
 
SITE WORK       
The location or place of a plot of ground set aside for a particular type of land use.
 
SKILLED NURSING     
A type of senior-housing which offers on-site medical care.
 
SOLE PROPRIETORSHIP     
Ownership of a business with no formal entity as a vehicle or structure.
 
SPREAD    
Number of basis points over a base rate index.
 
SPRINKLER       
Existence of fire-suppression systems in the building.
 
STABILIZED OPERATING PROPERTY  
The income generated on an annual basis from the commercial property is stable, consistent and reliable.
 
STANDBY COMMITMENT
Commitment to issue a loan, usually for a term of one to five years, after completion of construction, in the event a permanent loan cannot be obtained. The standby loan is usually at a higher interest rate than a permanent loan, and a standby fee is charged.
 
STRIP CENTER  
A string of stores in a commercial area, totaling less than 30,000 square feet, without central leasing, management, or theme.
 
STRUCTURAL/ENGINEERING REPORT         
A property Condition Report that outlines the current structural stability or instability of a property. The report will outline immediate costs needed to repair the property as well as a maintenance program to maintain the property at its current status.
 
SUBURBAN        
Describes a town or unincorporated, developed area in a close proximity to a city. Suburbs, largely residential, are often dependent on the city for employment and support services; generally characterized by low-density development relative to the city.
 
Subdivision
A housing development that is created by dividing a tract of land into individual lots for sale or lease.
 
Subordinate Financing
Any or other lien that has a priority that is lower than that of the first mortgage.
 
Subordinate Ground Lease
A land (ground) lease in which the rent payment due from the lessee (borrower) to the lessor (land owner) is subordinated to the debt service owed by the lessee (borrower) to the mortgagee (lender). Normally, a ground lease contains a subordination clause because without it, construction of improvements may be more difficult. A mortgage lender will consider the full value of the property only with a subordinated ground lease.
 
Survey
The process by which the precise physical boundaries of a parcel of land are measured. Legal descriptions appear in title reports, sales contracts, deeds, mortgages, notes, and other instruments involving rights and interests in real estate. When land is conveyed from one party to another, the survey provides a visual representation of the legal description including the precise location of structures, easements, encroachments, rights of ways and other physical features.
 
Sweat Equity
Contribution to the construction or rehabilitation of a property in the form of labor or services rather than cash.
 
 
 
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- T -  
 
TAKE OUT COMMITMENT
Agreement by a lender to place a long term (take out) loan on real property after completion of construction.
 
TAKE OUT LOAN
"Permanent" (long term) financing of real estate after completion of construction.
 
TAX & INSURANCE IMPOUND     
Monthly deposits that a lender may require to be included with principal and interest payments for the payment of taxes and insurance.
 
TANGIBLE VALUE
Value in appraisal of the physical value (land, buildings, etc.), as opposed to the value of an intangible, such as a favorable lease.
 
TAX LIEN CERTIFICATE
Certificate obtained by the purchase of a property tax lien. It entitles the purchaser to the tax owing, including interest and penalties. A method used by governments to improve cash flow by having private sector investors buy the certificates.
 
TENANCY IN COMMON
Undivided ownership in real estate by two or more persons. The interest need not be equal, and, in the event of the death of one of the owners, no right of survivorship in the other owners exist.
 
TENANT   
One who is given possession of real estate for a fixed period or at will.
 
TENANT IMPROVEMENTS (TI)    
The expense to physically improve the property to attract new tenants to new or vacated space which may include new improvements or remodeling. May be paid by tenant, landlord, or both. Typically, tenants are provided with a market rate TI allowance ($/sq. ft.) that the owner will contribute towards improvements. The tenant must pay for amounts above the TI allowance desired by the tenant.
 
TENTATIVE MAP
Map submitted by a subdivider to a planning commission for approval; approval is usually conditioned upon changes. The final map, embodying the changes, is recorded.
 
TERM        
The length of time a mortgage rate is fixed or adjustable prior to it coming due. Different from loan amortization.
 
TESTIMONIUM CLAUSE
Clause in a deed or other instrument of conveyance which states that the proper parties are signing the document: "In witness whereof, the parties to these presents have hereunto set their hands and seals".
 
THIRD PARTY COSTS         
Costs resulting from third-party reports such as appraisal reports, environmental reports or structural engineering reports.
 
Third-Party Origination
A process by which a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package the mortgages it plans to deliver to the secondary mortgage market.
 
Third-Party Reports
Reports required by a mortgage lender prior to funding a loan that include MAI Appraisal, Phase I Environmental and Physical Condition reports.
 
TILT-UP CONSTRUCTION
Method of construction whereby precast concrete walls are tilted upright at the building site. Faster and less expensive than building the walls upright at the site.
 
TIMBERLAND    
Land used for production of forest stands for commercial use.
 
TITLE        
The actual legal document conferring ownership of a piece of real estate.
 
TITLE INSURANCE     
An insurance policy that insures you against errors in the title search - essentially guaranteeing your, and your lenders, financial interest in the property.
 
TITLE INSURANCE COMPANY
Company which issues insurance regarding title to real property.
 
Title Search
A check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding.
 
TITLE ONE LOAN
Government insured loan which is greater than the equity in the property. These loans can currently go up to one hundred twenty five percent of the value of the property, and may be used only for improvements to the property. Also called a Negative Equity Loan
 
TOPOGRAPHICAL MAP
Map showing the differences in grade of a parcel of land. Grades are measured in relation to sea level.
 
TOPOGRAPHY
Contour of land surface, such as flat, rolling, mountainous, etc.
 
TOTAL ANNUAL OPERATING INCOME         
Total yearly income less operating expenses, adjustments, etc., but before mortgage payments, tenant improvements and leasing commissions.
 
TOTAL ANNUAL ROOM INCOME          
A hotel definition that represents the gross annual receipts from room revenue.
 
TRACT HOUSE
House built using the plan of the builder, as one of many similar homes in a subdivision, as opposed to a custom house, which is built to the specifications of the owner.
 
TRACT LOAN 
Lloan secured by an entire subdivision. Also See: Blanket Mortgage (1); Partial Release.
 
TRAFFIC COUNT        
The amount of incoming and outgoing traffic a retailer or self-storage building generates over a fixed period of time.
 
TRANSFERABLE DEVELOPMENT RIGHTS 
Allowing the assignment of development rights from parcel to parcel. Example: The owner of a parcel on which the zoning allows a maximum of a five story building could buy rights from another parcel and build a ten story building. The parcel transferring the rights would have to decrease its allowable height by the same number.
 
TREASURY BILLS - Interest bearing federal obligations with maturities of less than one year.
 
TREASURY BONDS - Interest bearing federal obligations with maturities of ten years or more. Commonly called the "Long Bond".
 
TREASURY INDEX
One of the indices used to adjust interest rates on an adjustable rate loan. It reflects the changes in the rate for U.S. Treasury Bills.
 
TREASURY NOTES
Interest bearing federal obligations with a maturity of one to ten years.
 
TRIPLE-NET LEASE (NNN)  
A lease that requires the tenant to pay for property taxes, insurance and maintenance in addition to the rent (also referred to as Net Net Net Lease).
 
 
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- U -  
 

UNBALANCED IMPROVEMENT
Appraisal term describing an improvement not in conformity with the surrounding area, and so, not suited to its location. May be an underimprovement or overimprovement.

UNANCHORED  
A tenant in a shopping center, which doesn't have an anchored tenant.

UNDERWRITING        
The process of deciding whether to make a loan based on property cash flow, credit, and/or other factors.
 
UNENCUMBERED
Free of liens and other encumbrances. Free and clear.
 
UNIFORM COMMERCIAL CODE (UCC)
Set of laws written to make it easier to do business between states by making the law the same for each state that adopted the code. The UCC covers many aspects of business such as transactions involving personal property (Article 2) and Negotiable Instruments (Article 3).
 
UNIT COST IN PLACE METHOD
Appraisal method. The cost of construction by estimating the cost of each component part in place, including labor cost and overhead.
 
UNIT OF COMPARISON
Used in appraisal to make the most appropriate use of comparables. Example: A house may best be compared by price per square foot, land by price per front foot, a hospital by price per bed, etc.
 
UNRECORDED INSTRUMENT
Deed, mortgage, etc., which is not recorded in the county recorder's office and, therefore, not protected under recording statutes. Valid between the parties involved, but not against innocent third parties.
 
UPSET PRICE
Legal term signifying the minimum price at which a property can be sold at auction, usually foreclosure.
 
U.S. TREASURY BILL
Treasury Bills, or T-Bills, are short-term securities with maturities of up to one year. They are issued by the U.S. Government at a discount from face value. The price is quoted in yield, not dollars. At maturity, T-Bills are redeemed for full face value. T-bills are issued in three-month, six-month and 1-year maturities and are backed by the full faith and credit of the U.S. Government.
 
U.S. TREASURY BOND        
Treasury Bonds are long-term securities with maturities greater than 10 years. Treasury bonds are coupon-bearing securities that pay interest on a semi-annual basis. Treasury bonds are backed by the full faith and credit of the U.S. Government.
 
U.S. TREASURY NOTE        
Treasury Notes are intermediate-term securities issued with 2, 3, 5, and 10-year maturities. Treasury notes are coupon-bearing securities that pay interest on a semi-annual basis. Treasury notes are backed by the full faith and credit of the U.S. Government.
 
 
 
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VACANCY PERCENT
The percentage of all units or space that is unoccupied or not rented. On a pro-forma income statement, a projected vacancy rate is used to estimate the vacancy allowance, which is deducted from potential gross income to derive effective gross income.
 
Vacancy Rate
The percentage of all units or space that is unoccupied, not rented or from which there is no rental income. On a pro-forma income statement a projected vacancy rate is used to estimate the vacancy allowance (both physical and economic), which is deducted from potential gross income to derive effective gross income.
 
VARIABLE INTEREST RATE
Interest rate which fluctuates as the prevailing rate moves up or down. In mortgages there are usually maximums as to the frequency and amount of fluctuation. Also called "flexible interest rate".
 
VARIABLE OPERATING EXPENSES
Those expenses which vary (usually with occupancy). Example: Maintenance costs vary with the number of units occupied. Property taxes are fixed under the same conditions.
 
VARIANCE
Change of a portion of zoning requirements without changing the zoning.
 
VENUE
(1) county (or other geographical division) in which an action or prosecution is brought for trial and which is to furnish the panel of jurors. (2) The county in which an acknowledgement (notarization) is made.
 
 
 
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Warehousing
The process by which a mortgage banker assembles mortgages that they have made and prepares the mortgages to be sold in the secondary mortgage market. By selling these mortgages the originator now has additional capital that can be used to make more mortgages, which in turn may also be sold in the secondary mortgage market.
 
WEIGHTED AVERAGE
Method of determining an average by valuing each component based on its relative importance. Example: In a mortgage pool a loan with a $100,000 balance would be valued higher for purposes of averaging than a similar loan with a $10,000 balance.
 
WITHOUT RECOURSE
Finance term. A mortgage or deed of trust securing a note without recourse allows the lender to look only to the security (property) for repayment in the event of default, and not personally to the borrower.
 
WORKING CAPITAL
Cash, or assets which are readily convertible to cash, used to carry on a business.
 
WRAP-AROUND MORTGAGE
Second or junior mortgage with a face value of both the amount it secures and the balance due under the first mortgage. The mortgagee under the wrap-around collects a payment based on its face value and then pays the first mortgagee. It is most effective when the first has a lower interest rate than the second, since the mortgagee under the wrap-around gains the difference between the interest rates, or the mortgagor under the wrap-around may obtain a lower rate than if refinancing.
 
 
 
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- Y -  
 
YIELD       
The rate of return on a security, taking into consideration annual interest payments, purchase price, redemption value, and the time remaining until maturity.
 
YIELD MAINTENANCE        
A prepayment premium that allows investors to attain the same yield as if the borrower made all scheduled mortgage payments until maturity. Yield maintenance premiums are designed to make investors indifferent to prepayments and to make refinancing unattractive and uneconomical to borrowers.
 
YIELD TO AVERAGE LIFE   
Yield calculation used, in lieu of Yield to Maturity or Yield to Call, where books are retired systematically during the life of the issue, as in the case of a Sinking Fund, with contractual requirements. Because the issuer will buy its own bonds on the open market to satisfy its sinking fund requirements, if the bonds are trading below Par, there is, to that extent, automatic price support for such bonds; they therefore tend to trade on a yield-to-average-life basis.
 
YIELD TO MATURITY (YTM)       
Concepts used to determine the rate of return an investor will receive if a long-term, interest-bearing investment, such as a bond, is held to its maturity date. It takes into account purchase price, redemption value, time to maturity, coupon yield and the time between interest payments. Recognizing time-value-of-money, it is the discount rate at which the present value of all future payments would equal the present price of the bond (also referred to as internal rate of return). It is implicitly assumed that coupons are reinvested at the YTM rate. YTM can be approximated using a bond value table (also referred to as a bond yield table) or can be determined using a programmable calculator equipped for bond mathematics calculations.
 
 
 -Z-
 
Zoning Ordinance
The act of city or county or other authorities specifying the type of use to which property may be put in specific areas. The act of city or county or other authorities specifying the type of use to which property may be put in specific areas.
 
 
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  For more Glossary of Real Estate Terms, visit The American Bar Association by using the link below.
 
The American Bar Association    -    Glossary of Real Estate Terms