Real Estate Glossary

Fillmore's Real Estate Glossary

At Fillmore Real Estate, we believe that our clients have the right to be informed. To that end, we're providing informative materials that can help you understand the complex world of real estate transactions. In this glossary, you will find explanations for over 700 real-estate-related concepts and abbreviations.

We also believe in listening to our clients, and welcome their feedback. If you would like to see another definition on this list, please feel free to E-mail your comments to glossary@fillmore.com. Thanks for helping us inform and educate Brooklyn home buyers and sellers!

Abatement (1)

Derived from Latin battere, “abatement” a common legal term meaning “the beating down, removal, or diminishment” of something. For example, lead abatement refers to finding and removing lead paint.

Abatement (2)

Also called “Rent Abatement”, the incentive offered by a landlord, including free rent, early occupancy, or reduction of fees.

Above building standard

Any improvements in an apartment building, done according to a tenant’s requirements, which are significantly more desirable than the standard building amenities.

Absorption rate

The rate at which rentable space is filled, divided into gross absorption and net absorption. Gross absorption is a measure of the total square feet leased over a specified period, with no consideration given to space vacated in the same geographic area during the same time period. Net absorption is equal to the amount occupied at the end of a period, minus the amount occupied at the beginning of a period. Net absorption does take into consideration the space vacated during the period

Abstract of Title

A chronological summary of the recorded instruments and proceedings on the title of a property.

Abstract or title search

The process of reviewing all publicly recorded transactions to determine the existence of any title defects that could interfere with a clear transfer of property ownership.

Accelerated cost recovery system

A tax calculation that provides greater depreciation in the early years of ownership. Also called “Declining-Balance Method”.

Accelerated depreciation

See “Accelerated Cost Recovery System”.

Acceleration clause

A clause that provides the mortgagee (lender) the right to demand immediate repayment of the loan balance upon default of the mortgagor (borrower).  "Acceleration Clause" is also triggered by the “Due On Sale Clause” (which demands immediate repayment if the home is sold).

Acceptance

The seller's written approval of a buyer's offer.

Ad valorem

A tax imposed on the value of property that is typically based on the local government's valuation of the property. Derives from Latin “valor” (value).

Addendum

An addition or change to an existing contract. May be published at the end of the contract, or as a separate indexed document.

Additional principal payment

An extra payment, used to reduce the principal balance and shorten the term of the loan.

Adjustable rate mortgage (ARM)

A home loan with an interest rate that periodically adjusts to reflect changes in a specified financial index.

Adjusted funds from operations (AFFO)

An improved view of a REIT’s performance or ability to pay dividends. The most common adjustment to FFO is an estimate of capital expenses necessary to keep the property competitive.

Adjustment period

In an ARM, the amount of time between interest rate adjustments.

Administrative fee

Amount paid to the management company for services provided. May be stated as a percentage of assets under management, or as a fixed annual dollar amount.

Advances

Payments made by the servicer when the borrower fails to make a payment. Essentially, a time extension to the borrower, usually for a fee.

Adviser

A broker, consultant or investment banker who represents an owner in a transaction. Advisers may be paid a retainer and/or a performance fee upon the close of a financing or sales transaction

Agency closing

When a lender uses a title company or other firm as an agent to complete a loan.

Agency disclosure

Most states require agents who act for both buyers and sellers to disclose who they are working for in the transaction.

Aggregation

This general term refers to collection of items for a specific purpose.

Agreement of sale

A legal document, detailing the price and terms of the transaction, that must be approved by both the buyer and the seller.

Air Rights

Legal right to build above the existing structure, or to extend the height of the structure above the neighboring buildings.

Air rights are usually restricted by zoning regulations, but may be sold to an adjoining structure – some of the tallest buildings in Manhattan have risen to their final height by purchasing air rights from surrounding, taller structures. Some metropolitan areas have citywide air-right restrictions based on height of a prominent monument or governmental building (for example, no building in Washington, D.C., can be made higher than the Capitol building).

Alienation clause

A loan provision, that requires the borrower to pay the balance of the loan in a lump sum, if the property is sold or transferred. See also “Due On Sale Clause” and “Acceleration Clause”.

Alternative mortgage

A home loan program that does not conform to standard fixed-rate mortgage terms.

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Alternative or specialty investments

Property types that are not considered conventional institutional-grade real estate investments. Examples include congregated care facilities, self-storage facilities, mobile homes, timber, agriculture and parking lots

Amenity

Any feature of the property that serves as a benefit, but is not a necessity for the property’s use. For example, lakefront location, swimming pool, tennis court, concierge service, etc.

Amortization (1)

Repayment of a mortgage loan through monthly installments rather than a lump sum. Amortized payments include principal and interest, and the monthly payment amount is based on a schedule that will allow you to complete the payout within a specific time period (for example, 15 or 30 years).

Amortization (2)

In accounting and taxation, “Amortization” refers to the liquidation of a financial debt through regular periodic installment payments, or the periodic deduction of capitalized expenses.

Amortization tables

Mathematical tables used to calculate a borrower's monthly payment.

Amortization term

The length of time required to amortize the mortgage loan, expressed as a number of months. For example, 360 months is the “Amortization Term” for a 30-year fixed-rate mortgage.

Anchor

Synonymous with “Anchor Store”, the tenant that serves as the predominant draw to a commercial property. Usually the largest tenant in a shopping center, and typically a branch of a national retail chain.

Annual mortgagor statement

An annual statement to borrowers, detailing the remaining principal balance and amounts paid for taxes and interest throughout the year.

Annual Percentage Rate (APR)

The actual, final cost of borrowing money. The APR shows the cost of the loan; when expressed as a “Yearly Interest Rate”, it includes the interest, points (cost of service), mortgage insurance, and all other fees associated with the loan.

Annual percentage rate (APR)

The actual cost of borrowing money. It may be higher than the note rate because it represents full disclosure of the interest rate, loan origination fees, loan discount points and other credit costs paid to the lender.

Annuity

The payment of a fixed sum at regular intervals.

Application

The first step in the official loan approval process; this form is used to record important information about the potential borrower necessary to the underwriting process.

Application fee

An application fee is charged by some lenders and may include charges for items such as property appraisal and/or a credit report unless those fees are reported separately.

Appraisal (1)

The term “appraisal” can refer to one or more instances of several things: 1.) The process of determining the value of a property, 2.) The professional opinion of the value of a property, compiled by a licensed real estate appraiser, 3.) The physical documentation for the abovementioned professional opinion, also called the “appraisal report”.

  An appraisal is typically based on replacement cost, discounted cash flow analysis and/or comparable sales price.

  An appraisal is generally required by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property.

Appraisal fee

The fee that a professional real estate appraiser charges to appraise a property.

Appraisal report

A written report on the value of a property based on recent sales of comparable property in the area.

Appraised value

A professional opinion of the current market value of a property.

Appraiser

A qualified (and typically licensed) individual who uses his or her experience and knowledge to prepare the appraisal estimate.

Appreciation

An increase in the value or price of an asset

Appreciation return

The portion of the total return generated by the change in the value of the real estate assets during the current quarter, as measured by both appraisals and sales of assets

APR (annual percentage rate)

A measure of interest that expresses the cost of a mortgage as a yearly rate on the loan balance. The APR assumes the loan is held for its full term. For adjustable-rate loans, the APR assumes the loan's index doesn't change from its initial value.

Arbitrage

Buying securities in one market and then selling them immediately in another market to make a profit on the price discrepancy

ARM

Adjustable Rate Mortgage; a mortgage loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender; the change in monthly payment amount, however, is usually subject to a cap.

ARM (adjustable rate mortgage)

A home loan with an interest rate that periodically adjusts to reflect changes in a specified financial index.

ARM index

A publicly published number used as the basis for adjusting the interest rates of adjustable rate loans (ARM).

“As-Is” condition

The acceptance by the tenant of the existing condition of the premises at the time a lease is consummated, including any physical defects.

Assessed value

A tax assessor's determination of the value of a home in order to calculate a tax base.

Assessment (1)

A fee imposed on property, usually to pay for public improvements such as water, sewers, streets, improvement districts, etc.

Assessment (2)

The estimated value of a piece of real estate.

Assessor

A government official who is responsible for determining the value of a property for the purpose of taxation.

Asset management

The various disciplines involved with managing real property assets from the time of investment through the time of disposition, including acquisition, management, leasing, operational/financial reporting, appraisals, audits, market review and asset disposition plans

Asset management fee

A fee charged to investors based on the amount invested into real estate assets for the fund or account.

Asset turnover

Calculated as total revenues for the trailing 12 months divided by the average total assets

Assets

Items of value which include cash, real estate, securities, and investments.

Assets under management

The current market value of real estate assets for which a manager has investment and asset management responsibilities

Assignee name

The individual or entity to which the obligations of a lease, mortgage or other contract have been transferred

Assignment (1)

The right to transfer a contract or a lease, from one party to another, or the actual process of such a transfer. See also “Sub Lease”.

Assignment (2)

The transfer of rights to pay a debt from one party to another, with the original party remaining liable if the second party defaults on the debt.

Assignor

A person who transfers rights and interests of a property.

Assumable mortgage

A mortgage that can be transferred from a seller to a buyer. Once the buyer assumes the loan, the seller is no longer responsible for repaying it. An assumable mortgage may include a fee and/or a credit package involved in the transfer.

Assumption clause

A provision that allows a buyer to take responsibility for the mortgage from a seller.

Assumption fee

A fee the lender charges to process new records for a buyer who assumes an existing loan.

Attended Elevator

A type of elevator that must be operated by an attendant. Usually found in very old residential, and some commercial structures. In an old apartment building, the elevator attendant often serves as a type of security personnel.

Attorn

To agree to recognize a new owner of a property and to pay him/her rent.

Attorney

Another term for “lawyer”.

Average common equity

Calculated by adding the common equity for the five most recent quarters and dividing by five

Average downtime

Expressed in months, the amount of time expected between the expiration of a lease and the commencement of a replacement lease under current market conditions

Average free rent

Expressed in months, the rent abatement concession expected to be granted to a tenant as part of a lease incentive under current market conditions

>Average occupancy

The average occupancy rate of each of the preceding 12 months

Average total assets

Calculated by adding the total assets of a company for the five most recent quarters and dividing by five

Back title letter

A letter that specifies the condition of the title, given by the title insurance company to an attorney, who then examines the title for insurance purposes.

Back-end ratio

A calculation used by lenders to compare a borrower's total debt to their gross monthly income.

Balance sheet

A statement providing the assets, liabilities and net worth of an individual.

Balcony

A small platform with railing, that protrudes to the outside of a building.

Balloon Loan

See Balloon Mortgage.

Balloon Mortgage

A mortgage that offers low rates for the initial period of time, then increases sharply. Else, a mortgage whose monthly payments are not enough to repay the entire loan by the due date. Most homeowners choose to refinance such mortgages, or pay them off if their assets are sufficient.

Balloon payment

The final lump sum payment due at the end of a balloon mortgage.

Balloon risk

The risk that a borrower will not be able to make a balloon payment (see Balloon Mortgage) at maturity, due to a lack of funding

Bankrupt

The state of an entity (person or corporation) that is unable to repay its debts as they become due. Usually followed by the Bankruptcy process.

Bankruptcy (1)

The process of turning over a person’s or a corporation’s assets to a trustee, for the purpose of paying off a debt that is larger than the ability to pay.  

Bankruptcy (2)

This term can also refer to either the federal laws that outline the procedure of turning over an entity’s assets to a trustee and the subsequent distribution of these assets to creditors, or the court decision which decrees that, while the amount of assets is not sufficient to repay the entire debt, assets will be distributed to creditors and the debts will be considered paid.  

Base loan amount

The original loan amount, without regard to fees or accrued interest. The borrower may choose to finance the closing costs and/or other fees, in which case these costs will be added to the base loan amount.

Base rent

A set amount used as a minimum rent, with provisions for increasing the rent over the term of the lease.

Base year

Actual taxes and operating expenses for a specified year, most often the year in which a lease commences.

Basis point

A basis point is one 1/100 of 1 percent.  For example, the difference between a home loan at 5.35 percent and one at 5.47 percent is 12 basis points.

Before-tax income

Total income before any taxes are deducted.

Below-grade (1)

Any structure or portion of a structure located underground or below the surface grade of the surrounding land.

Below-grade (2)

Refers to the condition of an asset that is judged to be below the expected value, condition, or amount.

Beneficiary

Generally, any entity who receives, or will receive, financial benefits from an existing contract. For example, an employee covered by a health-insurance plan is said to be the beneficiary of the plan; a relative to whom money is bequeathed in a will is said to be the beneficiary of the will.

Beta

A number that shows the ratio of the stock’s price fluctuation against the background of the entire market’s fluctuation. However, “beta” is also used to compare a stock’s risk to that of other stocks, or a particular sector of the market – make sure you understand which beta is specified. A beta number less than 1 means the stock is more stable than the market; greater than 1, the stock is riskier than the market.

Bid

An offer, stated as a price or spread, to buy assets, loans, or securities.

Bill of sale

A legal document transferring ownership of personal property.

Binder

A report detailing the condition of a property's title.  Usually issued by a title insurance company to provide guidelines for issuing a title insurance policy. See also Back Title Letter.

Binder

A preliminary agreement between buyer and seller. Also, “Binding Agreement”.

Biweekly mortgage

A mortgage that requires payments every two weeks and helps repay the loan over a shorter term.

Blanket mortgage

A mortgage that covers more than one property owned by the same borrower. This is very rare, as only entities with extremely good credits and assets may qualify for a blanket mortgage.

Blind pool

A fund that accepts investor capital without prior specification of assets.

Book value (1)

Also referred to as common shareholder's equity, this is the total shareholder's equity as of the most recent quarterly balance sheet, minus preferred stock and redeemable preferred stock.

Book value (2)

The value of a property based on its cost plus any additions, minus depreciation.

Borrower

A person who has been approved for a loan. The borrower is obligated to repay the principal of the loan, as well as any fees and interest.  

Break-even point

The point in which the owner's rental income matches expenses and debt.

Bridge loan

A short-term loan for borrowers who need more time to find permanent financing.

Broker (1)

A person who acts as an intermediary between two or more parties in connection with a transaction. Typically licensed by the state, and monitored by a professional organization.

Brokerage

The act of bringing together two or more parties in exchange for a fee or commission. Also, the process of setting the terms of the transaction.

Budget (1)

A detailed record of all income earned and spent during a specific period of time.

Budget (2)

The procedure of reserving money to pay off a future obligation. For example, a homeowner may budget 10% of their income for utilities, taxes, and other expenses that they are obligated to pay on a timely basis.

Buildable acres

The area of land that is available to be built on. Depends on land features such as roads and unbuildable terrain, and regulations such as zoning and building codes.

Building Amenities

Any feature of a property that is not a necessity, but is enjoyable by its tenants. For example, doorman service, high-speed Internet access, public pool, sun deck, and 24-hour security. 

Building code (1)

A regulation, or set of regulations, that determine the design, construction, and materials used in building a structure. Also, regulation(s) that determine the usage of a structure.

Building standard plus allowance

In a situation where a structure is ordered to be built, the builder or landlord provides a detailed list of materials and costs necessary to make the structure suitable for use. This list includes a flexible amount that may be negotiated by the tenant or future homeowner for customizing the property. The non-negotiable part of the list is the building standard , the flexible part is the allowance .

Build-out

Improvements or additions installed according to the tenant’s specifications. Takes into consideration the amount of tenant finish allowance, provided for in the lease agreement.

Build-to-suit

A method of leasing property whereby the developer/landlord builds to a tenant's specifications.

Built

The actual exterior dimensions of a structure, as opposed to the dimensions of the lot that it is placed on.

Buydown mortgage

A home loan program where the lender receives a premium as an enticement to reduce the interest rate during the early years of the mortgage.

Buyer’s Remorse

An emotion felt by first-time homebuyers after signing a sales contract or closing the purchase of a house.

Call option

A loan clause that allows the lender to ask for repayment of the entire balance at any time.

Cap

In an adjustable rate mortgage, the cap is the limit on the amount that the interest rate or monthly payment can increase.

Capital appreciation

The change in market value of a property or portfolio, adjusted for capital improvements and partial sales.

Capital expenditures

Investment of cash, or the creation of a liability, in order to acquire or improve an asset.

Capital gain

The amount by which the net proceeds from the sale of a capital item exceeds the book value of the asset.

Capital Improvement

An improvement on a piece of property that is going to increase the property’s value. Capital improvements may be designed to arrest deterioration, add new features and amenities, or extend the usage capabilities of the structure.

Capital markets

Public and private markets where businesses or individuals can raise or borrow capital.

Capitalization (1)

The total dollar value of various securities issued by a company. Also referred to as “Market Cap”.

Capitalization (2)

A mathematical formula that investors use to calculate property value based on net income. See also “Rent Roll”.

Capitalization rate

The rate at which net operating income is discounted to determine the value of a property. Generally, the formula is “net operating income divided by property sales price or value”.

Caps (Interest Rate Caps)

Generally, the term “cap” refers to a limit placed on any type of financial transaction. Specifically in real estate financing terms, interest rate caps are consumer safeguards that limit the amount of change of an adjustable-rate mortgage.

Carryback financing

Financing in which a seller agrees to hold back a note for a set amount of the sales price.

Carrying charges

Costs incidental to property ownership that must be absorbed by the landlord during the initial lease-up of a building and thereafter during periods of vacancy.

Cash flow

The amount of cash a rental property investor receives after deducting operating expenses and loan payments from gross income.

Cash reserves

A cash amount sometimes required to be held in reserve in addition to the down payment and closing costs. This amount is determined by the lender.

Cashier's check

A check the bank draws on itself rather than on a depositor's account. Also called a “bank check”.

Cash-on-cash yield

The relationship, expressed as a percentage, between the net cash flow of a property and the average amount of invested capital during an operating year.

Cash-out refinance

The refinancing of a mortgage in which the money received from the new loan is greater than the amount due on the old loan, allowing the borrower to “cash out”, or repay completely, the old loan.

Certificate of deposit index (CODI)

An index based on interest rates of six-month CDs, commonly used to determine interest rates for some adjustable rate mortgages.

Certificate of Eligibility

A document issued by the Veterans Administration that verifies the eligibility of a veteran for a loan program.

Certificate of Occupancy

A document that certifies that the building and/or the leased area is suitable for occupancy, as well as legal uses of the leased area. The Certificate of Occupancy may allow the building owner greater rights than those allowed by the local zoning regulations.

Certificate of Reasonable Value (CRV)

An appraisal issued by the Veterans Administration showing a property's current market value

ertificate of Title

A document provided by a qualified source (usually a title company) that shows the property legally belongs to the current owner. The title should be clear of all liens or other liabilities before its transfer at closing.  

Chain of Title

The official record that details the ownership history of a piece of property.

Chapter 11

The portion of the federal bankruptcy code that deals with business reorganizations.

Chapter 7

The portion of the federal bankruptcy code that deals with business liquidations.

Circulation factor

Interior space required for internal office circulation not accounted for in the net square footage.

Class "A"

The real estate rating assigned to properties that will generate the highest rents per square foot. This rating may be due to high quality, attractive location, useful amenities, or a combination of these factors.

Class "B"

The real estate rating assigned to properties that are above average, but lack the premium location or superior amenities of Class “A” properties.

Class "C"

The real estate rating assigned to properties that, while perfectly usable, do not offer any advantages in terms of location or amenities. Class “C” properties provide a cost-effective option for tenants who are not concerned with image or location.

Clear title

A title to property that does not have liens, defects or other legal encumbrances.

Clear-span facility

A building with all vertical columns on the outside edges of the structure and a clear span between columns.

Closed-end fund

A commingled fund that has a targeted range of investor capital and a finite life.

Closing

The time at which the property is formally sold and transferred from the seller to the buyer. This period of time is usually less than seven days, after a registration statement is effective. At closing, the borrower takes on the loan obligation, pays all closing costs, and receives title from the seller.

Closing Costs

Costs that cover the process of ownership transfer, including loan, title, and appraisal fees. Closing costs generally vary by geographic location and are typically detailed to the borrower after submission of a loan application. Most closing costs are one-time, but some may be recurring.

Closing statement

A receipt for the transfer process, the document which details the final financial details of a property sale between a buyer and seller and the costs paid by each party.

Cloud on title

An encumbrance on real property.

CMBS

Commercial Mortgage-Backed Securities are securities backed by loans on commercial real estate.

CMO

Collateralized Mortgage Obligation, debt obligation that is collateralized by, and have payments linked to, a pool of mortgages.

Co-Broke, Co-Brokered

The adjective describing a real estate property offering, whereby the listing broker will split the commission 50/50 with the broker or agency that brings in the tenant or buyer. The co-brokerage agreement is one of the cornerstones of the residential real estate market.

COFI

Cost Of Funds Index, a popular index for determining interest rates on adjustable-rate mortgages. COFI is the composite value that reflects the weighted-average interest rate paid by 11th Federal Home Loan Bank District savings institutions for savings and checking accounts, advances from the FHLB, and other sources of funds.  The 11th District represents the savings institutions (savings & loan associations and savings banks) headquartered in Arizona, California and Nevada.

Co-investment (1)

An arrangement where an investment manager or adviser invests their own capital along with the investor.

Co-investment (2)

An arrangement where two or more pension funds or groups of funds share ownership of a real estate investment. In co-investment ventures, relative ownership is always based on the amount of capital contributed.

Co-investment program

An account that enables two or more pension funds to co-invest their capital. Such an arrangement allows investors to invest in larger properties, which are commonly beyond the reach of small and mid-sized tax-exempt funds.

Collateral

Asset or assets pledged to a lender to secure repayment of a loan in case of default.

Collect Your Own Fee

The adjective describing an offering where the listing broker gives up their commission for the sake of enticing a buyer or tenant. A broker may do this in order to move a difficult property, or perform a personal favor to the owner.

Combined Apartment

When an apartment owner takes two separate adjoining apartments and combines them into a larger single apartment. New York City has regulations that make residential space transformations much less cumbersome than in most markets. 

Commercial Mortgage

A mortgage used to buy a commercial piece of property or commercial building.

Commercial Mortgage Broker

A mortgage broker who specializes in commercial mortgage applications.

Commercial Mortgage Lender

A mortgage lender who specializes in the funding of commercial mortgage loans.

Commingled fund

Similar in purpose to a “Co-Investment Program”, this is a fund that allows qualified employee-benefit plans to combine their assets for the purpose of investing in large properties that are beyond the reach of individual accounts.

Commission (1)

A fee or percentage of sales, given to broker or salesperson as the payment for services rendered.

Commission (2)

The act or process of committing an action.

Commission (3)

The right or authority given to an entity to carry out a specific task or duty. For example, an lawyer may be commissioned to oversee a transaction.

Commitment

A promise by a lender to make a loan with specific terms for a specified period.

Commitment fee

A fee charged by the lender to guarantee a specific set of loan terms to be honored at some future date.

Common Area

The area in a building that is shared by all of the tenants/owners of the building.  This usually includes the lobby, hallways, sidewalk, and elevators. Building amenities, such as gardens, terraces, and pools, may be common or exclusive to a particular tenant.

Common area maintenance

A fee charged to the tenant in addition to rent, that pays for cleanup, maintenance, and improvement of common areas.

Comparables

Properties in the same area, of a similar type or value, that are used to determine the fair market price.

Complimentary

A listing sent out by a brokerage firm, to the brokerage community at large, without a seller’s commission. Usually done as a personal favor to the property owner, or in order to move a difficult property..

Compound interest

The interest paid on the principal balance of a mortgage, plus accrued interest.

Concessions

Financial incentives spent by the landlord or owner, in order to influence a prospective tenant. Concessions can include rent abatement, additional finish allowance, coverage of moving expenses, and more.

Concierge (1)

In a residential building, an employee whose duties include receiving mail and packages, informing tenants of visitors, and forwarding messages. A concierge is not responsible for opening and holding doors, or operating an elevator.

Concierge (2)

In a hotel or other hospitality location, the concierge is the employee responsible for arranging various activities and services for guests, such as placing reservations, calling a taxi or limousine, and providing local information to guests.

Condemnation (1)

The process or action of marking a property as unfit for habitation or other suitable use.

Condemnation (2)

The process or action of taking private property without the owner’s consent, by a governmental agency for public use. The most common example of this type of condemnation is governmental purchase of houses situated along a proposed highway or bridge extension or expansion.

Conditional commitment

A promise by a lender to make a loan if the borrower meets certain conditions.

Conditional sale

A contract for property sale stating that the title will remain invested in the seller until all the conditions of the contract have been fulfilled.

Condominium

A form of apartment ownership in which an individual buys and owns a unit of housing in a multi-unit complex. Condominiums are more liberal than the co-operative type of apartment ownership, allowing owners to finance a much larger percentage of the purchase price (up to 90% in some cases), as well as have more flexible subletting, and pet policies.  Owners are responsible for monthly common-area maintenance charges and real estate taxes.

Conduit

A situation in which the mortgage originator (lender) has an open alliance with an unaffiliated organization that acts as a funding source by regularly purchasing loans.

Conforming loan

A home loan that meets qualifications to be purchased by Fannie Mae or Freddie Mac.

Construction documents

Documents that detail the requirements for the construction of a project, created by an architect, and engineer, or both. In other words, the technical specification sheets.

Construction loan

Interim financing during the developmental phase of a property. Lenders usually pay out installments of the loan based on completion of defined stages of construction.

Construction management

The act of ensuring the various stages of the construction process are completed in a timely and seamless fashion. May be performed by an in-house department of the construction company, or outsourced to a professional construction management firm.

Construction-to-permanent loan

A construction loan that is converts to a long-term loan after the construction is completed.

Consultant

Any company or individual that provides a knowledge-based service. Unlike an investment adviser or manager, a consultant does not source or execute transactions and does not manage assets.

Consumer price index (CPI)

A composite index that measures inflation in relation to the change in the price of goods and services purchased by a specified population during a base period of time. The CPI is commonly used to increase the base rent. This increase serves as protection of the rental stream against inflation.

Contact Person

The individual commissioned to show and promote the property.

Contiguous space

In residential structures, “contiguous space” means the multiple spaces or suites on the same floor, which can be combined and rented to a single tenant. In commercial structures, this term refers to combinable spaces on the same floor, and the adjoining floors.

Contract documents

>The complete set of design plans and specifications for the construction of a building.

Contract Out

The specific time when a buyer and seller have agreed on a price, and the parties’ attorneys have drafted a contract of sale and have sent it to the purchaser.

Contract rent

The rental obligation, expressed in dollars, as specified in a lease. Also known as face rent.

Conventional loan

A private sector loan, one that is not guaranteed or insured by the U.S. government.  

Conversion (1)

A change in the usage of a structure. Usually due to the changing make-up of the neighborhood, or tax incentives. Most common example of conversion is bringing a factory floor up to residential code, splitting it into units, and renting them out as loft sections..

Conversion (2)

A change in ownership structure, for example a rental building being converted to a co-operative ownership type.

Convertible Apartment

A large single or two-bedroom apartment that contains an L-shaped dining room with a window, which could be converted into another bedroom (via the installation of a wall).

Convertible adjustable-rate mortgage

A mortgage which starts as an adjustable rate loan, but contains a provision that allows the borrower to convert the loan to a fixed-rate mortgage during a specified period of time.

Convertible debt

A mortgage provision that gives the lender the option to convert to a partial or full ownership position in a property within a specified time period.

Convertible preferred stock

Preferred stock that is convertible to common stock under certain formulas and conditions, which are specified by the issuer of the stock.

Conveyance

In general, this term refers to most instruments with which an interest in real estate is created, mortgaged, and/or assigned. The most common use of “conveyance” refers to the transfer of title between parties by deed.

Cooperative (Co-op)

A type of apartment ownership, under which owners purchase stock in a co-operative corporation that actually owns the structure. Each owner (stockholder) has the right to live in a specific unit, and is responsible for paying a portion of the loan on the entire structure.  

Cooperative mortgage

Any loan related to a cooperative residential project.

Core properties

Major properties that generate high profits, have a potential for appreciation, and are completely or nearly leased and occupied (thus actively producing income). Core property types include: office, retail, industrial, and multi-unit residential. Most core properties are built within the last five years, or recently renovated.

Co-signer

>A second party who also signs a promissory note and takes responsibility for the debt.

Cost-approach improvement value

The current cost to construct a reproduction of, or replacement for, the existing structure, after subtracting an estimate for accrued depreciation (loss of value over time). In other words, an estimate of whether it will be cheaper to renovate, or build a new or similar property.

Cost-approach land value

The estimated value of the fee-simple interest in the land as if vacant and available for development to its highest and best use.

Cost-of-sale percentage

The product arrived at by dividing the cost of sales (broker commissions, closing costs, fees, etc) by the value of the property. For example, if a property is worth $100,000 and it will cost $5,000 to sell it, the COS is 5%.

Coupon

The nominal interest rate charged to the borrower on a promissory note or mortgage

Courier fee

The fee (charged at closing) that covers the delivery of documents between lenders, escrow companies, and other third parties during a real estate transaction.

Courtyard

This term most often refers to the interior outside grounds of a building. The phrase "courtyard views" in a listing usually means that the apartment looks away from the street, and usually gets little sunlight..

Covenant

A written agreement inserted into deeds or other legal instruments, that stipulates performance or non-performance of certain acts, or use or non-use of a property and/or land. An example of a covenant would be a commercial space renter agreeing to not manufacture certain hazardous goods.

Credit bureau score

A number representing the possibility a borrower may default,  it is based upon credit history and is used to determine ability to qualify for a mortgage loan.

Credit enhancement

The credit support needed in addition to the mortgage collateral to achieve a desired credit rating on mortgage-backed securities. The forms of credit enhancement most often employed are subordination, over-collateralization, reserve funds, corporate guarantees and letters of credit.

Credit History

A file detailing an individual’s current and past debt payments (and/or defaults). This history is used by lenders to gauge a potential borrower's ability to repay a loan.

Credit life insurance

Insurance that pays off a mortgage in the event of the borrower's death.

Credit Report

A record that lists all past and present debts and the timeliness of their repayment. May also include the individual’s employment and residence history. Credit reports are provided by the “Big Three” (Trans Union, Equifax, and Experian), as well as many other companies.

Credit repository

Large companies that gather financial and credit information from various sources about individuals who have applied for credit.

Credit Risk Score

See “Credit Score”.

Cross-collateralization

A grouping of mortgages or properties that serves to jointly secure one debt obligation.

Cross-defaulting

The provision of a loan agreement that allows a trustee to call all loans in a group into default when any single loan is in default.

Cumulative discount rate

The interest rate, expressed as a percentage of base rent, used in finding present values. The CDR takes into account all landlord lease concessions.

Current occupancy

The current leased portion of a building or property, expressed as a percentage of its total area or units.

Current yield

For CMBS, the coupon divided by the price.

Deal structure

In general, the type and condition of the obligations of the parties involved in a financial transaction. In particular regard to the financing of an acquisition, deals can be: unleveraged, leveraged, traditional debt, participating debt, participating/convertible debt, or joint ventures.

Debt

Any amount one person owes to another.

Debt service

The outlay necessary to meet all interest and principal payments during a given period.

Debt service coverage ratio (DSCR)

The annual net operating income from a property, divided by annual cost of debt service. A DSCR below 1 means the property not generating sufficient cash flow to cover debt payments.

Debt-to-Income ratio

The ratio or percentage that is calculated by dividing the monthly payments on a long-term loan (mortgage) by monthly gross income. According to the FHA, the monthly mortgage payment should not take up more than 29% of the gross monthly income, and the mortgage payment combined with all non-housing debts should not exceed 41% of income.

Dedicate

To appropriate private property to public ownership for a public use.

Deed

The legal document that transfers property ownership.

Deed in lieu of foreclosure

A deed given by an owner/borrower to a lender to satisfy a mortgage debt and avoid foreclosure. This process does not allow the borrower to remain in the house, but avoids the costs and lost time associated with foreclosure.

Deed of trust

An instrument used in place of a mortgage by which real property is transferred to a trustee to secure repayment of a debt.

Default

The failure or inability to pay monthly mortgage payments in a timely manner, or to otherwise meet the mortgage terms.

Deferred maintenance account

An account required to be maintained by the borrower, that provides funds for maintenance of a property.

Deficiency judgment

Imposition of personal liability on a borrower for the unpaid balance of mortgage debt, after a foreclosure has failed to yield the full amount of the debt.

Defined-benefit plan

An employee benefit plan that is specifically defined as a fixed amount or a percentage of salary. Pension plans, health and welfare plans, and Keogh plans are examples of defined-benefit plans.

Defined-contribution plan

An employee benefit plan whose contribution is defined in terms of amount contributed by the employee (deferred salary percentage), employer contribution (matching contributions), and earnings of the fund over the life of the fund, which are usually reinvested into the fund principal. Profit-sharing plans, 401(k), and thrift/savings plans are examples of defined-contribution plans.

Delinquency

Failure of a borrower to make timely mortgage payments under a loan agreement. Severe delinquency may lead to the lender calling the mortgage (foreclose).

Delinquent mortgage

A mortgage that involves a borrower who is behind on payments. The lender may send out a notice of delinquency, and begin foreclosure proceedings if the borrower cannot bring the payments up to date within a specified time limit.

Demising wall

The partition wall that separates one tenant's space from another, or from the building's common areas.

Department of Veterans Affairs (VA)

An independent agency of the federal government which guarantees long-term, low-payment, or no-down-payment mortgages to eligible veterans.

Deposit

Funds provided by the buyer with an offer to purchase property. Also referred to as "earnest money".

Depreciation

A decrease or loss in property value due to wear, age or other cause. In accounting, depreciation is a periodic allowance made for this real or implied loss.

Derivative securities

Securities that are created artificially, i.e., derived from other financial instruments. In the context of CMBS, the most common derivative security is the interest-only strip.

Design/build

Describes a planned construction situation in which a single entity is responsible for both the design and construction.

Disclosure

A statement to a potential buyer listing information relevant to a piece of property, describing potentially harmful conditions, such as the presence of radon gas, lead paint, or unstable structural members.

Discount point

Fees charged by a lender to reduce the interest rate. Generally calculated to be equal to 1% of the total loan amount, and normally paid at closing.

Discount rate

A yield rate used to convert future payments or receipts into present value.

Discretion

The level of authority granted to an adviser or manager over the investment and management of a client's capital.

Distraint

The act of seizing personal property of a tenant in default, based on the right and interest a landlord has in the property.

Diversification

The process of creating individual investments in a manner that insulates against risk. This is accomplished by spreading portions of the investment among a variety of asset types with different characteristics.

Dividend

Cash or stock distribution paid to holders of common stock.

Dividend yield

The annual dividend rate for a security expressed as a percent of its market price (annual dividend/price = dividend yield).

Dividend-ex date

Dividend expiration date. On this date, the stock owner is no longer eligible to receive dividends.

Document needs list

A list of documents required by a lender from a potential borrower submitting a loan application. Documents requested can range from paycheck stubs to bank statements.

Documentation Preparation Fee

A fee charged by lenders, brokers and/or settlement agents to prepare the necessary documents for closing.

Dollar stop

An agreed dollar amount of taxes and operating expense each tenant will pay on a prorated basis.

Down payment

The portion of a purchase price that is paid in cash and is not part of the mortgage loan.

DOWNREIT

An organizational structure that makes it possible for REITs to buy properties using partnership units. The effect is the same as an UPREIT, however, the DOWNREIT is subordinate to the REIT itself, hence the name.

Draw

A payment made to contractors, subcontractors, home builders or suppliers from the proceeds of a construction loan.

Dual Sinks/Dual Vanity

A bathroom layout including two sinks and cabinets, usually “his and hers”.

Due diligence

In general, any investigation of a financial deal that assures all facts and amounts to be true. In real estate specifically, the activities carried out by a prospective purchaser or mortgager of real property to confirm that the property is as represented by the seller and is not subject to environmental or other problems.

Due on sale

A mortgage provision that makes a mortgage due if the property is sold before the mortgage maturity date.

Duplex Apartment

An apartment that is spread out over two levels.

Earnest money

A type of deposit arrangement. Funds secured by a potential buyer to show that they are serious about purchasing the property. Earnest money becomes part of the down payment if the offer is accepted, is returned if the offer is rejected, or is forfeited if the buyer pulls out of the deal.

Earthquake insurance

An insurance policy that provides coverage against damage to a home from an earthquake.

Easement

A right created by grant, reservation, agreement, prescription or necessary implication to use someone else's property, usually for public use. For example, the city council may create an easement granting a utility company the right to extend power lines across a private property.

Economic feasibility

The feasibility of a building or project in terms of costs and revenue, with excess revenue establishing the degree of viability.

Economic rent

The market rental value of a property at a given point in time.

EEM

Acronym for “Energy Efficient Mortgage”, an FHA program that helps homebuyers save money on utility bills by enabling them to finance the cost of adding energy-efficiency features to a new or existing home as part of the home purchase.

Effective date

The date on which a registration statement becomes effective and the sale of securities can commence.

Effective gross income (EGI)

The total income from a property generated by rents and other sources, after subtracting the “appropriate vacancy factor”. EGI is expressed as collected income before expenses and debt service.

Effective gross rent (EGR)

The net rent generated, after adjusting for tenant improvements and other capital costs, lease commissions and other sales expenses.

Effective rent

The actual rental rate to be achieved by the landlord after deducting the value of concessions from the base rental rate paid by a tenant. Usually expressed as an average rate over the term of the lease.

EIK

Acronym for “Eat-In Kitchen”, describing a kitchen with a space for a table and chairs, in the same space or separated by a counter. A common space-saving arrangement, as opposed to a dedicated dining room.

Electronic Authentication

Any of several methods used to provide proof that a particular document received by electronic means is unaltered, and was sent by the indicated source.

Eminent domain

A power to acquire by condemnation private property for public use, in return for just compensation (fair market value).

En Suite Bathroom

A bathroom, usually in the master bedroom, that opens into the bedroom instead of a hallway. A private bathroom for the master suite.

Encroachment

The intrusion of a structure that extends, without permission, over a property line, easement boundary or building setback line.

Encumbrance (1)

A right to, or interest in, real property held by someone other than the owner, that does not prevent the transfer of fee title.

Encumbrance (2)

Any right or interest in property interfering with its use or transfer.

End loan

The conversion from a construction loan to permanent financing.

Entitlement

The VA home loan benefit is called an entitlement and often referred to as eligibility.

Environmental impact statement

Documents required by federal and state laws to accompany proposals for major projects and programs that will likely have an impact on the surrounding environment.

Equal Credit Opportunity Act (ECOA)

Federal law that prohibits a lender or other creditor from refusing to grant credit based on the applicant's sex, marital status, race, religion, national origin or age.

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Equifax

One of the main credit-reporting bureaus. The other two are Experian and Trans Union.

Equity

The value of a property calculated by subtracting debts (mortgages) from the fair market value.

ERISA (Employee Retirement Income Security Act)

Legislation passed in 1974 and administered by the Department of Labor, that controls the investment activities, primarily of corporate and union pension plans.

Errors and omissions insurance

A policy that insures against mistakes made by a builder or architect.

Escalation clause

A clause in a lease that provides for the rent to be increased to reflect changes in expenses paid by the landlord, such as real estate taxes and operating costs.

Escrow

The procedure of securing funds and/or documents by placing them into an account controlled by an independent third party (escrow agent). Neither the buyer nor the seller have access to the funds or documents until the conditions of the transaction are met.

Escrow agreement

A written agreement between an escrow agent and the parties in a contract, that specifies the terms of the transaction, the conditions permitting access to the funds and/or documents deposited in escrow, and the instructions to the escrow agent.

Escrow Disbursements

Payments made for recurring expenses (taxes, insurance, property expenses) from an escrow account, as opposed to “regular” payments (from available funds).

Estate

The total assets of a person, including real property, at the time of death.

Estimated closing costs

An estimate of expenses related to the sale of real estate, including title and appraisal fees.

Estimated property taxes

An estimate of property taxes payable on the property according to state and county tax rates.  The amount due is based on the property's assessed value, which is based on the most recent sale price plus any assessment updates.

Estoppel certificate

A signed statement certifying that certain statements of fact are correct as of the date of the statement and can be relied upon by a third party, including a prospective lender or purchaser.

Examination of title

An inspection by a title company of public records and other documents to determine the chain of ownership of a property.

Excellent

Interchangeable with the term “mint”, this describes a property that is in an exceptionally good condition and requires no renovation whatsoever.

Exclusive Listing (1)

An agreement that makes the selling agent financially responsible for selling the property, and precludes the property owner from selling the property him or herself. The exclusive broker is accountable to the owner of the property and is responsible for seeing the transaction through its conclusion.

Exclusive Listing (2)

A property listing that is distributed only to the other agents of the same company or agency, and not to the wide-area MLS. This serves to keep both the seller and the buyer agents’ commissions “in-house”, as well as limiting the buyer pool to “in-house” buyers, who may have already been pre-qualified for a loan.

Executed contract

A contract in which all parties have fulfilled their promises.

Exit strategy

Strategy available to investors when they desire to liquidate all or part of their investment.

Experian

One of the main credit reporting bureaus. The other two are Equifax and Trans Union.

Façade

The front of a building. This term can refer to the direction that an element of the structure is facing (façade windows), or the actual surface of the front wall (marble façade).

Face rental rate

The asking rental rate, before any concessions are subtracted or fees/taxes added.

Facility space

In hospitality properties, this term refers to areas occupied by operations, support, and storage facilities. In other words, all usable area not directly related to room occupancy or common use.

FAD (funds available for distribution)

Funds from operations, minus deductions for cash expenditures for leasing commissions and tenant improvement costs.

FAD multiple

Share price of a REIT divided by its funds available for distribution.

Fair Credit Reporting Act

Federal law designed to regulate procedures and prevent old or inaccurate information from staying in consumer credit files. This act provides individuals the right to inspect their own credit files, although the credit bureau may charge a fee.

Fair Housing Act

Federal law making it illegal to refuse to rent or sell to anyone based on race, color, religion, sex, national origin, family status or disability.

Fair market value

The sale price at which a property would change hands between a willing buyer and willing seller, neither being under any compulsion to buy or sell, and both having reasonable knowledge of the relevant facts

Fannie Mae

The common name of the Federal National Mortgage Association (FNMA) - a congressionally-chartered, shareholder-owned, tax-paying company that buys mortgages from lenders and resells them as securities on the secondary mortgage market. By purchasing mortgages, FNMA supplies funds that lenders may loan to potential homebuyers. The FNMA buys and sells conventional, FHA-insured, and VA-guaranteed mortgages.

Federal Home Loan Mortgage Corporation (FHLMC)

The FHLMC is commonly known as Freddie Mac.  This corporation buys mortgages from lending institutions, pools them with other loans and sells shares to investors.

Federal Housing Administration (FHA)

A department of the government, established in 1934 to advance homeownership opportunities for all Americans. The FHA helps homebuyers by providing mortgage insurance to lenders to cover most losses that may occur when a borrower defaults. This encourages lenders to make loans to borrowers who might not qualify for conventional mortgages. The FHA provides loans with a low rate, secured by a down payment as small as 3 percent.

Fee simple interest

Describes the condition when an owner holds all the rights in a real estate parcel, with no encumbrances.

FFO (funds from operations)

A ratio intended to highlight the amount of cash generated by a company's real estate portfolio relative to its total operating cash flow. The FFO is equal to net income, excluding gains (or losses) from debt restructuring and sales of property, plus depreciation and amortization.

FFO multiple

Share price of a REIT divided by its FFO.

FHA loans

Mortgages that are insured by the Federal Housing Administration (FHA). Typically low-rate mortgages with a down payment as small as 3 percent.

FHA Mortgage Insurance

Requires a fee (up to 2.25 percent of the loan amount) paid at closing to insure the loan with the Federal Housing Administration (FHA).  In addition to the one-time fee, the FHA also requires an additional insurance fee of up to 0.5 percent of the current loan amount, paid in monthly installments. The lower the down payment, the more years the fee must be paid.

Fiduciary

An adjective describing any entity (person or company) that exercises any discretionary authority or control over a plan's asset management, administration or disposition, or renders investment advice for a fee or other compensation with respect to a plan's assets. Fiduciaries can be held personally liable for any losses to a plan resulting from a breach of fiduciary duty.

Finance charge

The amount paid for the privilege of deferring payment of goods or services purchased, including any charges payable by the purchaser as a condition of the loan.

Financing Allowed

The clause of a co-operative agreement that specifies how much of the apartment’s purchase price may be financed. Usually, this portion is about 70-80% of the purchase price. However, more desirable buildings may allow a much lower number (i.e. more cash up front), and some may disallow financing altogether. The percentage of allowed financing is purely arbitrary, and is determined by the co-operative board of directors.

Firm commitment

A written promise made by a lender to loan money for the purchase of property.

First mortgage

The senior mortgage that, by reason of its position, has priority over all junior encumbrances. The holder has a priority right to payment in the event of default.

First-generation space

This term usually refers to newly-created space that is currently available for lease, and has never before been occupied by a tenant.

First-loss position

he position in a security that will suffer the first economic loss if the underlying assets lose value, or are foreclosed on. The first-loss position carries a higher risk and a higher yield.

Fixed Costs

Costs that do not fluctuate in proportion to the level of sales or production.

Fixed Rate

Refers to a loan (or any other financial instrument involving interest rates) wherein the interest rate remains constant over the term of the loan.

Fixed time

In timeshare accommodations, this term specifies the time period in which  the timeshare owner has access to the property..

Fixed-rate mortgage

A mortgage (loan) with an interest rate that will remain at a specific rate for the term of the loan, regardless of payment amount, inflation, or other changes in situation.

Flex space

In commercial properties, this term refers to part(s) of a property that can be configured by the tenant to serve various needs.

FlipTax (Transfer Fee)

A charge imposed by the co-operative on the sale of a co-operative apartment. This charge could be based on a percentage of the gross sale, the net sale, the gain, or the number of shares held by the owner. However, it could also be a fixed amount. This charge can be paid by the seller, buyer, or both (split). However, some co-op boards specify who must pay the fee.

Float

The number of freely traded shares in the hands of the public.

Flood certification

The process of determining whether a property is located within a known flood zone.

Flood insurance

Insurance coverage that protects against damage by flooding. This insurance is usually required in designated flood areas.

Floor area ratio (FAR)

The ratio of the area of a building to the area of the land that it’s situated on; refers to the gross square footage, not the net usable space.

For Sale By Owner (FSBO)

A selling method whereas the owner of the property acts as the selling agent and handles the sales process directly with the buyer or buyer's agent.  This is most commonly done by owners in order to avoid having to pay a listing commission. The problem with FSBO is that a selling agent will frequently get a higher selling price (due to access to a far larger pool of potential buyers, as well as negotiating experience, and other factors). This higher selling price most often covers the commission, and presents a profit. Thus, in comparison to an agent sale, FSBO sellers have to spend a lot more time and effort, for a lower overall profit.

Force majeure

A force that cannot be controlled by the parties to a contract and prevents them from complying with the provisions of the contract. This includes acts of God such as a flood or a hurricane, or acts of man such as a strike, fire, or war.

Foreclosure

A legal process in which mortgaged property is sold to pay the loan of the defaulting borrower.

Forward commitments

Contractual obligations to perform certain financing activities upon the satisfaction of any (or all) stated conditions. Usually used to describe a lender's obligation to fund a mortgage.

Four Quadrants (of the real estate capital markets)

1.) Private equity - direct real estate investments acquired privately.
2.) Public equity - REITs and other publicly traded real estate operating companies.
3.) Private debt – whole-loan mortgages.
4.) Public debt - Commercial mortgage-backed securities and other securitized forms of whole loan mortgage interests.

Freddie Mac

The common name for the Federal Home Loan Mortgage Corporation (FHLM). This is a federally-chartered corporation that purchases residential mortgages, securitizes them, and sells them to investors on the secondary mortgage market. This process provides lenders with funds for new homebuyers.

Front-end ratio

A lender calculation that compares a borrower's monthly housing expense (principal, interest, taxes, and insurance) to gross monthly income.

Full-service rent

An all-inclusive rental rate that includes operating expenses and real estate taxes for the first year. The tenant is generally still responsible for any increase in operating expenses over the base year amount.

Fully Amortized ARM

An adjustable-rate mortgage (ARM) with a monthly payment that is sufficient to amortize the remaining balance, at the interest accrual rate, over the amortization term.

Fully diluted shares

The number of shares of common stock that would be outstanding if all convertible securities were converted to common shares.

Future proposed space

Space in a proposed commercial development that is not yet under construction or where no construction start date has been set. It also may refer to the future phases of a multi-phase project not yet built.

General contractor

The prime contractor who signs a contract for the construction of an entire building or project, rather than just a portion of the work. The general contractor may do all the work in-house, or hire subcontractors (more common). The general contractor is then responsible for coordination, scheduling, and payment to, all subcontractors.

General partner

A member of a partnership who has authority to bind the partnership, and shares in the profits and losses of the partnership.

Gift

Any funds that a buyer receives from a relative or other source, that do not need to be repaid. Mortgage lenders usually require a gift letter from the giver stating that the money does not have to be repaid.

Ginnie Mae

The common name for the Government National Mortgage Association (GNMA). The GNMA is a government-owned corporation overseen by the U.S. Department of Housing and Urban Development (HUD). The GNMA pools FHA-insured and VA-guaranteed loans to back securities for private investment. Similar to Fannie Mae and Freddie Mac, this corporation provides funding for private loans; the difference is that the GNMA deals only with FHA and VA-secured (i.e. government-backed) loans.

Going-in capitalization rate

The capitalization rate computed by dividing the projected first year's net operating income by the value of the property.

Good Faith Estimate

An estimate of all closing fees, including pre-paid and escrow items, as well as lender charges. The GFE must be given to the borrower within three days after submission of a loan application.

Grace period

A specified amount of time for a borrower to make a loan payment past the due date, without penalty.

Graduated lease

A lease in which the amount of rent varies depending upon future contingencies.

Graduated Payment Mortgage

A mortgage that requires a borrower to make larger monthly payments over the term of the loan. Payments are lower for the first few years but gradually rise until year three or five, when payments become fixed.

Grant

In real estate terms, to bestow or transfer an interest in real property by deed or other instrument. In the general sense, to give funds, property, authority, permission, or other rights and/or privileges, without demanding payment.

Grantee

The entity (person or organization) to which a grant is made.

Grantor

The entity making the grant.

Gross building area

The sum of areas at each floor level, including basements, mezzanines and penthouses, but without taking into account architectural setbacks and  projections (decorations or structural support elements), or extensions of usable space outside the primary (structural) walls, i.e. penthouse balconies.

Gross income

The total household income before taxes or expenses are subtracted.

Gross investment in real estate (historic cost)

The total amount of equity and debt invested in real estate investments, including the gross purchase price, acquisition fees and costs, and capital improvements, minus proceeds from sales and partial sales.

Gross lease

A lease in which the tenant pays a flat sum for rent, out of which the landlord must pay all expenses.

Gross leaseable area

The portion of total floor area designed for occupancy and exclusive use by tenants, including tenants’ storage areas. This measurement excludes common areas and building-support areas (elevators, heating/cooling equipment, common storage, etc.).

Gross returns

Returns generated from the operation of real estate, without accounting for adviser or manager fees.

Ground rent

Rent paid to the owner for use of land. Generally, the arrangement takes the form of a long-term lease, with the lessor retaining title to the land.

Growing-equity mortgage

A fixed rate mortgage that increases payments over a specific period of time. The extra funds are applied to the principal.

Guarantor

The entity that makes a guaranty.

Guaranty

An agreement whereby the guarantor assures satisfaction of the debt of another, or performs the obligation of another, if and when the debtor fails to do so.

Half-Bath

A bathroom with no bath or shower, including only a toilet and sink. Another term for a half-bath is a “powder room”.

Hard cost

The cost of actually constructing property improvements.

Hazard insurance

Also known as “homeowner’s insurance” or “fire & flood insurance”, this type of policy provides coverage against structural damage from fire, flooding, and wind. Most mortgage lenders require coverage for at least the replacement value of the home.

HELP

The acronym for the Homebuyer Education Learning Program. The HELP is an educational program that counsels people about the homebuying process, including topics such as budgeting, finding a home, getting a loan, and home maintenance. Usually, completing the program entitles the buyer to a reduced FHA mortgage insurance premium.

High Ceilings

This term refers to ceilings with a height of nine feet or more. High ceilings are usually found in pre-war residential, and most commercial spaces. However, some of the newer high-end residential buildings may also have high ceilings.

Highest and best use

The reasonably probable and legal use of vacant land or an improved property that is physically possible, appropriately supported, financially feasible, and that results in the highest value.

High-rise

In central urban districts, this usually means a building above 25 stories high (from the ground level at the site of the building). In suburban districts, however, this term can refer to structures higher than 7 or 8 stories.

Holdbacks

A portion of a loan commitment that is not funded until an additional requirement is met, such as completion of construction. See also: Graduated Loan, Construction-To-Permanent Loan.

Holding period

The length of time an investor expects to own a property from purchase to sale.

Hold-over tenant

A tenant retaining possession of the leased premises after the expiration of a lease.

Home equity line

An open-ended line of credit based on a homeowner's accumulated equity. The available may increase if the value of the property increases.

Home equity loan

A closed-ended loan secured by the equity in a home. The loan amount is fixed, without an option to redraw in the future.

Home inspection

A complete examination of the home’s structural and mechanical systems, done by a licensed professional. Home inspection determines the house’s safety and makes the potential buyer aware of any repairs that may be needed.

Home inspector

A licensed professional who performs home inspections.

Home price

The price agreed upon by a buyer and seller, as opposed to the market value or appraised value. For example, a house may be appraised at $ 500,000, be offered for $550,000 (due to neighborhood attractiveness), and priced at $ 525,000 at the time of sale.

Home warranty

Offers insurance protection for mechanical systems and attached appliances. Does not cover the structure (which is covered by homeowner’s insurance).

Homeowners Association (HOA)

A private group that governs a subdivision, condominium or planned community. The HOA collects regular fees from owners, pays for common area maintenance, handles legal and safety issues, and enforces the covenants, conditions, and restrictions set by the developer.

Homeowner's insurance

An insurance policy that offers protection against damage to a house and its contents, as well as protection from claims of negligence or inappropriate action that results in injury or property damage.

Homestead

A parcel of land used by the owner as a primary residence.

Housing counseling agency

>An organization that provides counseling and assistance to individuals on a variety of issues, including loan default, fair housing, and home buying.

Housing expense ratio

The percentage of gross monthly income devoted to housing costs.

HUD

The U.S. Department of Housing and Urban Development, whose mission is “to increase homeownership, support community development and increase access to affordable housing free from discrimination.” (Direct quote from the HUD website - www.hud.gov). The HUD works with community and faith-based organizations, provides emergency funding for troubled districts, educates low-income communities about housing and discrimination laws, enforces fair-housing laws, and more. See also: FHA (which is overseen by the HUD).

HUD-1 Statement

A document that itemizes all closing costs, that must be given to the borrower, at or before closing. Also known as a settlement sheet.

HVAC

The acronym for Heating, Ventilation and Air Conditioning; generally refers to all of the appliances involved, as a complete system (i.e. “HVAC setup”, “certified HVAC installation”, etc.). The acronym HVAC/R also includes [commercial] refrigeration systems.

Hybrid debt

A mortgage position with equity-like participation features in both cash flow and the appreciation of the property at the time of sale or refinance.

In Contract

The moment in time when a buyer and a seller both sign a contract of sale.

Implied capitalization rate (REIT ICR)

Referring to Real Estate Investment Trusts, the ICR is calculated by dividing the net operating income by the sum of REIT's equity market capitalization and its total outstanding debt.

Impounds

A portion of the monthly mortgage payment that is placed in an [escrow] account and used to pay for hazard insurance, property taxes, and other legally-required expenses.

Improvements

Referring to leases, this term generally to improvements made inside a building, but may include any permanent structural developments, or outside improvements, such as sidewalk replacement, utilities upgrade, or façade resurfacing.

Income property

Property that is not occupied by the owner but is used to generate income.

Income return

The portion of the gain on an investment that is generated by income from operations. (As opposed to gain from change in market value, reinvested dividends, or other sources).

Index

A measurement used by lenders to determine changes to the interest rate charged on an adjustable rate mortgage. Commonly-used indexes are the Prime Rate table and the Treasury Bill value chart.

Indexed Rate

The sum of the published index plus a margin (lender’s interest).

Indirect costs

Development costs other than direct material and labor costs. Indirect costs include financing and engineering costs, administrative and managerial expenses, and taxes and fees.

Inflation (1)

The annual rate at which consumer prices increase.

Inflation (2)

A situation wherein the amount of currency in circulation exceeds the amount of goods & services available for purchase.

Initial interest rate

The original interest rate on an adjustable rate mortgage, which may be subject to adjustment due to market conditions and other factors.

Initial public offering (IPO)

The first time a private company offers securities for sale to the public.

Initial rate cap

Within the contract of an adjustable rate mortgage (see ARM), the initial rate cap is a specific limit for the maximum amount the interest rate may increase at the expiration of the initial interest rate.

Initial rate duration

Within the contract of an adjustable rate mortgage (see ARM), this is the specified time period during which the initial rate applies.

Insurance

Protection against a specific loss over a period of time, that is secured by the payment of a regularly scheduled premium.

Insurance binder

A temporary insurance arrangement, usually put in force until a permanent policy can be secured.

Insured Mortgage

A mortgage that is guaranteed by the Federal Housing Administration (FHA) or by private mortgage insurance (PMI).

Interest

The price paid for the use of someone else’s money.

Interest-only loan

The borrower pays only the interest that accrues on the loan balance each month. Because each payment goes toward interest, the outstanding balance of the loan does not decline with each payment.

Interest paid over life of loan

The total amount of interest paid over the duration of the loan.

Interest Rate

The amount charged by a lender to borrower for the use of borrowed money.

Interest Rate Cap

During the adjustment period of an ARM, the Interest Rate Cap is the maximum interest rate change allowed.

Interest Rate Ceiling

The highest interest rate a lender can charge for an adjustable rate mortgage.

Interest Rate Floor

The lowest interest rate a lender can charge for an adjustable rate mortgage.

Interest-only strip

A derivative security consisting of the interest portion of the underlying loan or security. May include all or part of the interest amount.

Interim financing

Also known as “bridge” or “swing” loans, interim financing is used by sellers to sustain solvency in the time between the sale of one house and the purchase of another. Most construction loans are a form of interim financing.

Inventory

Most often, brokers use the term “inventory” to mean the total available listings by their agency, without regard to type, size, condition, or price. For example, “Fillmore has the largest inventory in Brooklyn”. However, this term can be used to refer to almost anything – “commercial inventory” means only commercial properties, “lease inventory” can include commercial and residential properties available for lease, and so on.

Investment manager

An entity (person or organization) that assumes control over capital, invests that capital in assets, and provides asset management.

Investment policy

A document that specifies an investment manager’s goals and methods for investment and asset management. This policy typically contains: overall goals, core investment criteria and methods, specialized investment criteria and methods, as well as asset management guidelines.

Investment property

>Any real estate property that actively generates income. Examples include apartment buildings,

Investment strategy

The investment parameters used by the manager in structuring the portfolio and selecting the real estate assets for a fund or account. This includes a description of the types, locations and sizes of properties to be considered, the ownership positions that will be used, and the stages of the investment lifecycle.

Investment structures

Unleveraged acquisitions, leveraged acquisitions, traditional debt, participating debt, convertible debt, triple-net leases and joint ventures

Investment-grade CMBS

Commercial mortgage-backed securities with ratings of "AAA," "AA," "A" or "BBB"

Investor status

In reporting to clients and consultants, all investors are divided into two categories: taxable and tax-exempt. The tax-exempt category includes all qualified pension and retirement accounts. The taxable category includes all other accounts under management, including off-shore capital.

Joint liability

The responsibility of two or more people to fulfill the terms of a home loan or other financial debt.

Joint tenancy

Ownership by two or more people that gives equal shares to a piece of property.  Rights pass to the surviving owner or owners.

Joint venture

An investment entity formed by one or more entities to acquire or develop and manage real property and/or other assets

Judgment

A legal decision; when requiring debt repayment, a judgment may include a property lien that secures the creditor's claim by providing a collateral source.

Jumbo loan

Loans that exceed the conforming limits set annually by Fannie Mae & Freddie Mac.

Junior mortgage

A loan that is subordinate to the primary loan.

Just compensation

Compensation that is fair to both the owner and the public when property is taken for public use through condemnation (eminent domain)

Keyed Elevator

This terminology refers to a situation when an apartment occupies an entire floor in a building.   In other words, the elevator opens up right into the apartment on into a foyer which leads directly to the particular apartment.  This type of elevator can be seen in loft spaces where an apartment can occupy an entire floor or in high-end apartments where one must use a key to control access to a penthouse apartment.

Lease

A legal document which outlines the responsibilities and parameters between a landlord and a tenant.

Lease Assignment

When a lessee (tenant) must leave his/her apartment prior to the end of the particular lease and he/she remains responsible for the duration of the term. In such an instance, the lessor (owner) will allow the lessee to assign the remaining term on the lease to a new tenant. However, in most situations like this, a prudent owner/landlord will keep the original tenant on the lease and thus responsible for the remainder of the term. Whether or not the owner/landlord allows the new tenant to remain in the apartment is strictly at the discretion of the owner/landlord.

Lease purchase

Assists low to moderate income homebuyers in purchasing a home by allowing them to lease a home with an option to buy; the rent payment is made up of the monthly rental payment plus an additional amount that is credited to an account for use as a down payment.

Leasehold

The limited interest in a property held by a tenant; primarily the right to inhabit it for a specified period of time. At the end of the lease, the property reverts to the owner or landlord.

Leasehold interest

The right to hold or use property for a fixed period of time at a given price, without transfer of ownership

Lease-Purchase

The lease purchase contract sets the closing date and provides remedies to the seller if the buyer defaults. (a type of delayed closing)

Legal blemish

Blemishes on a piece of property such as a zoning violation or fraudulent title claim.

Legal description

A geographical description identifying a parcel by government survey, metes and bounds, or lot numbers of a recorded plat including a description of any portion that is subject to an easement or reservation. A specific way of identifying and locating a piece of real estate that is acceptable to a court.

Legal owner

The legal owner has title to the property, although the title may actually carry no rights to the property other than as a lien.

Lender

A bank, savings institution or mortgage company that offers home loans.

Letter of credit

A commitment by a bank or other person that the issuer will honor drafts or other demands for payment upon full compliance with the conditions specified in the letter of credit. Letters of credit are often used in place of cash deposited with the landlord in satisfying the security deposit provisions of a lease.

Letter of intent

A preliminary agreement stating the proposed terms for a final contract

Leverage

The use of credit to finance a portion of the costs of purchasing or developing a real estate investment. Positive leverage occurs when the interest rate is lower than the capitalization rate or projected internal rate of return. Negative leverage occurs when the current return on equity is diminished by the employment of debt.

Liabilities

A borrower's debts and financial obligations.

Liability insurance

An insurance policy that protects owners against claims of negligence, personal injury or property damage.

LIBOR

Acronym for "London Interbank Offered Rate." An index used to determine interest rate changes for adjustable rate mortgages. Very popular index for interest only mortgage programs.

LIBOR (London InterBank Offered Rate)

The interest rate offered on Eurodollar deposits traded between banks, also called swaps

Lien

A legal claim against property that must be satisfied when the property is sold.

Lien

A claim or encumbrance against property used to secure a debt, a charge or the performance of some act

Lien

A claim laid by one person or company on the property of another as security for money owed.

Lien waiver

Waiver of a mechanic's lien rights that is often required before the general contractor can receive a draw under the payment provisions of a construction contract. It may also be required before the owner can receive a draw on a construction loan.

Life cap

Limits the amount a loan's interest rate can change during the mortgage term. For example, if the rate on an adjustable-rate mortgage begins at 4 percent and has a life cap of 6 percentage points, it can not go over 10 percent.

Lifecycle

The various developmental stages of a property: pre-development, development, leasing, operating and redevelopment (or rehab)

Lifetime Payment Cap

For an adjustable-rate mortgage (ARM), a limit on the amount payments can increase or decrease over the life of the mortgage.

Lifetime Rate Cap

A maximum interest rate or "ceiling" that may not be exceeded under any circumstances over the entire life of the loan.

Like-kind property

A term used in an exchange of property held for productive use in a trade or business or for investment. Unless cash is received, the tax consequences of the exchange are postponed pursuant to Section 1031 of the Internal Revenue Code.

Limited partnership

A type of partnership comprised of one or more general partners who manage the business and are personally liable for partnership debts, and one or more limited partners who contribute capital and share in profits but who take no part in running the business and incur no liability above the amount contributed

Liquid assets

Cash and all other assets that can be converted to cash relatively quickly. Liquid assets can include money in savings and checking accounts, money-market accounts and most CD's.

Liquidity

The ease with which assets can be converted to cash without loss in value

Listing agreement

An agreement between the owner of a property and a real estate broker giving the broker authorization to attempt to sell or lease the property at a certain price and terms in return for a commission, set fee or other form of compensation

Listing(s)

Brokers refer to available apartments as listings. These can be either sale or rental availabilities.

Listing(s)

Brokers refer to available apartments as listings. These can be either sale or rental availabilities.

Loan

Money borrowed that is usually repaid with interest.

Loan application

A document that details a borrower's income, debt and other obligations to determine credit worthiness. Also includes information on the subject property.

Loan application fee

A fee charged by lenders to cover expenses incidental to reviewing a loan application.

Loan commitment

A promise by a lender or other financial institution to make or insure a loan for a specified amount and on specific terms.

Loan fraud

purposely giving incorrect information on a loan application in order to better qualify for a loan; may result in civil liability or criminal penalties.

Loan officer

An official lending institution representative who is empowered to act on behalf of the lender within certain limits.

Loan origination fee

A fee charged by lenders to cover the direct costs of arranging the loan.

Loan term

The time set by a lender for a buyer to pay a mortgage. Most conforming loans have 30 or 15-year terms.

Loan-to-value (LTV) ratio

A percentage calculated by dividing the amount borrowed by the price or appraised value of the home to be purchased; the higher the LTV, the less cash a borrower is required to pay as down payment.

Loan-to-value (LTV) ratio

A percentage calculated by dividing the amount borrowed by the price or appraised value of the home to be purchased; the higher the LTV, the less cash a borrower is required to pay as down payment.

Loan-to-value ratio (LTV)

The ratio of the value of the loan principal divided by the property's appraised value

Loan-to-value ratio (LTV)

The ratio of the total loan amount to the value of the property. For lending purposes, the property value is equal to the purchase price or the appraised value, whichever is lower.

Lock-box structure

A structure whereby the rental or debt-service payments are sent directly from the tenant or mortgagor to the trustee

Lock-in

since interest rates can change frequently, many lenders offer an interest rate lock-in that guarantees a specific interest rate if the loan is closed within a specific time.

Lock-in

A lender's commitment to a borrower to guarantee (or "lock in") a specific interest rate for a limited amount of time.

Lock-in period

A period of time during which the borrower is guaranteed an agreed-upon interest rate, even if market rates rise. The longer the period, the higher the cost (in points) to the borrower.

Lockout

The period during which a loan may not be prepaid.

Loft Space

By definition, this term refers to space which has been converted from commercial usage to residential usage. This can include the conversion of office space, factory space or warehouse space. At present, there is a wave of conversion of downtown space from commercial office building space to residential loft or loft-like space. Some of the attributes of loft space may include high ceilings, open space, raw space, large windows, etc.

Long-term lease

In most markets, this refers to a lease whose term is at least three years from initial signing to the date of expiration or renewal.

Loss mitigation

a process to avoid foreclosure; the lender tries to help a borrower who has been unable to make loan payments and is in danger of defaulting on his or her loan

Loss severity

The percentage of principal lost when a loan is foreclosed

Lot

Each New York City parcel of land is divided into lots for purpose of identification

Lot

Generally one of several contiguous parcels of land making up a fractional part or subdivision of a block, the boundaries of which are shown on recorded maps and plats

Low-documentation loan

A home loan that requires only minimal verification of income and assets.

Low-rise

A building with fewer than four stories above ground level

LTV (loan-to-value ratio)

The ratio of the total loan amount to the value of the property. For lending purposes, the property value is equal to the purchase price or the appraised value, whichever is lower.

Lump-sum contract

A type of construction contract requiring the general contractor to complete a building or project for a fixed cost normally established by competitive bidding. The contractor absorbs any loss or retains any profit.

Magic page

Included in the offering prospectus, the magic page is a projected growth story, describing how a new REIT will accomplish its future expectations for funds from operations or funds available for distribution.

Maintenance

This refers to the amount of monthly charges paid by an individual co-operative owner to the co-operative as their proportionate share of the expenses of the building. Maintenance is comprised of three components: 1) The daily cost to run and operate the building; 2) The shareholders proportionate share of the building's underlying mortgage and 3) the shareholders proportionate share of the building's local real estate taxes.

Maintenance fee

The monthly assessment paid by homeowners' association members for the repair and maintenance of common areas.

Maisonette

A ground floor apartment with a separate street entrance from the rest of the building. This type of apartment will usually have a second entrance inside the building's lobby and will enjoy the same amenities of the building. Typically these apartments are located in Park Avenue or Fifth Avenue co-operative apartment buildings and provide the owners of these apartments a more private existence within a co-op and a 'townhouse' type of environment without the maintenance of an actual townhouse.

Maker

One who creates or executes a promissory note and promises to pay the note when it becomes due

Managing Agent

Most co-operative and condominium buildings will hire an independent company to manage the property. These firms are responsible for the daily maintenance of a property, the collection of rents or monthly maintenance charges, enforcing building policies, etc.

Margin

An amount the lender adds to an index to determine the interest rate on an adjustable rate mortgage.

Margin

A percentage added to the index and fixed for the life of the loan. When the initial interest rate on an adjustable-rate loan has expired, the interest rate moves toward the sum of its index plus a margin.

Mark to market

The process of increasing or decreasing the original investment cost or value of a property asset or portfolio to a level estimated to be the current market value

Market capitalization

One measure of the value of a company; it is calculated by multiplying the current share price by the current number of shares outstanding.

Market rental rates

The rental income that a property most likely would command in the open market, indicated by the current rents asked and paid for comparable space

Market study

A forecast of future demand for a certain type of real estate project that includes an estimate of the square footage that can be absorbed and the rents that can be charged

Market value

The highest price a property would command in a competitive and open market under all conditions requisite to a fair sale

Market value

The price a piece of property sells for at a particular point in time.

Marketable title

A title free from encumbrances that could be readily marketed to a willing purchaser

Master lease

A primary lease that controls subsequent leases and may cover more property than subsequent leases

Master servicer

An institution that acts on behalf of a trustee for the benefit of security holders in collecting funds from a borrower, advancing funds in the event of delinquencies and, in the event of default, taking a property through foreclosure

Maturity date

The date when the total principal balance comes due

Mechanic's lien

A claim created for the purpose of securing priority of payment of the price and value of work performed and materials furnished in constructing, repairing or improving a building or other structure

Meeting space

In hotels, space made available to the public to rent for meeting, conference or banquet uses

Merged credit report

A report that draws information from the three (3) main credit-reporting agencies incvluding: Equifax, Experian and Trans Union.

Metes and bounds

The boundary lines of land described by listing the compass directions and distances of the boundaries. Originally, metes referred to distance and bounds referred to direction.

Mezzanine financing

Mezzanine financing is somewhere between equity and debt. It is that piece of the capital structure that has senior debt above it and equity below it. There is both equity and debt mezzanine financing, and it can be done at the asset or company level, or it could be unrated tranches of CMBS. Returns are generally in the mid- to high-teens.

Mid-rise

A building with four to eight stories above ground level. In a central business district this might extend to buildings up to 25 stories.

Mixed-use

Space within a building or project providing for more than one use

Modern portfolio theory (MPT)

An approach to quantifying risk and return in a portfolio of assets. Developed in 1959 by Harry Markowitz, MPT is the foundation for present-day principles of investment diversification. It emphasizes the portfolio rather than individual assets, and how assets perform in relation to each other based on the assumption that investors can benefit from diversification when asset class returns do not move in lock step with one another.

Modification

A change in the terms of a loan agreement.

Modified annual percentage rate (APR)

The modified APR is an index of loan cost based on the standard APR and adjusted for the time the borrower expects to hold the loan.

Monthly association dues

A payment due monthly to a homeowners' association for maintenance and communal expenses.

Mortgage

In order to purchase a property, an individual often will enter into an agreement with a lending institution to provide him/her with a loan to cover a large percentage of the purchase price. A mortgage is a very common vehicle used in the purchase of a home and most Americans use this type of financing throughout their lives when they purchase property. There are several components to a mortgage, including the interest rate due on the loan (this can be either a fixed or floating rate), the term of the mortgage in number of years (usually 15 or 30) and the amount that is being financed. Using simple math, one can figure out his/her monthly payments for the term of the mortgage. If the rate is fixed, the amount for each payment period will be identical and will be comprised of two components, principle and interest.

Mortgage

A lien on the property that secures the promise to repay a loan.

Mortgage

A legal document by which real property is pledged as security for repayment of a loan until the debt is repaid in full

Mortgage

A sum of money borrowed to purchase a home using the property as collateral. A mortgage is the legal document that pledges the property as collateral for a loan.

Mortgage acceleration clause

A clause that allows a mortgage lender to demand repayment of the entire loan balance in a lump sum under certain circumstances, such as when the home is sold, title is changed, the loan is refinanced or the borrower defaults on a scheduled payment.

Mortgage banker

A company that originates loans and resells them to secondary mortgage lenders such as Fannie Mae or Freddie Mac.

Mortgage banker

A company that provides home loans using its own money. The loans are usually sold to investors such as insurance companies and Fannie Mae.

Mortgage broker

A firm that originates and processes loans for a number of lenders.

Mortgage broker

An individual that matches lenders with prospective borrowers who meet the criteria of lenders the broker is approved to deal with.

Mortgage broker business

A company that matches lenders with prospective borrowers who meet the criteria of lenders the broker is approved to deal with. The mortgage broker business does not keep or make the loan, but receives payment from the lender for services.

Mortgage constant

The ratio of an amortizing mortgage payment to the outstanding mortgage balance

Mortgage insurance

A policy that protects lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan; mortgage insurance is required primarily for borrowers with a down payment of less than 20% of the home's purchase price.

Mortgage insurance

Required by lenders on some loans to protect lenders from a possible default. Most conventional loans with down payments or home equity percentages that are less than 20 percent of the home value require private mortgage insurance (PMI).

Mortgage insurance premium (MIP)

A monthly payment usually part of the mortgage payment paid by a borrower for mortgage insurance.

Mortgage Interest deduction

The tax write-off that the Internal Revenue Service allows most owners to claim for annual interest payments made on real estate loans.

Mortgage life insurance

Insurance that will pay off a mortgage if the borrower dies before the debt is retired.

Mortgage Modification

a loss mitigation option that allows a borrower to refinance and/or extend the term of the mortgage loan and thus reduce the monthly payments.

Mortgage Points

Often when a consumer takes out a mortgage, the lender will tack on points to the mortgage amount is an upfront cost of doing business. In other words, if the lending institution offers a mortgage rate at 2 points, you will be paying 2% of the total mortgage upfront as an added cost of doing business.

Mortgagee

A bank or other financial institution that lends money to the borrower. The borrower is considered the mortgagor.

Mortgagor

The person who borrows money to purchase a house. The lender is called the mortgagee.

Murphy Bed

A bed which is built into a wall or attached to a wall and can be pulled down when needed. One can find Murphy Beds in smaller apartments. These beds can provide for great space saving and often resemble wall units so that when they are not exposed they are hardly if at all noticeable.

NAREIT (National Association of Real Estate Investment Trusts)

The national, not-for-profit trade organization that represents the real estate investment trust industry

NCREIF (National Council of Real Estate Investment Fiduciaries)

An association of real estate professionals who serve on working committees, sponsor research articles, seminars and symposiums, and produce the NCREIF Property Index

NCREIF Property Index (NPI)

The index reports quarterly and annual returns consisting of income and appreciation components. The index is based on data collected from the voting members of NCREIF. Specific property-type subindices include apartment, office, retail, industrial and hotel; regional subindices include West, East, South and Midwest.

Negative amortization

The accrual feature found in numerous participating debt structures that allows an investor to pay, for an initial period of time, an interest rate below the contract rate stated in loan documents.

Negative amortization

Occurs when a borrower's monthly payment is too small to cover both the principal and interest of a loan, so the outstanding balance of the loan actually grows larger with each payment. Many adjustable rate mortgages are susceptible to this.

NEGATIVE PLEDGE

A “Negative Pledge” co-op loan is a loan which exceeds the financing limit permitted or recognized by a co-op corporation. Because the co-op board does not approve or recognize any portion of the loan which exceeds the board’s financing limit, the lender’s rights, in the event of a default, are severely limited with respect to the unrecognized portion of the loan. Essentially, the bank’s rights against the stock and proprietary lease, in the event of a default, are subordinate to the co-op corporation’s rights to collect back maintenance and control the sale of the apartment. Consequently, only the most sophisticated banks are able to analyze and underwrite these negative pledge loans…for very well qualified borrowers.

Net asset value (NAV)

The value of an individual asset or portfolio of real estate properties net of leveraging or joint venture interests

Net asset value per share

The current value of a REIT's assets divided by shares outstanding

Net assets

Total assets less total liabilities on a market-value basis

Net cash flow

Generally determined by net income plus depreciation less principal payments on long-term mortgages

Net cash flow

Income from an investment property after expenses such as principal, interest, taxes and insurance are subtracted.

Net investment in real estate

Gross investment in real estate less the outstanding debt balance

Net investment income

The income or loss of a portfolio or entity resulting after deducting all expenses, including portfolio and asset management fees, but before realized and unrealized gains and losses on investments

Net operating income (NOI)

A before-tax computation of gross revenue less operating expenses and an allowance for anticipated vacancy. It is a key indicator of financial strength.

Net present value (NPV)

Net present value usually is employed to evaluate the relative merits of two or more investment alternatives. It is calculated as the sum of the total present value of incremental future cash flows plus the present value of estimated proceeds from sale. Whenever the net present value is greater than zero, an investment opportunity generally is considered to have merit.

Net purchase price

Gross purchase price less associated debt financing

Net real estate investment value

The market value of all real estate less property-level debt

Net returns

Returns to investors net of fees to advisers or managers

Net sales proceeds

Proceeds from the sale of an asset or part of an asset less brokerage commissions, closing costs and market expenses

Net square footage

The space required for a function or staff position

Net worth

The worth of a person or company based on the difference between total assets and liabilities.

New Windows

When a building replaces its windows. The monies for this type of capital expenditure comes from either the building's reserve fund, a building wide assessment or a maintenance increase. A building will change its windows for a variety of reasons. These include noise abatement, aesthetics, and the ability to keep out silt from the city traffic.

No Board Approval

This terminology can refer to two situations: The first is when a prospective purchaser of an apartment does not have to go through the scrutiny of a board approval process when purchasing a co-operative apartment. The second situation is when a prospective renter does not have to go through the board approval process when renting an apartment from a co-operative owner.

No-cash-out refinance

When the amount of the new mortgage covers the remaining balance of the first loan plus closing costs and any liens, and yields no more than 1 percent of the new loan's principal in cash.

No-documentation loan

A loan application that does not require verification of income or assets and is generally based on a combination of strong credit with a large down payment.

Nominal yield

The yield to investors before adjustments for fees, inflation or risk

Non-assumption clause

A loan provision that prohibits the transfer of a mortgage to another borrower without lender approval.

Non-compete clause

A clause that can be inserted into a lease specifying that the business of the tenant is exclusive in the property and that no other tenant operating the same or similar type of business can occupy space in the building. This clause benefits service-oriented businesses desiring exclusive access to the building's population.

Non-conforming loan

A non-conforming loan is any loan that doesn't meet the qualifications or is too large to be purchased by Fannie Mae or Freddie Mac.

Non-discretionary funds

Funds allocated to an investment manager requiring the investor's approval on each transaction

Non-investment-grade CMBS

Securities rated "BB" or "B," also referred to as high-yield CMBS

Non-liquid asset

An asset such as a house that is not easily turned into cash. Also called a “Fixed Asset”.

Non-performing loan

A loan that is unable to meet its contractual principal and interest payments

Non-recourse debt

A loan that, in the event of a default by the borrower, limits the lender's remedies to a foreclosure of the mortgage, realization on its assignment of leases and rents, and acquisition of the real estate

Nonrecurring closing costs

Fees that are only payable once such as appraisal, loan points, credit report, title insurance and home inspection.

Note

A legal document that requires a borrower to repay a mortgage at a certain interest rate over a specified period of time.

Note rate

The interest rate specified in a mortgage note.

Oblique Views

This term is used to describe views from an apartment when one has a rather 'turn of your head' view of Central Park or either of the two rivers.

Offer

indication by a potential buyer of a willingness to purchase a home at a specific price; generally put forth in writing.

Offer

Term used to describe a stated price or spread to sell whole loans or securities

Offer Accepted

This term describes one of chain of events in the purchase of an apartment. This refers to the point in time when an owner accepts the business terms of an offer for an apartment. This can include the price, the closing period, and any contingencies the parties may agree upon.

One-year Adjustable Rate Mortgage

A mortgage whose interest rate changes yearly. The rate is usually based on movements of a published index plus a specified margin.

On-Site Broker or Contact Person

This is the person hired by the owner of the building (rental) or a developer to sit at the building to field questions about the property, show vacant apartments and follow-through with any transactions at the building. This is usually the person with whom the listing manager of a real estate firm will have contact for updates.

Open House

In order to promote a property, the listing broker or the owner of the property may hold an open house in order to get a large number of people and/or brokers through the property in a short period of time. Often you will see Open Houses advertised in the Sunday New York Times Real Estate Section.

Open Kitchen

A kitchen which opens up to the living space of an apartment. There is no door separating the kitchen from the rest of the apartment. These types of kitchens are most often found in loft spaces.

Open Listing

A listing offered to the brokerage community by an apartment owner, a developer or a management firm which is not being marketed on a co-broke basis. This type of listing often allows a broker to earn a larger fee than if the property were being marketed by a co-operating broker.

Open space

An area of land or water dedicated for public or private use or enjoyment

Open-end fund

A commingled fund that does not have a finite life, continually accepts new investor capital and makes new property investments

Operating cost escalation

Although there are many variations of escalation clauses, all are intended to adjust rents by reference to external standards such as published indexes, negotiated wage levels, or expenses related to the ownership and operation of a building.

Operating expense

The actual costs associated with operating a property, including maintenance, repairs, management, utilities, taxes and insurance

Opportunistic

A phrase generally used by advisers and managers to describe investments in underperforming and/or undermanaged assets that hold the expectation of near-term increases in cash flow and value. Total return objectives for opportunistic strategies tend to be 20 percent or higher. Opportunistic investments typically involve a high degree of leverage - typically 60 percent to 100 percent on an asset basis and 60 percent to 80 percent on a portfolio basis.

Option

A situation in which a buyer puts down money for the right to purchase a piece of real estate within a set time period but does not have an obligation to buy.

Option Arm Loan

A home loan where the borrower has multiple payment options each month.

Original Detail

This term is used to describe detailing in pre-war apartments. This can include ceiling moldings, chair rails, ornamental decorations around doors or fireplaces, etc.

Original principal balance

The amount of principal owed on a loan before a borrower makes any payments.

Original Room Count

Many pre-war apartment buildings when built were designed to accommodate one or two apartments per floor. Often these apartments could encompass from 10 to 16 rooms. Over time these apartments have been slimmed down to smaller apartments of significantly smaller sizes. Today we may also see a situation where individual apartment owners may take a six or seven room apartment and combine two maids' rooms or add a maid's room to a kitchen to create fewer, yet larger rooms in an apartment.

Origination

the process of preparing, submitting, and evaluating a loan application; generally includes a credit check, verification of employment, and a property appraisal.

Origination fee

The charge for originating a loan; is usually calculated in the form of points and paid at closing.

Origination fee

A fee charged by most mortgage lenders to cover costs of arranging the loan.

Originator

A company that sources and underwrites commercial and/or multifamily mortgage loans

Out-parcel

Individual retail sites in a shopping center

Overallotment

A practice through which underwriters offer and sell more shares than they have agreed to buy from the issuer

Owner financing

A transaction in which the seller of a property agrees to finance all or part of the purchase.

Owner Pays (OP)

A situation when an owner of an apartment building or an individual apartment will offer an inducement to a prospective tenant or to a broker by paying all or part of the commission on the rental of an apartment. In hot rental market, it will be less likely that an owner will pay any portion of a rental commission.

Ownership

There are several different types of residential ownership in Manhattan. Each of them has their distinct characteristics. They are Condominiums; Co-operatives; and Cond-ops.

Parking ratio

Dividing the total rentable square footage of a building by the building's total number of parking spaces provides the amount of rentable square feet per each individual parking space.

Parlor Floor

This is the second floor in a townhouse. In its original form, the building's front steps accessed the parlor floor. The parlor is traditionally the grandest floor in the townhouse and almost always has the building's highest ceilings. Historically, these floors were primarily used for entertaining with two rooms separated by a staircase. These rooms were usually Living Rooms, Libraries or Formal Dining Rooms.

Partial Claim

a loss mitigation option offered by the FHA that allows a borrower, with help from a lender, to get an interest-free loan from HUD to bring their mortgage payments up to date.

Partial sales

The sale of an interest in real estate that is less than the whole property. This may include a sale of easement rights, parcel of land or retail pad, or a single building of a multi-building investment.

Partial taking

The taking of part of an owner's property under the laws of eminent domain

Partial Views

Views that offer angled or partial (obscured) perspectives of local landmarks or landscape features (park, waterfront, oceanfront, etc.)

Participating debt

In addition to collecting a contract interest rate, participating debt allows the lender to have participatory equity rights through a share of increases in income and/or increases in residual value over the loan balance or original value at the time of loan funding.

Party in interest

Under ERISA's 2002 Modernization Act: Parties in interest include employers, unions and, in certain circumstances, fiduciaries. It excludes service providers and their affiliates. Fiduciaries would only be parties in interest where they act on behalf of a plan sponsor in entering into a transaction. An affiliate of a party in interest does not include remote affiliates of employers, unions and fiduciaries (e.g., 10 percent owners), as well as employees of such remote affiliates.

Pass-through certificate

Payments of principal and interest from the underlying pool of mortgages are passed through to the holders of the certificates.

Pass-through Kitchen

This term refers to a Kitchen with an opening from the Kitchen into another room in the apartment, usually a Dining Area or Living Room

Payment cap

A limit on the amount a monthly payment can increase on an adjustable rate mortgage.

Payment Change Date

The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment mortgage (GPM). Generally, the payment change date occurs in the month immediately after the adjustment date.

Payout ratio

The percentage of the primary earnings per share, excluding extraordinary items, paid to common stockholders in the form of cash dividends during the trailing 12 months

Pension liability

The total amount of capital required to fund vested pension fund benefits

Percentage rent

Rent payable under a lease that is equal to a percentage of gross sales or gross revenues received by the tenant. It is commonly used in retail center leases.

Per-diem interest

Interest charged or accrued daily.

Performance

The quarterly changes in fund or account values attributable to investment income, realized or unrealized appreciation, and the total gross return to the investors both before and after investment management fees. Formulas for calculating performance information are varied, making comparisons difficult.

Performance bond

A surety bond posted by a contractor guaranteeing full performance of a contract with the proceeds to be used to complete the contract or compensate for the owner's loss in the event of nonperformance

Performance measurement

The process of measuring an investor's real estate performance in terms of individual assets, advisers/managers and portfolios. The scope of performance measurement reports varies among managers, consultants and plan sponsors.

Performance-based fees

Fees paid to advisers or managers based on returns to investors, often packaged with a modest acquisition and asset-management fee structure

Periodic Payment Cap

A limit on the amount that payments can increase or decrease during any single adjustment period.

Periodic Rate Cap

A limit on the amount that the interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might be.

Permanent loan

The long-term mortgage on a property

Pet Policy

Each building has a pet policy particular to that building. This can vary from a strict no pet policy to a more liberal pet policy in which tenant or owner can harbor as many pets as he/she desires. Some particularisms to different pet policies may includes the following: No dogs, weight limits on dogs, no pets on sublets, board interviews of pets or pets by written permission of the board.

Pied à terre

Translated literally from the French, pied à terre means foot on the ground. In English, we would call it a "landing pad." A pied à terre is a small, comfortable apartment maintained by someone who resides in another city. Usually, the owner has a career that requires them to be in New York several days per month, or even per week. The pied à terre allows its owner to avoid the daily commute, or to spend occasional late nights in the city. However, these apartments can also be kept by the well-heeled who simply enjoy having access to the exciting culture and glamorous society found in major cities.

PITI

Principal, Interest, Taxes, and Insurance - the four elements of a monthly mortgage payment; payments of principal and interest go directly towards repaying the loan while the portion that covers taxes and insurance (homeowner's and mortgage, if applicable) goes into an escrow account to cover the fees when they are due.

PITI (principal, interest, taxes, and insurance)

A payment amount calculated by a mortgage lender to include the total payment of all principal, interest, taxes and insurance due monthly.

Plan assets

The assets of a pension plan

Plan sponsor

The entity that establishes, contributes to and is responsible for the administration of an employee benefit plan, often used interchangeably to describe staff who administer the plan and trustees or investment board members who govern it

Plat

Map of a specific area, such as a subdivision, that shows the boundaries of individual lots together with streets and easements

Pledged Account Mortgage (PAM)

A type of mortgage that is tied to a pledged savings account and this fund (plus earned interest) is gradually used to reduce mortgage payments.

PMI

Private Mortgage Insurance; privately-owned companies that offer standard and special affordable mortgage insurance programs for qualified borrowers with down payments of less than 20% of a purchase price.

Point

Fees charged by a lender to provide a lower interest rate. One point equals one percent (1%) of the loan amount. Also referred to as a discount point.

Portfolio management

The portfolio management process involves formulating, modifying and implementing a real estate investment strategy in light of an investor's broader overall investment objectives. It also can be defined as the management of several properties owned by a single entity.

Portfolio turnover

The average time from the funding of an investment until it is repaid or sold

Possession

This term refers to the time (month and day) that a new purchaser or a new tenant can actually take possession of an apartment.

Post-War

Refers to buildings built after World War II. Post-war building needs and modern building techniques dramatically altered the composition of the middle and upper-class apartment house. Apartment houses were built in a "plain vanilla" style with lower ceilings, fewer moldings and details, an absence of fireplaces and reduced room proportions. The exterior of the New York apartment house also saw dramatic change. Plain red and white brick exteriors replaced the ornate limestone detailing of the pre-war apartment house.

Powder Room

Refers to a bathroom with no bath or shower. A powder room is also commonly referred to as half-bath.

Power of sale

Clause inserted in a mortgage or deed of trust giving the mortgagee (or trustee) the right and power, upon default in the payment of the debt secured, to advertise and sell the property at public auction

Pre-approval

A thorough assessment made by a lender of a potential borrower's ability to pay for a home and a confirmation of the amount to be borrowed. The completion of a loan application is necessary to close the loan.

Pre-approval letter

A letter from a lender that states the amount of money a potential buyer can obtain.

Pre-approve

lender commits to lend to a potential borrower; commitment remains as long as the borrower still meets the qualification requirements at the time of purchase.

Preferred shares

Stocks that have prior claim on distributions (and/or assets in the event of dissolution) up to a definite amount before the common shareholders are entitled to anything. As a form of ownership, preferred shareholders fall behind all creditors in dissolutions.

Pre-foreclosure sale

Allows a defaulting borrower to sell the mortgaged property to satisfy the loan and avoid foreclosure.

Preleased

Space in a proposed building that has been leased before the start of construction or in advance of the issuance of a certificate of occupancy

Premium

An amount paid on a regular schedule by a policyholder that maintains insurance coverage.

Prepaid expenses

Expenses including taxes, insurance, and assessments that are paid before the due date.

Prepaid fees

Funds collected by the lender from the borrower to pay certain recurring items in advance, including interest, property taxes, hazard insurance and, if applicable, private mortgage insurance (PMI).

Prepaid interest

Interest paid before it is due.

Prepayment

Payment of the mortgage loan before the scheduled due date; may be subject to a prepayment penalty.

Prepayment penalty

A penalty that a lender may impose on a borrower who pays a loan off before its expected end date.

Prepayment rights

Rights given to the borrower to make partial or full payment of the total principal balance prior to the maturity date without penalty

Prequalification

A lender's preliminary assessment of a buyer's ability to pay for a home and an estimate of how much the buyer may borrow.

Pre-qualify

A lender informally determines the maximum amount an individual is eligible to borrow.

Pre-War

Refers to buildings built prior to the start of World War II. Some common elements of these structures include hardwood floors, moldings, high ceilings and fireplaces.

Price to earnings ratio

This ratio is calculated by dividing the current share price by the sum of the primary earnings per share from continuing operations, before extraordinary items and accounting changes, over the past four quarters.

Primary issuance

The initial financing of an issuer

Prime space

Typically refers to first-generation space that is available for lease

Prime tenant

The major tenant in a building, or the major or anchor tenant in a shopping center

Principal

The amount borrowed from a lender; doesn't include interest or additional fees.

Principal

The amount of money originally borrowed in a mortgage, minus any payments made subsequently.

Principal paid over life of loan

The sum of scheduled principal payments calculated by the lender to equal the face amount of the loan.

Principal payments

The return of invested capital to the lender

Principle of conformity

The idea that a house will more likely appreciate in value if its size, age, condition and style are similar to other houses in the neighborhood.

Private mortgage insurance (PMI)

A form of insurance required by a lender when the borrower's down payment or home equity percentage is less than 20 percent of the home value.

Private placement

A sale of a security in a manner that is exempt from the registration rules and requirements of the Securities and Exchange Commission. An example would be a REIT directly placing an issue of stock with a pension fund.

Private REIT

An infinite- or finite-life real estate investment company structured as a real estate investment trust. Shares are placed and held privately rather than sold and traded publicly

Pro rata

In the case of a tenant, the proportionate share of expenses for the maintenance and operation of the property

Processing fee

A fee charged by some lenders for gathering information necessary to process the loan.

Production acres

The area of land that can be used in agriculture or timber operations to produce income, not including areas used for crop or machinery storage, or other support areas

Professional Space

Office space set aside in a residential building for use by professionals, usually in the medical field. Professional space does not refer to attorneys or architects. The strict interpretation is for the medical profession. Similar to maisonettes, these spaces can have separate street entrances as well as lobby entrances.

Prohibited transaction

ERISA defines the following transactions as prohibited between a pension plan and a party in interest: the sale, exchange or leasing of any property; a loan or other extension of credit; and the furnishing of goods or services. Other prohibited transactions include the transfer of plan assets to a party in interest or use of plan assets by a party in interest, and the acquisition of employer real property in excess of limits set by ERISA.

Property tax

Tax paid on privately owned property. Property taxes are usually paid semiannually, or monthly if the lender requires. The amount is based on local tax rates and assessed property value.

Prudent man rule

The standard to which a fiduciary is held accountable under ERISA. "Act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man, acting in a like capacity and familiar with such matters, would use in the conduct of an enterprise of a like character and with like aims."

Pullman or Petite Kitchen

This type of kitchen is most often found in small apartments and are situated against a single wall. Usually these kitchens are no bigger than the size of a closet and consist of a refrigerator (full or half), an oven and a sink. This type of kitchen does not count as a room when counting apartment rooms. Many of these kitchens are found in pre-war buildings that were originally constructed as hotels.

Punch list

An itemized list documenting incomplete or unsatisfactory items after the contractor has notified the owner that the tenant space is substantially complete

Purchase-money mortgage (PMM)

A mortgage obtained by a borrower as partial payment for a property.

Quadruplex

An apartment that is spread out over four levels.

Qualified plan

Any employee benefit plan that is qualified by the IRS as a tax-exempt plan. Among other requirements, the plan's assets must be placed in trust for the sole benefit of the employees covered by the plan.

Qualifying ratio

A ratio calculated by a lender to determine how much a potential buyer can borrow.

Quitclaim deed

A deed operating as a release that is intended to pass any title, interest or claim that the grantor may have in the property, but not guaranteeing such title is valid

Quitclaim deed

A document that releases a party from any interest in a piece of real estate.

Radon

A radioactive gas found in some homes that, if occurring in strong enough concentrations, can cause health problems.

Rate cap

The maximum interest rate allowed on the monthly payment of an adjustable rate mortgage during an adjustment period.

Rate lock

A lender's commitment to a borrower to guarantee (or "lock in") a specific interest rate for a limited amount of time.

Rate-improvement mortgage

A loan with a clause that entitles a borrower to a one-time interest rate cut without going through refinancing.

Rating

Grade, assigned by a rating agency, designating the credit quality or creditworthiness of the underlying assets

Rating agencies

Independent firms engaged to rate the creditworthiness of securities for the benefit of investors. The major rating agencies are Fitch Ratings, Standard & Poor's and Moody's Investors Service.

Raw land

Unimproved land that remains in its natural state

Raw space

Unimproved shell space in a building

Real estate agent

An individual who is licensed to negotiate and arrange real estate sales; works for a real estate broker.

Real estate fundamentals

The factors driving the value of real property (i.e., the supply, demand and pricing for land and/or developed space in a given geographic or economic region or market)

Real property

Land, and generally whatever is erected or affixed to the land that would be personal property if not attached

Real rate of return

Yield to investors net of an inflationary factor. The formula for calculating the real rate of return is [(1 + nominal yield) / (1 + inflation rate)] - 1.

Realtor

A real estate agent or broker who is a member of the NATIONAL ASSOCIATION OF REALTORS®, and its local and state associations.

Recapture

When the IRS recovers the tax benefit of a deduction or a credit previously taken by a taxpayer, which is often a factor in foreclosure because there is a forgiveness of debt. As used in leases, it is a clause giving the lessor a percentage of profits above a fixed amount of rent; or in a percentage lease, a clause granting the landlord the right to terminate the lease if the tenant fails to realize minimum sales.

Recessed Lighting

This term refers to lighting that is located above the ceiling and does not have alight fixture hanging from the ceilings. This type of lighting provides a very clean and contemporary look to an apartment.

Recording fee

A fee charged by real estate agents for conveying the sale of a piece of property into the public record.

Recourse

The right of a lender, in the event of default by the borrower, to recover against the personal assets of a party who is secondarily liable for the debt

Red herring

The preliminary prospectus for an initial public offering. Before the registration statement becomes effective, underwriters may use the preliminary prospectus to market the offering. The preliminary prospectus, however, must bear a legend printed in red ink stating that the offering has been filed but is not yet effective.

Refinancing

Paying off one loan by obtaining another; refinancing is generally done to secure better loan terms (such as a lower interest rate).

Refinancing

The process of replacing an older mortgage with a new mortgage.

Regional diversification

Definitions for what constitute various regions, for diversification purposes, vary among managers, consultants and plan sponsors. Some boundaries are defined based purely on geography; others have attempted to define boundaries along economic lines.

Registration statement

Forms filed with the Securities and Exchange Commission (or the appropriate state regulatory agency) in connection with a proposed offering of new securities or the listing of outstanding securities on a national exchange

Regulation Z

A federal code issued under the Truth in Lending Act that requires a borrower be advised in writing of all costs associated with the credit portion of a financial transaction.

Rehab

Extensive renovation intended to cure obsolescence of a building or project

Rehabilitation mortgage

a mortgage that covers the costs of rehabilitating (repairing or improving) a property; some rehabilitation mortgages such as the FHA's 203(k) allow a borrower to roll the costs of rehabilitation and home purchase into one mortgage loan.

Rehabilitation mortgage

A mortgage that provides for the costs of repairing and improving a resale home or building.

REIT (Real estate investment trust)

A business trust or corporation that combines the capital of many investors to acquire or provide financing for real estate. A corporation or trust that qualifies for REIT status generally does not pay corporate income tax to the IRS. Instead, it pays out at least 90 percent of its taxable income in the form of dividends.

Remaining balance

The amount of unpaid principal on a home loan.

Remaining term

The original loan term minus the number of payments made.

REMIC (Real estate mortgage investment conduit)

A product of the Tax Reform Act of 1986, REMICs are designed to hold a pool of mortgages for the exclusive purpose of issuing multiple classes of mortgage-backed securities in a way that avoids a corporate double tax.

Renewal option

A clause giving a tenant the right to extend the term of a lease

Renewal probability

Used to estimate leasing-related costs and downtime, it is the average percentage of tenants in a building that are expected to renew at market rental rates upon the expiration of their leases.

Rent

Compensation or fee paid for the occupancy and use of any rental property, land, buildings, equipment, etc.

Rent commencement date

The date on which a tenant begins paying rent

Rentable/usable ratio

A building's total rentable area divided by its usable area. It represents the tenant's pro-rata share of the building's common areas and can determine the square footage upon which the tenant will pay rent. The inverse describes the proportion of space that an occupant can expect to actually use.

Rental Building

These buildings are owned by an individual or a company and the apartments are available on a rental basis only.

Rental Commission

A broker earns a rental commission on the rental of an apartment. The prospective tenant typically pays this commission which can range from ten to fifteen percent of a year's aggregate rent. In a hot rental market, these fees will tend to be in the neighborhood of fifteen percent. In a soft market, one may induce a real estate agent to reduce his/her fee in order to conclude a transaction.

Rental concession

What landlords offer tenants to secure their tenancy. While rental abatement is one form of a concession, there are many others such as increased tenant improvement allowance, signage, below-market rental rates and moving allowances.

Rental growth rate

The expected trend in market rental rates over the period of analysis, expressed as an annual percentage increase

Rental Sublet

When a tenant in a rental building decides that he/she must rent out their apartment for a short period of time because they are leaving New York, they have an opportunity to assign their lease to another tenant for the period of time that they will be out of town. These types of sublets are usually furnished and last for less than a year in duration.

Rent-up period

The period following construction of a new building when tenants are actively being sought and the project is approaching its stabilized occupancy

REO (Real estate owned)

Real estate owned by a savings institution as a result of default by borrowers and subsequent foreclosure by the institution

Replacement cost

The estimated current cost to construct a building with utility equivalent to the building being appraised, using modern materials and current standards, design and layout

Replacement reserves

An allowance that provides for the periodic replacement of building components that wear out more rapidly than the building itself and must be replaced during the building's economic life

Request for proposal (RFP)

A formal request, issued by a plan sponsor or its consultant, inviting investment managers to submit information on their firms' investment strategy, historical investment performance, current investment opportunities, investment management fees, other pension fund client relationships, etc. Firms that meet the qualifications are requested to make a formal presentation to the board of trustees and senior staff members. Finalists are chosen at the completion of this process, and contract negotiation begins.

Rescission

The cancellation of a contract by law or consent from the parties involved.

Reserve account

An account that a borrower has to fund to protect the lender. Examples include capital expenditure accounts and deferred maintenance accounts.

Reserve Fund

Each co-operative and condominium maintains a reserve fund. The objective of the board of directors or the board of managers is to grow this reserve fund so that the building has the ability to pay for the monthly expenses involved in the upkeep of the building as well as for those expenses that are out of the ordinary (such as elevator, repairs, roof repairs, new boilers, etc.).

Resolution Trust Corp. (RTC)

The RTC was established by Congress in 1989 to contain, manage and sell failed savings institutions and recover taxpayer funds through the management and sale of the institutions' assets.

RESPA

Real Estate Settlement Procedures Act; a law protecting consumers from abuses during the residential real estate purchase and loan process by requiring lenders to disclose all settlement costs, practices, and relationships

Retail investor

When used to describe an investor, retail refers to the nature of the distribution channel and the market for the services - selling interests directly to consumers.

Retention rate

The percent of trailing 12-month earnings that have been ploughed back into the company. It is calculated as 100 minus the trailing 12-month payout ratio.

Return on assets

The income after taxes for the trailing 12 months divided by the average total assets, expressed as a percentage

Return on equity

The income available to common stockholders for the trailing 12 months divided by the average common equity, expressed as a percentage

Return on investments

The trailing 12-month income after taxes divided by the average total long-term debt, other long-term liabilities and shareholders equity, expressed as a percentage

Reverse mortgage

A special type of loan available to equity-rich, older home owners. Repayment is not necessary until the borrower sells the property. Many downsides exist to these loans.

Reversion capitalization rate

The capitalization rate used to determine reversion value

Reversion value

A lump-sum benefit that an investor receives or expects to receive at the termination of an investment

RevPAR (Revenue per available room)

Total room revenue for the period divided by the average number of available rooms in a hospitality facility

Right to rescission

A provision in the federal Truth in Lending Act that allows borrowers to cancel certain kinds of loans within three (3) days of signing.

Risk management

A systematic approach to identifying and separating insurable risks from non-insurable risks, and evaluating the availability and costs of purchasing third-party insurance

Risk-adjusted rate of return

Used to identify investment alternatives that can be expected to deliver a positive premium, after taking into consideration the expected volatility. The risk-adjusted rate of return is defined as the expected rate of return of a given asset, less the expected return for T-bills, divided by the expected standard deviation of the returns for the assets.

Road show

A tour made by executives of a company that plans to go public, where they travel to various cities to meet with underwriters and analysts and make presentations regarding their company and IPO. The road show takes place during the marketing period before the registration statement becomes effective.

Roll-over risk

The risk that a tenant's lease will not be renewed

Room Count

Every apartment has a room count. Straight Studio, Petite Kitchen: One room. Straight Studio, Full Kitchen: Two rooms. Alcove Studio, Full Kitchen: 2.5 Rooms. Junior-One, Full Kitchen, No Wall: 2.5 Rooms. Junior-One, Full Kitchen, Wall: 3.0 Rooms. One Bedroom, Living Room, Kitchen: 3 Rooms. Junior-Four, Living Rooms, Kitchen, Dining Alcove: 3.5 Rooms. Convertible-2, Living Rooms, Kitchen, Dining Alcove, No Wall: 3.5 Rooms.

Sale-leaseback

An arrangement by which the owner-occupant of a property agrees to sell all or part of the property to an investor, then lease it back and continue to occupy space as a tenant

Sales comparison value

A value indication derived by comparing the property being appraised to similar properties that have been sold recently

Sales contract

A contract signed by the buyer and seller detailing the terms of a property sale.

Second mortgage

A second loan placed upon a piece of property.

Secondary financing

A loan on real property secured by a lien junior to an existing first mortgage loan

Secondary market

A market where existing mortgage loans are securitized and then bought and sold to other investors

Secondary, or follow-on, offering

A stock offering made by an existing public company

Second-generation or secondary space

Previously occupied space that becomes available for lease, either directly from the landlord or as sublease space

Securities and Exchange Commission (SEC)

The federal agency that supervises and oversees the issuance and exchange of public securities

Securitization

The process of converting an illiquid asset, such as a mortgage loan, into a tradable form, such as mortgage-backed securities

Security Deposit

A rental tenant will put down a security deposit on an apartment so that the owner of the apartment has security against any potential damages in the apartment during the term of tenancy. This security deposit is not in lieu of a tenant paying his/her last month's rent.

Security deposit

A deposit of money by a tenant to a landlord to secure performance of a lease. It also can take the form of a letter of credit or other financial instrument.

Seisen (seizen)

Possession of real property under claim of freehold estate

Self-administered REIT

When members of the management are employees of the REIT or an entity having essentially the same economic ownership as the REIT

Self-managed REIT

A REIT whose employees are responsible for performing property management functions

Seller carry-back

An agreement where the seller provides financing for a home purchase.

Seller financing

The seller allows the borrower to use a portion of the equity in the property to finance the purchase.

Senior classes

With regard to securities, describes the classes with the highest priority to receive the payments from the underlying mortgage loans

Separate account

A relationship where an investment manager or adviser is retained by a single pension plan sponsor to source real estate product under a stated investment policy exclusively for that sponsor

Service Entrance

This term refers to a second entrance to a kitchen from the common hallway or a rear or private smaller hallway. This entrance is basically used for deliveries and as a means of egress for the servants of the house.

Service Level

When one refers to a building's service level, one is referring to the level of the front-door service available in a particular building.

Servicer

An organization that acts on behalf of a trustee for the benefit of security holders

Setback

The distance from a curb, property line or other reference point, within which building is prohibited

Settlement

Another name for closing.

Settlement or closing fees

Fees paid to the escrow agent (often a title insurance company) for carrying out the written instructions of the agreement between buyer and seller and/or borrower and lender.

Settlement statement

A closing statement or settlement sheet that outlines all closing costs on a real estate transaction or refinancing for the buyer and seller.

Shared-appreciation mortgage

A loan that allows a lender or other party to share in the borrower's profits when the home is sold.

Shared-equity transaction

A transaction in which two buyers purchase a property, one as a resident co-owner and the other as an investor co-owner.

Shares

Each apartment in a co-operative actually owns shares in the co-operative (The same way that an individual might own shares in a publicly traded cooperation). These shares represent the proportion of the building that is owned by that individual shareholder. This is determined by the size of the apartment, the floor on which the apartment is located and if there are any particular special features associated with a particular apartment. Two identical apartments located on different floors will possess a different number of shares.

Shares outstanding

The number of shares of common stock currently outstanding, less the shares held in treasury

Shortfall

A situation in which a building owner is unable to meet the operating expenses of a building because the building's income is less than the building's expenses. In a co-operatives where there is sponsor maintaining unsold shares, there is a good chance that the tenants occupying unsold share apartments are paying below-market rents while the sponsor is responsible for the maintenance payments to the co-operative for the particular apartment. There is a tremendous likelihood that the difference between the collected rent and the maintenance due the co-operative can create a long-term financial burden for a sponsor. This is referred to as a shortfall. Obviously, the more unsold shares owned by a sponsor the greater the financial strain.

Short-Term

Many apartments are available on a short-term basis ranging from 1-6 months. These apartments are typically furnished and offer the tenant a less expensive alternative to weekly hotel bills. These apartments are typically not subject to New York City Hotel taxes and average out to be far less expensive on a per diem basis.

Site analysis

Determines the suitability of a specific parcel of land for a specific use

Site development

The installation of all necessary improvements made to a site before a building or project can be constructed on the site

Site plan

A detailed plan that depicts the location of improvements on a parcel

Slab

The exposed wearing surface laid over the structural support beams of a building to form the floor(s) of the building

Social investing

Investments driven in whole or in part by social or political (non-real estate) objectives. Under ERISA, social investing is economically justified only if proper real estate fundamentals are considered first.

Soft cost

The portion of an equity investment other than the actual cost of the improvements themselves that may be tax-deductible in the first year

Space plan

A graphic representation of a tenant's space requirements, showing wall and door locations, room sizes and sometimes furniture layouts

Special assessment

Special charges levied against real property for public improvements that benefit the assessed property

Special Forbearance

A loss mitigation option where the lender arranges a revised repayment plan for the borrower that may include a temporary reduction or suspension of monthly loan payments.

Special servicer

A firm that is employed to work out mortgages that are either delinquent or in default

Specified investing

Investment in individually specified properties or portfolios, or investment in commingled funds whose real estate assets are fully or partially specified prior to the commitment of investor capital

Speculative space

Any tenant space that has not been leased before the start of construction on a new building

Square Footage

When referencing square footage in the Manhattan residential marketplace, the term can mean almost anything. Measurements are usually approximate and most often done by the subjective eye of the real estate broker or the apartment owner. Brokers should always use the term approximate when describing the square footage of an apartment. In the sale of condominium units, square footage is measurements are fairly accurate because people refer to the condominium offering books where by law these measurements need to accurately reflect the square footage of the units.

Stabilized net operating income

Projected income less expenses that are subject to change but have been adjusted to reflect equivalent, stable property operations

Stabilized occupancy

The optimum range of long-term occupancy that an income-producing real estate project is expected to achieve after exposure for leasing in the open market for a reasonable period of time at terms and conditions comparable to competitive offerings

Step-rate mortgage

A loan that allows a gradual increase in the interest rate during the first few years of the loan.

Step-up lease (graded lease)

A lease specifying set increases in rent at set intervals during the term of the lease

Straight lease (flat lease)

A lease specifying a fixed amount of rent that is to be paid periodically, typically monthly, during the entire term of the lease

Strip center

Any shopping area comprised of a row of stores but smaller than a neighborhood center anchored by a grocery store

Subcontractor

A contractor working under and being paid by the general contractor, often a specialist in nature, such as an electrical contractor, cement contractor, etc.

Sublessee

A person or identity to whom the rights of use and occupancy under a lease have been conveyed, while the original lessee retains primary responsibility for the obligations of the lease

Subordinate

To place in a rank of lesser importance or to make one claim secondary to another.

Subordinate loan

A second or third mortgage.

Subordinated classes

With regard to CMBS, describes those classes with the lowest priority to receive payments from the underlying mortgage loans

Subordination

The process of sharing the risk of credit losses disproportionately among two or more classes of securities

Subsequent rate adjustments

The interest rate for adjustable rate loans (ARMs) adjusts at regular intervals. This adjustment period could in some cases differ from the initial interest rate duration period.

Subsequent rate cap

A specific limit defined by most adjustable rate loans (ARMs) for the maximum amount the interest rate may increase at each regularly scheduled interest rate adjstment date. This limit may differ from the initial rate cap.

Super jumbo mortgage

A mortgage that is over $650,000 or $1,000,000, depending on the lender.

Surety

One who voluntarily binds himself to be obligated for the debt or obligation of another

Surface rights

A right or easement granted with mineral rights, enabling the possessor of the mineral rights to drill or mine through the surface

Survey

A property diagram that indicates legal boundaries, easements, encroachments, rights of way, improvement locations, etc.

Survey

The process by which a parcel is measured and its boundaries and contents ascertained

Survey

A precise measurement of a piece of property by a licensed surveyor.

Sweat equity

Using labor to build or improve a property as part of the down payment.

Sweat equity

The non-cash value added to a piece of property by the owner, such as do-it-yourself home improvements.

Synthetic lease

A transaction that appears as a lease from an accounting standpoint but as a loan from a tax standpoint.

Taking

A common synonym for condemnation, or any interference with private property rights, but it is not essential that there be physical seizure or appropriation.

Tax Abatement

The city of New York often offers developers tax breaks in the form of abatements in order to induce development in a particular area of the city. Most recently the wave of development in the downtown area has been spurred on by tax incentives offered by the city for the conversion of commercial space to residential housing.

Tax base

The assessed valuation of all real property that lies within a taxing authority's jurisdiction. When multiplied by the tax rate, it determines the amount of tax due.

Tax Deductibility

Each co-operative has a yearly number that reflects an amount that each individual shareholder is allowed to deduct from his/her personal taxes each year. This number will be in the form of a percentage. The number reflects the shareholders proportionate share of the building's underlying mortgage and the New York City real estate taxes paid in that particular year.

Tax lien

A statutory lien for nonpayment of property taxes that attaches only to the property upon which the taxes are unpaid

Tax lien

A lien placed against a property for nonpayment of taxes (property and/or personal)

Tax roll

A list or record containing the descriptions of all land parcels located within the county, the names of the owners or those receiving the tax bill, assessed values and tax amounts

Tax service fee

A fee collected to set up third-party monitoring of the borrower's property tax payments. This is done to ensure that the payments are made on time and to prevent tax liens from occurring to the detriment of the lender.

Teaser rate

A low, short-term interest rate offered on a mortgage to entice the borrower.

Tenancy by the entirety

Ownership by a husband and wife in which they together hold title to the whole property with right of survivorship.

Tenancy in common

A form of ownership in which two or more owners hold an undivided (though not necessarily equal) interest in the property, with no right of survivorship.

Tenant (lessee)

One who rents real estate from another and holds an estate by virtue of a lease

Tenant at will

One who holds possession of premises by permission of the owner or landlord. The characteristics of the lease are an uncertain duration and the right of either party to terminate on proper notice.

Tenant improvement (TI)

Improvements made to the leased premises by or for a tenant

Tenant improvement (TI) allowance

Defines the fixed amount of money contributed by the landlord toward tenant improvements. The tenant pays any of the costs that exceed this amount.

Tenant mix

A phrase used to describe the quality of a property's income stream. In multi-tenanted properties, institutional investors typically prefer a mixture of national credit tenants, regional credit tenants and local non-credit tenants.

Term

Each rental lease is for a duration of time. This period of time is called the term and will range from one month to a two or three years. Typically an unfurnished apartment will rent for a term of 12-24 months.

Term

The lifetime of a loan

Terrace

By definition, a terrace is a roof or part of a roof in a building. In Manhattan, terraces can be found when there is a setback on a high-rise. These terraces are also enjoyed for the private use of an individual apartment owner. We categorize a terrace as outdoor space. A terrace and balcony are often confused and the terms are used interchangeably.

Timeshare

Ownership that involves the acquisition of a specific period of time or percentage of interest in a vacation home or resort.

Time-weighted average annual rate of return

The constant annual return over a series of years that would compound to the same return as compounding the actual annual returns for each year in the series

Title

The means whereby the owner has the just and full possession of real property

Title

The legal document conferring ownership of a piece of real estate.

Title 1

An FHA-insured loan that allows a borrower to make non-luxury improvements (such as renovations or repairs) to their home; Title I loans less than $7,500 don't require a property lien.

Title company

A firm that ensures that the property title is clear and provides title insurance.

Title Exam

An examination of the public record to determine that the seller is the legal owner and there are no encumbrances (such as claims or liens) affecting the property.

Title insurance

Insurance that protects the lender against any claims that arise from arguments about ownership of the property; also available for homebuyers.

Title insurance

A policy issued by a title company that insures against loss resulting from defects of title to a specifically described parcel of real property, or from the enforcement of liens existing against it at the time the title policy is issued

Title insurance

A policy issued to lenders and buyers to protect against loss due to disputed property ownership at a later date.

Title insurance binder

A title insurance company's written commitment to insure title to the property subject to the conditions and exclusions shown on the binder.

Title risk

Possible impediments to the transfer of a title from one owner to another.

Title search

A check of public records to be sure that the seller is the recognized owner of the real estate and that there are no unsettled liens or other claims against the property.

Title search

A review of all recorded documents affecting a specific piece of property to determine the present condition of title

Title search

The process of reviewing all recorded transactions in the public record to determine whether any title defects exist that could interfere with the clear transfer of ownership of the property.

Total acres

All land area contained within a real estate investment

Total assets

The sum of all gross investments, cash and equivalents, receivables, and other assets presented on the balance sheet

Total commitment

The full mortgage loan amount that is obligated to be funded if all stated conditions are met

Total expense ratio

The percentage of monthly debt obligations relative to gross monthly income.

Total inventory

The total square footage of a type of property within a geographical area, whether vacant or occupied

Total lender fees

Fees required by the lender to obtain the loan, apart from other fees associated with transferring a property between buyer and seller.

Total loan amount

The base loan amount plus any financed closing costs.

Total monthly housing costs

The sum of principal, interest, property taxes and, if applicable, private mortgage insurance (PMI) and either hazard insurance or homeowners' association dues

Total of all payments

The total cost of the loan including repayment of the principal amount and the sum of monthly interest payments.

Total principal balance

The total amount of debt, including the original mortgage amount adjusted for subsequent fundings, principal payments and other unpaid items (e.g., interest) that are allowed to be added to the principal balance by the mortgage note or by law

Total retail area

Total floor area of a retail center less common areas. It is the area from which sales are generated and includes any department stores or other areas (such as banks, restaurants or service stations) not owned by the center.

Total return

The sum of quarterly income and appreciation returns

Townhouse

This type of structure was pre-eminent in the 1900s and up through the 1930s. The townhouse primarily built as private residences for its occupants with one family owning and occupying the entire structure. These structures were usually built in groups and were commonly referred to as row houses. They were built four to five stories high and enjoyed many common design elements. Typically, the houses were built with an English basement level (slightly below street grade) which housed the kitchen at the front of the building underneath the building stoop (or stairs) and was entered via a service entrance. At the rear of the first level was usually a Dining Room leading to the private garden. The second level, commonly referred to as the Parlor Floor was the garden floor and used for entertaining. Visitors entered the townhouse via the steps leading to this floor.

Townhouse

An attached home that is not a condominium.

Trade fixtures

Personal property that is attached to a structure that is used in the business. Because this property is part of the business and not deemed to be part of the real estate, it is typically removable upon lease termination.

Trading down

Buying a home that is less expensive than the one's current house.

Trading up

Buying a home that is more expensive than one's current house.

Tranche

A class of securities. CMBS offerings are generally divided into rated and unrated classes, or tranches, according to seniority and risk. Higher-rated tranches allow for internal credit enhancements; lower-rated classes offer higher yields.

Trans Union Corporation

One of the major credit reporting bureaus.

Transfer tax

An assessment by state or local authorities at the time a piece of property changes hands.

Treasury Index

An index used to determine interest rate changes for adjustable rate mortgages.

Triple net lease

A lease that requires the tenant to pay all expenses of the property being leased in addition to rent. Typical expenses covered in such a lease include taxes, insurance, maintenance and utilities.

Triple-Mint

This term refers to the condition of an apartment. In this case the 'triple' refers to the general condition of the apartment, the condition of the kitchen and the condition of the bathroom.

Triplex Apartment

An apartment that is spread out over three levels.

Trustee

The trustee oversees the flow of funds through the CMBS structure on behalf of the bondholders. The trustee is responsible for collecting principal and interest from the servicer, distributing payments to bondholders and reporting to bondholders.

Truth-in-Lending

A federal law obligating a lender to give full written disclosure of all fees, terms, and conditions associated with the loan initial period and then adjusts to another rate that lasts for the term of the loan.

Turn key project

The construction of a project in which a third party is responsible for the total completion of a building, or for the construction of tenant improvements to the customized requirements and specifications of a future owner or tenant

Two-step mortgage

An adjustable mortgage with two interest rates: one for the first five or seven years of the loan, and the other for the remainder of the loan term.

U.S. Department of Housing and Urban Development

Also known as HUD. This federal agency oversees the Federal Housing Administration and a variety of housing and community development programs.

Under construction

The period of time after construction has started but before the certificate of occupancy has been issued

Under contract

The period of time after a seller has accepted a buyer's offer to purchase a property and during which the buyer is able to perform its due diligence and finalize financing arrangements. During this time, the seller is precluded from entertaining offers from other buyers.

Underwriter

A company, usually an investment banking firm, that guarantees or participates in a guarantee that an entire issue of stocks or bonds will be purchased

Underwriters' knot

A code-approved knot tied at the end of an electrical cord to prevent the wires from being pulled away from their connection to electrical terminals.

Underwriting

The process of analyzing a loan application to determine the amount of risk involved in making the loan; it includes a review of the potential borrower's credit history and a judgment of the property value.

Underwriting

The process in which lenders evaluate the risks posed by a particular borrower and set appropriate conditions for the loan.

Underwriting fee

A fee charged by mortgage lenders to verify information on the loan application and make a final decision about whether or not to approve the loan.

Unencumbered

Property that is free of liens and other encumbrances

Unimproved land

Most commonly refers to land without improvements or buildings but also can mean land in its natural state

Unrated classes

Typically the most subordinated classes of CMBS

Unrecorded deed

A deed that transfers ownership from one party to another without being officially recorded.

Unsold Shares

This term pertains to shares in a co-operative apartment building that have not been sold to shareholders (owners of individual apartments). These shares (apartments) remain as assets of the co-operative sponsor. When a building is converted from a rental property to a co-operative apartment building, there are almost always rental tenants who do not wish to purchase their apartments, but would rather remain in the apartments and continue to pay the sponsor rent (as opposed to the maintenance charges on the apartment). These shares remain 'unsold' until the tenant either changes his/her mind on purchasing the apartment, the tenant moves out of the building, the sponsor offers the tenant a monetary sum or incentive so that he/she moves. Another scenario facing a sponsor is one in which market conditions prohibit the sponsor from selling the unsold shares at a profit margin that he deems financially acceptable. In such a case, the sponsor may rent out these apartments for a period of time until the market shifts in favor of selling the units at a profitable margin.

UPREIT (Umbrella partnership real estate investment trust)

Organizational structure where a REIT's assets are owned by a holding company for tax purposes

Usable square footage

The area contained within the demising walls of the tenant space that equals the net square footage multiplied by the circulation factor

Use

The specific purpose for which a parcel or a building is intended to be used or for which it has been designed or arranged

Utilities Included

In some buildings you will find that Electric and Gas (sometimes Cable TV) is included in the monthly maintenance charges.

VA

Department of Veterans Affairs: a federal agency which guarantees loans made to veterans; similar to mortgage insurance, a loan guarantee protects lenders against loss that may result from a borrower default.

VA (Veterans Administration)

The Veterans Administration assists veterans with purchasing a home without a down payment.

VA loan

A loan through the Veterans Administration program, which allows most veterans to purchase a house without a down payment.

Vacancy factor

The amount of gross revenue that pro forma income statements anticipate will be lost because of vacancies, often expressed as a percentage of the total rentable square footage available in a building or project

Vacancy rate

The total amount of available space compared to the total inventory of space and expressed as a percentage

Vacant space

Existing tenant space currently being marketed for lease excluding space available for sublease

Value-added

A phrase generally used by advisers and managers to describe investments in underperforming and/or undermanaged assets. The objective is to generate 13 percent to 18 percent returns.

Variable rate mortgage (VRM)

A mortgage with an interest rate that changes with fluctuations in such indexes as the prime rate, LIBOR Rate, or treasury bill.

Variable-rate

A loan interest rate that varies over the term of the loan, usually tied to a predetermined index. Also called adjustable-rate.

Variance

Permission that allows a property owner to depart from the literal requirements of a zoning ordinance that, because of special circumstances, cause a unique hardship

Verification of deposit (VOD)

As part of the loan process a lender may ask a borrower's bank to sign a statement verifying the borrower's account balances and history.

Verification of employment (VOE)

As part of the loan process a lender may ask the borrower's employer for confirmation of the borrower's position and salary.

Virtual storefront

An online business presence for sales

Waiting period

The time between the initial filing of a registration statement and its effective date

Walk-through Kitchen

A Kitchen with two means of egress. An individual can actually walk through the Kitchen by entering through one room and exiting into another room.

Walk-up Building

A building without an elevator. This term usually refers to four to six story pre-war buildings that were built without an elevator. Today it is uncommon to see new construction without the incorporation of an elevator.

Warehouse fee

A closing cost fee representing the lender's cost of holding a borrower's loan temporarily before it is sold on the secondary mortgage market.

Weighted-average coupon

The weighted average of the gross interest rates of the mortgages underlying a pool as of the issue date, with the balance of each mortgage used as the weighting factor

Weighted-average equity

The denominator of the fraction used to calculate investment-level income, appreciation and total returns on a quarterly basis, consisting of net assets at the beginning of the period adjusted for weighted contributions and distributions

Weighted-average rental rates

The average proportion of unequal rental rates in two or more buildings within a market

WEIK

The acronym used to describe a windowed Eat-In-Kitchen

Window Treatments

This refers to the treatments an individual may put on a window. These can include shades or blinds.

Working drawings

The set of plans for a building or project that comprise the contract documents that indicate the precise manner in which a project is to be built

Workout

The process by which a borrower attempts to negotiate with a lender to restructure the borrower's debt rather than go through foreclosure proceedings

Wraparound mortgage

A loan given to a buyer for the remaining balance on a seller's first mortgage and an additional amount requested by the seller. Payments on both amounts are made to the lender who holds the wraparound loan.

Write-down

The accounting procedure used when the book value of an asset is adjusted downward to better reflect current market value

Write-off

The accounting procedure used when an asset has been determined to be uncollectible and is therefore charged as a loss

There are no glossary terms for the letter "X"

Yield

The effective return on an investment, as paid in dividends or interest

Yield maintenance premium

A penalty, paid by the borrower, designed to make investors whole in the event of early redemption of principal

Yield spread

The difference in yields between a commercial mortgage and a benchmark value, typically U.S. Treasuries of the same maturity

Yield spread

A form of compensation some brokers receive from a lender for originating and processing a loan. The yield spread is based on the interest rate of the loan and can usually vary anywhere from zero to 6%.

Zoning

The division of a city or town into zones and the application of regulations having to do with the architectural design and structural and intended uses of buildings within such zones

Zoning ordinance

The set of laws and regulations controlling the use of land and construction of improvements in a given area or zone