TERM

DEFINITION

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.

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