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Façade
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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).
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Face rental rate
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The asking rental rate, before any concessions are subtracted or fees/taxes added.
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Facility space
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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.
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FAD (funds available for distribution)
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Funds from operations, minus deductions for cash expenditures for leasing commissions and tenant improvement costs.
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FAD multiple
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Share price of a REIT divided by its funds available for distribution.
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Fair Credit Reporting Act
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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.
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Fair Housing Act
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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.
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Fair market value
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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
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Fannie Mae
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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.
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Federal Home Loan Mortgage Corporation (FHLMC)
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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.
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Federal Housing Administration (FHA)
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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.
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Fee simple interest
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Describes the condition when an owner holds all the rights in a real estate parcel, with no encumbrances.
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FFO (funds from operations)
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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.
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FFO multiple
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Share price of a REIT divided by its FFO.
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FHA loans
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Mortgages that are insured by the Federal Housing Administration (FHA). Typically low-rate mortgages with a down payment as small as 3 percent.
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FHA Mortgage Insurance
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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.
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Fiduciary
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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.
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Finance charge
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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.
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Financing Allowed
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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.
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Firm commitment
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A written promise made by a lender to loan money for the purchase of property.
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First mortgage
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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.
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First-generation space
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This term usually refers to newly-created space that is currently available for lease, and has never before been occupied by a tenant.
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First-loss position
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The 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.
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Fixed Costs
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Costs that do not fluctuate in proportion to the level of sales or production.
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Fixed Rate
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Refers to a loan (or any other financial instrument involving interest rates) wherein the interest rate remains constant over the term of the loan.
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Fixed time
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In timeshare accommodations, this term specifies the time period in which the timeshare owner has access to the property..
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Fixed-rate mortgage
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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.
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Flex space
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In commercial properties, this term refers to part(s) of a property that can be configured by the tenant to serve various needs.
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FlipTax (Transfer Fee)
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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.
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Float
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The number of freely traded shares in the hands of the public.
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Flood certification
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The process of determining whether a property is located within a known flood zone.
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Flood insurance
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Insurance coverage that protects against damage by flooding. This insurance is usually required in designated flood areas.
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Floor area ratio (FAR)
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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.
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For Sale By Owner (FSBO)
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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.
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Force majeure
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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.
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Foreclosure
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A legal process in which mortgaged property is sold to pay the loan of the defaulting borrower.
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Forward commitments
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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.
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Four Quadrants (of the real estate capital markets)
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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.
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Freddie Mac
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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.
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Front-end ratio
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A lender calculation that compares a borrower's monthly housing expense (principal, interest, taxes, and insurance) to gross monthly income.
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Full-service rent
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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.
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Fully Amortized ARM
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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.
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Fully diluted shares
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The number of shares of common stock that would be outstanding if all convertible securities were converted to common shares.
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Future proposed space
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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.
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