TERM

DEFINITION

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.