GLOSSARY

401(k)/403(b) An investment plan sponsored by an employer which enables individuals to set aside pre-tax income for retirement or emergency purposes. 401(k) plans are provided by private corporations. 403(b) plans are provided by non-profit organizations.

401(k)/403(b) loan A type of financing using a loan against the money accumulated in a 401(k)/403(b) plan.

Abatement Sometimes referred to as free rent or early occupancy. A condition that could happen in addition to the primary term of the lease.

Above Building Standard Finishes and specialized designs that have been upgraded in order to accommodate a tenant’s requirements.

Absorption Rate The speed and amount of time at which rentable space, in square feet, is filled.

Abstract or Title Search The process of reviewing all transactions that have been recorded publicly in order to determine whether any defects in the title exist which could interfere with a clear property ownership transfer.

Accelerated Cost Recovery System A calculation for taxes to provide more depreciation for the first few years of ownership.

Accelerated Depreciation A method of depreciation where the value of a property depreciates faster in the first few years after purchasing it.

Acceleration Clause A clause in a contract that gives the lender the right to demand immediate payment of the balance of the loan if the borrower defaults on the loan.

Acceptance An approval of a buyer’s offer written by the seller.

Ad Valorem A Latin phrase which translates as “according to value.” Refers to a tax that is imposed on a property’s value which is typically based on the local government’s evaluation of the property.

Addendum An addition or update for an existing contract between parties.

Additional Principal Payment Additional money paid to the lender, apart from the scheduled loan payments, to pay more of the principal balance, shortening the length of the loan.

Adjustable Rate Mortgage (ARM) A home loan with an interest rate that is adjusted periodically in order to reflect changes in a specific financial resource.

Adjusted Funds From Operations (AFFO) The rate of REIT performance or ability to pay dividends which is used by many analysts who have concerns about the quality of earnings as measured by Funds From Operations (FFO).

Adjustment Date The date at which the interest rate is adjusted for an Adjustable-Rate Mortgage (ARM).

Adjustment Period The amount of time between adjustments for an interest rate in an ARM.

Administrative Fee A percentage of the value of the assets under management, or a fixed annual dollar amount charged to manage an account.

Advances The payments the servicer makes when the borrower fails to send a payment.

Adviser A broker or investment banker who represents an owner in a transaction and is paid a retainer and/or a performance fee once a financing or sales transaction has closed.

Agency Closing A type of closing in which a lender uses a title company or other firm as an agent to finish a loan.

Agency Disclosure A requirement in most states that agents who act for both buyers or sellers must disclose who they are working for in the transaction.

Aggregation Risk The risk that is associated with warehousing mortgages during the process of pooling them for future security.

Agreement of Sale A legal document the buyer and seller must approve and sign that details the price and terms in the transaction.

Alienation Clause The provision in a loan that requires the borrower to pay the total balance of the loan at once if the property is sold or the ownership transferred.

Alternative Mortgage A home loan that does not match the standard terms of a fixed-rate mortgage.

Alternative or Specialty Investments Types of property that are not considered to be conventional real estate investments, such as self-storage facilities, mobile homes, timber, agriculture, or parking lots.

Amortization The usual process of paying a loan’s interest and principal via scheduled monthly payments.

Amortization Schedule A chart or table which shows the percentage of each payment that will be applied toward principal and interest over the life of the mortgage and how the loan balance decreases until it reaches zero.

Amortization Tables The mathematical tables that are used to calculate what a borrower’s monthly payment will be.

Amortization Term The number of months it will take to amortize the loan.

Anchor The business or individual who is serving as the primary draw to a commercial property.

Annual Mortgagor Statement A yearly statement to borrowers which details the remaining principal balance and amounts paid throughout the year for taxes and interest.

Annual Percentage Rate (APR) The interest rate that states the actual cost of borrowing money over the course of a year.

Annuity The regular payments of a fixed sum.

Application The form a borrower must complete in order to apply for a mortgage loan, including information such as income, savings, assets, and debts.

Application Fee A fee some lenders charge that may include charges for items such as property appraisal or a credit report unless those fees are included elsewhere.

Appraisal The estimate of the value of a property on a particular date given by a professional appraiser, usually presented in a written document.

Appraisal Fee The fee charged by a professional appraiser for his estimate of the market value of a property.

Appraisal Report The written report presented by an appraiser regarding the value of a property.

Appraised Value The dollar amount a professional appraiser assigned to the value of a property in his report.

Appraiser A certified individual who is qualified by education, training, and experience to estimate the value of real and personal property.

Appreciation An increase in the home’s or property’s value.

Appreciation Return The amount gained when the value of the real estate assets increases during the current quarter.

Arbitrage The act of buying securities in one market and selling them immediately in another market in order to profit from the difference in price.

ARM index A number that is publicly published and used as the basis for interest rate adjustments on an ARM.

As-Is Condition A phrase in a purchase or lease contract in which the new tenant accepts the existing condition of the premises as well as any physical defects.

Assessed Value The value placed on a home which is determined by a tax assessor in order to calculate a tax base.

Assessment (1) The approximate value of a property. (2) A fee charged in addition to taxes in order to help pay for items such as water, sewer, street improvements, etc.

Assessor A public officer who estimates the value of a property for the purpose of taxation.

Asset A property or item of value owned by an individual or company.

Asset Management Fee A fee that is charged to investors based on the amount of money they have invested into real estate assets for the particular fund or account.

Asset Management The various tasks and areas around managing real estate assets from the initial investment until the time it is sold.

Asset Turnover The rate of total revenues for the previous 12 months divided by the average total assets.

Assets Under Management The amount of the current market value of real estate assets which a manager is responsible to manage and invest.

Assignee Name The individual or business to whom the lease, mortgage or other contract has been re-assigned.

Assignment The transfer of rights and responsibilities from one party to another for paying a debt. The original party remains liable for the debt should the second party default.

Assignor The person who transfers the rights and interests of a property to another.

Assumable Mortgage A mortgage that is capable of being transferred to a different borrower.

Assumption The act of assuming the mortgage of the seller.

Assumption Clause A contractual provision that enables the buyer to take responsibility for the mortgage loan from the seller.

Assumption Fee A fee charged to the buyer for processing new records when they are assuming an existing loan.

Attorn To agree to recognize a new owner of a property and to pay rent to the new landlord.

Average Common Equity The sum of the common equity for the last five quarters divided by five.

Average Downtime The number of months that are expected between a lease’s expiration and the beginning of a replacement lease under the current market conditions.

Average Free Rent The number of months the rent abatement concession is expected to be granted to a tenant as part of an incentive to lease under current market conditions

Average Occupancy The average rate of each of the previous 12 months that a property was occupied.

Average Total Assets The sum of the total assets of a company for the previous five quarters divided by five.

Back Title Letter A letter that an attorney receives from a title insurance company before examining the title for insurance purposes.

Back-End Ratio The calculation lenders use to compare a borrower’s gross monthly income to their total debt.

Balance Sheet A statement that lists an individual’s assets, liabilities and net worth.

Balloon Loan A type of mortgage in which the monthly payments are not large enough to repay the loan by the end of the term, and the final payment is one large payment of the remaining balance.

Balloon Payment The final huge payment due at the end of a balloon mortgage.

Balloon Risk The risk that a borrower may not be able to come up with the funds for the balloon payment at maturity.

Bankrupt The state an individual or business is in if they are unable to repay their debt when it is due.

Bankruptcy A legal proceeding where a debtor can obtain relief from payment of certain obligations through restructuring their finances.

Base Loan Amount The amount which forms the basis for the loan payments.

Base Principal Balance The original loan amount once adjustments for subsequent fundings and principal payments have been made without including accrued interest or other unpaid debts.

Base Rent A certain amount that is used as a minimum rent, providing for rent increases over the term of the lease agreement.

Base Year The sum of actual taxes and operating expenses during a given year, often that in which a lease begins.

Basis Point A term for 1/100 of one percentage point.

Before-Tax Income An individual’s income before taxes have been deducted.

Below-Grade Any structure or part of a structure that is below the surface of the ground that surrounds it.

Beneficiary An employee who is covered by the benefit plan his company provides.

Beta The measurement of common stock price volatility for a company in comparison to the market.

Bid The price or range an investor is willing to spend on whole loans or securities.

Bill of Sale A written legal document that transfers the ownership of personal property to another party.

Binder (1) A report describing the conditions of a property’s title. (2) An early agreement between seller and buyer.

Biweekly Mortgage A mortgage repayment plan that requires payments every two weeks to help repay the loan over a shorter amount of time.

Blanket Mortgage A rare type of mortgage that covers more than one of the borrower’s properties.

Blind Pool A mixed fund that accepts capital from investors without specifying property assets.

Bond Market The daily buying and selling of thirty-year treasury bonds which also affects fixed rate mortgages.

Book Value The value of a property based on its purchase amount plus upgrades or other additions with depreciation subtracted.

Break-Even Point The point at which a landlord’s income from rent matches expenses and debt.

Bridge Loan A short-term loan for individuals or companies that are still seeking more permanent financing.

Broker A person who serves as a go-between for a buyer and seller.

Brokerage The process of bringing two or more parties together in exchange for a fee, commission, or other compensation.

Buildable Acres The portion of land that can be built on after allowances for roads, setbacks, anticipated open spaces, and unsuitable areas have been made.

Building Code The laws set forth by the local government regarding end use of a given piece of property. These law codes may dictate the design, materials used, and/or types of improvements that will be allowed.

Building Standard Plus Allowance A detailed list provided by the landlord stating the standard building materials and costs necessary to make the premises inhabitable.

Build-Out Improvements to a property’s space that have been implemented according to the tenant’s specifications.

Build-to-Suit A way of leasing property, usually for commerical purposes, in which the developer or landlord builds to a tenant’s specifications.

Buydown A term that usually refers to a fixed-rate mortgage for which additional payments can be applied to the interest rate for a temporary period, lowering payments for a period of one to three years.

Buydown Mortgage A style of home loan in which the lender receives a higher payment in order to convince them to reduce the interest rate during the initial years of the mortgage.

Buyer’s Remorse A nervousness first-time homebuyers tend to feel after signing a sales contract or closing the purchase of a house.

Call Date The periodic or continuous right a lender has to call for payment of the total remaining balance prior to the date of maturity.

Call Option A clause in a loan agreement that allows a lender to demand repayment of the entire principal balance at any time.

Cap A limit on how much the monthly payment or interest rate is allowed to increase in an adjustable-rate mortgage.

Capital Appreciation The change in a property’s or portfolio’s market value after it has been adjusted for capital improvements and partial sales.

Capital Expenditures The purchase of long-term assets, or the expansion of existing ones which prolongs the life or efficiency of those assets.

Capital Gain The amount of excess when the net proceeds from the sale of an asset are higher than its book value.

Capital Improvements Expenses that prolong the life of a property or add new improvements to it.

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

Capitalization The mathematical process that investors use to derive the value of a property using the rate of return on investments.

Capitalization Rate The percentage of return as it is estimated from the net income of a property.

Carryback Financing A type of funding in which a seller agrees to hold back a note for a specified portion of the sales price.

Carrying Charges Costs incurred to the landlord when initially leasing out a property and then during the periods of vacancy.

Cash Flow The amount of income an investor receives on a rental property after operating expenses and loan payments have been deducted.

Cashier’s Check A check the bank draws on its own resources instead of a depositor’s account.

Cash-on-Cash Yield The percentage of a property’s net cash flow and the average amount of invested capital during the specified operating year.

Cash-Out Refinance The act of refinancing a mortgage for an amount that is higher than the original amount for the purpose of using the leftover cash for personal use.

Certificate of Deposit A type of deposit that is held in a bank for a limited time and pays a certain amount of interest to the depositor.

Certificate of Deposit Index (CODI) A rate that is based on interest rates of six-month CDs and is often used to determine interest rates for some ARMs.

Certificate of Eligibility A type of document that the Veterans Administration issues to verify the eligibility of a veteran for a VA loan.

Certificate of Occupancy (CO) A written document issued by a local government or building agency that states that a home or other building is inhabitable after meeting all building codes.

Certificate of Reasonable Value (CRV) An appraisal presented by the Veterans Administration that shows the current market value of a property.

Certificate of Veteran Status A document veterans or reservists receive if they have served 90 days of continuous active duty (including training time).

Chain of Title The official record of all transfers of ownership over the history of a piece of property.

Chapter 11 The part of the federal bankruptcy code that deals with reorganizations of businesses.

Chapter 7 The part of the federal bankruptcy code that deals with liquidations of businesses.

Circulation Factor The interior space that is required for internal office circulation and is not included in the net square footage.

Class A A property rating that is usually assigned to those that will generate the maximum rent per square foot, due to superior quality and/or location.

Class B A good property that most potential tenants would find desirable but lacks certain attributes that would bring in the top dollar.

Class C A building that is physically acceptable but offers few amenities, thereby becoming cost-effective space for tenants who are seeking a particular image.

Clear Title A property title that is free of liens, defects, or other legal encumbrances.

Clear-Span Facility A type of building, usually a warehouse or parking garage, consisting of vertical columns on the outer edges of the structure and clear spaces between the columns.

Closed-End Fund A mixed fund with a planned range of investor capital and a limited life.

Closing The final act of procuring a loan and title in which documents are signed between the buyer and seller and/or their respective representation, and all money, concerned in the contract, changes hands.

Closing Costs The expenses that are related to the sale of real estate including loan, title, and appraisal fees and are beyond the price of the property itself.

Closing Statement See: Settlement Statement.

Cloud on Title Certain conditions uncovered in a title search that present a negative impact to the title for the property.

Commercial Mortgage-Backed Securities (CMBS) A type of securities that is backed by loans on commercial real estate.

Collateralized Mortgage Obligation (CMO) Debt that is fully based on a pool of mortgages.

Co-Borrower Another individual who is jointly responsible for the loan and is on the title to the property.

Cost of Funds Index (COFI) An index used to determine changes in the interest rates for certain ARMs.

Co-Investment Program A separate account for an insurance company or investment partnership in which two or more pension funds may co-invest their capital in an individual property or a portfolio of properties.

Co-Investment The condition that occurs when two or more pension funds or groups of funds are sharing ownership of a real estate investment.

Collateral The property for which a borrower has obtained a loan, thereby assuming the risk of losing the property if the loan is not repaid according to the terms of the loan agreement.

Collection The effort on the part of a lender, due to a borrower defaulting on a loan, which involves mailing and recording certain documents in the event that the foreclosure procedure must be implemented.

Commercial Mortgage A loan used to purchase a piece of commercial property or building.

Commercial Mortgage Broker A broker specialized in commercial mortgage applications.

Commercial Mortgage Lender A lender specialized in funding commercial mortgage loans.

Commingled Fund A pooled fund that enables qualified employee benefit plans to mix their capital in order to achieve professional management, greater diversification, or investment positions in larger properties.

Commission A compensation to salespeople that is paid out of the total amount of the purchase transaction.

Commitment The agreement of a lender to make a loan with given terms for a specific period.

Commitment Fee The fee a lender charges for the guarantee of specified loan terms, to be honored at some point in the future.

Common Area Assessments Sometimes called Homeowners’ Association Fees. Charges paid to the Homeowners’ Association by the individual unit owners, in a condominium or Planned Unit Development (PUD), that are usually used to maintain the property and common areas.

Common Area Maintenance The additional charges the tenant must pay in addition to the base rent to pay for the maintenance of common areas.

Common Areas The portions of a building, land, and amenities, owned or managed by a planned unit development (PUD) or condominium’s homeowners’ association, that are used by all of the unit owners who share in the common expense of operation and maintenance.

Common Law A set of unofficial laws that were originally based on English customs and used to some extent in several states.

Community Property Property that is acquired by a married couple during the course of their marriage and is considered in many states to be owned jointly, unless certain circumstances are in play.

Comparable Sales Also called Comps or Comparables. The recent selling prices of similar properties in the area that are used to help determine the market value of a property.

Compound Interest The amount of interest paid on the principal balance of a mortgage in addition to accrued interest.

Concessions Cash, or the equivalent, that the landlord pays or allows in the form of rental abatement, additional tenant finish allowance, moving expenses, or other costs expended in order to persuade a tenant to sign a lease.

Condemnation A government agency’s act of taking private property, without the owner’s consent, for public use through the power of eminent domain.

Conditional Commitment A lender’s agreement to make a loan providing the borrower meets certain conditions.

Conditional Sale A contract to sell a property which states that the seller will retain the title until all contractual conditions have been fulfilled.

Condominium A type of ownership in which all of the unit owners own the property, common areas, and buildings jointly, and have sole ownership in the unit to which they hold the title.

Condominium Conversion Changing an existing rental property’s ownership to the condominium form of ownership.

Condominium Hotel A condominium project that involves registration desks, short-term occupancy, food and telephone services, and daily cleaning services, and is generally operated as a commercial hotel even though the units are individually owned.

Conduit A strategic alliance between lenders and unaffiliated organizations that acts as a source of funding by regularly purchasing loans, usually with a goal of pooling and securitizing them.

Conforming Loan A type of mortgage that meets the conditions to be purchased by Fannie Mae or Freddie Mac.

Construction Documents The drawings and specifications an architect and/or engineer provides to describe construction requirements for a project.

Construction Loan A short-term loan to finance the cost of construction, usually dispensed in stages throughout the construction project.

Construction Management The process of ensuring that the stages of the construction project are completed in a timely and seamless manner.

Construction-to-Permanent Loan A construction loan that can be converted to a longer-term traditional mortgage after construction is complete.

Consultant Any individual or company that provides the services to institutional investors, such as defining real estate investment policies, making recommendations to advisors or managers, analyzing existing real estate portfolios, monitoring and reporting on portfolio performance, and/or reviewing specified investment opportunities.

Consumer Price Index (CPI) A measurement of inflation, relating to the change in the prices of goods and services that are regularly purchased by a specific population during a certain period of time.

Contiguous Space Refers to several suites or spaces on a floor (or connected floors) in a given building that can be combined and rented to a single tenant.

Contingency A specific condition that must be met before either party in a contract can be legally bound.

Contract An agreement, either verbal or written, to perform or not to perform a certain thing.

Contract documents See: Construction Documents.

Contract Rent Also known as Face Rent. The dollar amount of the rental obligation specified in a lease.

Conventional Loan A long-term loan from a nongovernmental lender that a borrower obtains for the purchase of a home.

Convertible Adjustable-Rate Mortgage A type of mortgage that begins as a traditional ARM but contains a provision to enable the borrower to change to a fixed-rate mortgage during a certain period of time.

Convertible Debt The point in a mortgage at which the lender has the option to convert to a partially or fully owned property within a certain period of time.

Convertible Preferred Stock Preferred stock that can be converted to common stock under certain conditions which have been specified by the issuer.

Conveyance The act of transfering a property title between parties by deed.

Cooperative Also called a Co-op. A type of ownership by multiple residents of a multi-unit housing complex, in which they all own shares in the cooperative corporation that owns the property, thereby having the right to occupy a particular apartment or unit.

Cooperative Mortgage Any loan that is related to a cooperative residential project.

Core Properties The main types of property, specifically office, retail, industrial, and multi-family.

Co-Signer A second individual or party who also signs a promissory note or loan agreement, thereby taking responsibility for the debt in the event that the primary borrower cannot pay.

Cost-Approach Improvement Value The current expenses for constructing a copy or replacement for an existing structure, but subtracting an estimate of the accrued depreciation.

Cost-Approach Land Value The estimated value of the basic interest in the land, as if it were available for development to its highest and best use.

Cost-of-Sale Percentage An estimate of the expenses of selling an investment that represents brokerage commissions, closing costs, fees, and other necessary sales costs.

Coupon The token or expected interest rate the borrower is charged on a promissory note or mortgage.

Courier Fee The fee that is charged at closing for the delivery of documents between all parties concerned in a real estate transaction.

Covenant A written agreement, included in deeds or other legal documents, that defines the requirements for certain acts or use of a property.

Credit An agreement in which a borrower promises to repay the lender at a later date and receives something of value in exchange.

Credit Enhancement The necessary credit support, in addition to mortgage collateral, in order to achieve the desired credit rating on mortgage-backed securities.

Credit History An individual’s record which details his current and past financial obligations and performance.

Credit Life Insurance A type of insurance that pays the balance of a mortgage if the borrower dies.

Credit Rating The degree of creditworthiness a person is assigned based on his credit history and current financial status.

Credit Report An individual’s record detailing an individual’s credit, employment, and residence history used to determine the individual’s creditworthiness.

Credit Repository A company that records and updates credit applicants’ financial and credit information from various sources.

Credit Score Sometimes called a Credit Risk Score. The number contained in a consumer’s credit report that represents a statistical summary of the information.

Creditor A party to whom other parties owe money.

Cross-Collateralization A group of mortgages or properties that jointly secures one debt obligation.

Cross-Defaulting A provision that allows a trustee or lender to require full payment on all loans in a group, if any single loan in the group is in default.

Cumulative Discount Rate A percentage of the current value of base rent with all landlord lease concessions taken into account.

Current Occupancy The current percentage of units in a building or property that is leased.

Current Yield The amount of the coupon divided by the price.

Deal Structure The type of agreement in financing an acquisition. The deal can be unleveraged, leveraged, traditional debt, participating debt, participating/convertible debt, or joint ventures.

Debt Any amount one party owes to another party.

Debt Service Coverage Ratio (DSCR) A property’s yearly net operating income divided by the yearly cost of debt service.

Debt Service The amount of money that is necessary to meet all interest and principal payments during a specific period.

Debt-to-Income Ratio The percentage of a borrower’s monthly payment on long-term debts divided by his gross monthly income.

Dedicate To change a private property to public ownership for a particular public use.

Deed A legal document that conveys property ownership to the buyer.

Deed in Lieu of Foreclosure A situation in which a deed is given to a lender in order to satisfy a mortgage debt and to avoid the foreclosure process.

Deed of Trust A provision that allows a lender to foreclose on a property in the event that the borrower defaults on the loan.

Default The state that occurs when a borrow fails to fulfill a duty or take care of an obligation, such as making monthly mortgage payments.

Deferred Maintenance Account A type of account that a borrower must fund to provide for maintenance of a property.

Deficiency Judgment The legal assignment of personal liability to a borrower for the unpaid balance of a mortgage, after foreclosing on the property has failed to yield the full amount of the debt.

Defined-Benefit Plan A type of benefit provided by an employer that defines an employee’s benefits either as a fixed amount or a percentage of the beneficiary’s salary when he retires.

Defined-Contribution Plan A type of benefit plan provided by an employer in which an employee’s retirement benefits are determined by the amount that has been contributed by the employer and/or employee during the time of employment, and by the actual investment earnings on those contributions over the life of the fund.

Delinquency A state that occurs when the borrower fails to make mortgage payments on time, eventually resulting in foreclosure, if severe enough.

Delinquent Mortgage A mortgage in which the borrower is behind on payments.

Demising Wall The physical partition between the spaces of two tenants or from the building’s common areas.

Deposit Also referred to as “Earnest Money.” The funds that the buyer provides when offering to purchase property.

Depreciation A decline in the value of property or an asset, often used as a tax deductible item.

Derivative Securities A type of securities that has been created from other financial instruments.

Design/Build An approach in which a single individual or business is responsible for both the design and construction.

Disclosure A written statement, presented to a potential buyer, that lists information relevant to a piece of property, whether positive or negative.

Discount Points Fees that a lender charges in order to provide a lower interest rate.

Discount Rate A figure used to translate present value from future payments or receipts.

Discretion The amount of authority an adviser or manager is granted for investing and managing a client’s capital.

Distraint The act of seizing a tenant’s personal property when the tenant is in default, based on the right the landlord has in satisfying the debt.

Diversification The act of spreading individual investments out to insulate a portfolio against the risk of reduced yield or capital loss.

Dividend Yield The percentage of a security’s market price that represents the annual dividend rate.

Dividend Distributions of cash or stock that stockholders receive.

Dividend-Ex Date The initial date on which a person purchasing the stock can no longer receive the most recently announced dividend.

Document Needs List The list of documents a lender requires from a potential borrower who is submitting a loan application.

Documentation Preparation Fee A fee that lenders, brokers, and/or settlement agents charge for the preparation of the necessary closing documents.

Dollar Stop An agreed amount of taxes and operating expenses each tenant must pay out on a prorated basis.

Down Payment The variance between the purchase price and the portion that the mortgage lender financed.

DOWNREIT A structure of organization that makes it possible for REITs to purchase properties using partnership units.

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

Due Diligence The activities of a prospective purchaser or mortgager of real property for the purpose of confirming that the property is as represented by the seller and is not subject to environmental or other problems.

Due on Sale Clause The standard mortage language that states the loan must still be repaid if the property is resold.

Earnest Money See: Deposit.

Earthquake Insurance A type of insurance policy that provides coverage against earthquake damage to a home.

Easement The right given to a non-ownership party to use a certain part of the property for specified purposes, such as servicing power lines or cable lines.

Economic Feasibility The viability of a building or project in terms of costs and revenue where the degree of viability is established by extra revenue.

Economic Rent The market rental value of a property at a particular point in time.

Effective Age An estimate of the physical condition of a building presented by an appraiser.

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

Effective Gross Income (EGI) The total property income which rents and other sources generate after subtracting a vacancy factor estimated to be appropriate for the property.

Effective Gross Rent (EGR) The net rent that is generated after adjusting for tenant improvements and other capital costs, lease commissions and other sales expenses.

Effective Rent The actual rental rate that the landlord achieves after deducting the concession value from the base rental rate a tenant pays.

Electronic Authentication A way of providing proof that a particular electronic document is genuine, has arrived unaltered, and came from the indicated source.

Eminent Domain The power of the governement to pay the fair market value for a property, appropriating it for public use.

Encroachment Any improvement or upgrade that illegally intrudes onto another party’s property.

Encumbrance Any right or interest in a property that interferes with using it or transfering ownership.

End Loan The result of converting to permanent financing from a construction loan.

Entitlement A benefit of a VA home loan. Often referred to as eligibility.

Environmental Impact Statement Legally required documents that must accompany major project proposals where there will likely be an impact on the surrounding environment.

Equal Credit Opportunity Act (ECOA) A federal law that requires a lender or other creditor to make credit available for applicants regardless of sex, marital status, race, religion, or age.

Equifax One of the three primary credit-reporting bureaus.

Equity The value of a property after existing liabilities have been deducted.

 

Employee Retirement Income Security Act (ERISA) A legislation that controls the investment activities, mainly of corporate and union pension plans.

Errors and Omissions Insurance A type of policy that insures against the mistakes of a builder or architect.

Escalation Clause The clause in a lease that provides for the rent to be increased to account for increases in the expenses the landlord must pay.

Escrow A valuable item, money or documents deposited with a third party for delivery upon the fulfillment of a condition.

Escrow Account Also referred to as an Impound Account. An account established by a mortgage lender or servicing company for the purpose of holding funds for the payment of items, such as homeowners insurance and property taxes.

Escrow Agent A neutral third party who makes sure that all conditions of a real estate transaction have been met before any funds are transfered or property is recorded.

Escrow Agreement A written agreement between an escrow agent and the contractual parties which defines the basic obligations of each party, the money (or other valuables) to be deposited in escrow, and how the escrow agent is to dispose of the money on deposit.

Escrow Analysis An annual investigation a lender performs to make sure they are collecting the appropriate amount of money for anticipated expenditures.

Escrow Closing The event in which all conditions of a real estate transaction have been met, and the property title is transferred to the buyer.

Escrow Company A neutral company that serves as a third party to ensure that all conditions of a real estate transaction are met.

Escrow Disbursements The dispensing of escrow funds for the payment of real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they are due.

Escrow Payment The funds that are withdrawn by a mortgage servicer from a borrower’s escrow account to pay property taxes and insurance.

Estate The total assets, including property, of an individual after he has died.

Estimated Closing Costs An estimation of the expenses relating to the sale of real estate.

Estimated Hazard Insurance An estimation of hazard insurance, or homeowners’ insurance, that will cover physical risks.

Estimated Property Taxes An estimation of the property taxes that must be paid on the property, according to state and county tax rates.

Estoppel Certificate A signed statement that certifies that certain factual statements are correct as of the date of the statement and can be relied upon by a third party, such as a prospective lender or purchaser.

Eviction The legal removal of an occupant from a piece of property.

Examination of Title A title company’s inspection and report of public records and other documents for the purpose of determining the chain of ownership of a property.

Exclusive Agency Listing A written agreement between a property owner and a real estate broker in which the owner promises to pay the broker a commission if certain property is leased during the listing period.

Exclusive Listing A contract that allows a licensed real estate agent to be the only agent who can sell a property for a given time.

Executed Contract An agreement in which all parties involved have fulfilled their duties.

Executor The individual who is named in a will to administer an estate. Executrix is the feminine form.

Exit strategy An approach investors may use when they wish to liquidate all or part of their investment.

Experian One of the three primary credit-reporting bureaus.

Face Rental Rate The rental rate that the landlord publishes.

Facility Space The floor area in a hospitality property that is dedicated to activities, such as restaurants, health clubs, and gift shops that interactively service multiple people and is not directly related to room occupancy.

Funds Available for Distribution (FAD) The income from operations, with cash expenditures subtracted, that may be used for leasing commissions and tenant improvement costs.

FAD Multiple The price per share of a REIT divided by its funds available for distribution.

Fair Credit Reporting Act (FCRA) The federal legislation that governs the processes credit reporting agencies must follow.

Fair Housing Act The federal legislation that prohibits the refusal to rent or sell to anyone based on race, color, religion, sex, family status, B268, or disability.

Fair Market Value The highest price that a buyer would be willing to pay, and the lowest a seller would be willing to accept.

Fannie Mae See: Federal National Mortgage Association.

Fannie Mae’s Community Home Buyer’s Program A community lending model based on borrower income in which mortgage insurers and Fannie Mae offer flexible underwriting guidelines in order to increase the buying power for a low- or moderate-income family and to decrease the total amount of cash needed to purchase a home.

Farmer’s Home Administration (FMHA) An agency within the U.S. Department of Agriculture that provides credit to farmers and other rural residents.

Federal Home Loan Mortgage Corporation (FHLMC) Also known as Freddie Mac. The company that buys mortgages from lending institutions, combines them with other loans, and sells shares to investors.

Federal Housing Administration (FHA) A government agency that provides low-rate mortgages to buyers who are able to make a down payment as low as three percent.

Federal National Mortgage Association (FNMA) Also known as Fannie Mae. A congressionally chartered, shareholder-owned company that is the nation’s largest supplier of home mortgage funds. The company buys mortgages from lenders and resells them as securities on the secondary mortgage market.

Fee Simple The highest possible interest a person can have in a piece of real estate.

Fee Simple Estate An unconditional, unlimited inheritance estate in which the owner may dispose of or use the property as desired.

Fee Simple Interest The state of owning all the rights in a real estate parcel.

Funds From Operations (FFO) A ratio that is meant to highlight the amount of cash a company’s real estate portfolio generates relative to its total operating cash flow.

FFO Multiple The price of a REIT share divided by its funds from operations.

FHA Loans Mortgages that the Federal Housing Administration (FHA) insures.

FHA Mortgage Insurance A type of insurance that requires a fee to be paid at closing in order to insure the loan with the Federal Housing Administration (FHA).

Fiduciary Any individual who holds authority over a plan’s asset management, administration or disposition, or renders paid investment advice regarding a plan’s assets.

Finance Charge The amount of interest to be paid on a loan or credit card balance.

Firm Commitment A written agreement a lender makes to loan money for the purchase of property.

First Mortgage The main mortgage on a property.

First Refusal Right/ Right of First Refusal A lease clause that gives a tenant the first opportunity to buy a property or to lease additional space in a property at the same price and terms as those contained in an offer from a third-party that the owner has expressed a willingness to accept.

First-Generation Space A new space that has never before been occupied by a tenant and is currently available for lease.

First-Loss Position A security’s position that will suffer the first economic loss if the assets below it lose value or are foreclosed on.

Fixed Costs Expenses remain the same despite the level of sales or production.

Fixed Rate An interest rate that does not change over the life of the loan.

Fixed Time The particular weeks of a year that the owner of a timeshare arrangement can access his accommodations.

Fixed-Rate Mortgage A loan with an unchanging interest rate over the life of the loan.

Fixture Items that become a part of the property when they are permanently attached to the property.

Flat Fee An amount of money that an adviser or manager receives for managing a portfolio of real estate assets.

Flex Space A building that provides a flexible configuration of office or showroom space combined with manufacturing, laboratory, warehouse, distribution, etc.

Float The number of freely traded shares owned by the public.

Flood Certification The process of analyzing whether a property is located in a known flood zone.

Flood Insurance A policy that is required in designated flood zones to protect against loss due to flood damage.

Floor Area Ratio (FAR) A measurement of a building’s gross square footage compared to the square footage of the land on which it is located.

For Sale By Owner (FSBO) A method of selling property in which the property owner serves as the selling agent and directly handles the sales process with the buyer or buyer’s agent.

Force Majeure An external force that is not controlled by the contractual parties and prevents them from complying with the provisions of the contract.

Foreclosure The legal process in which a lender takes over ownership of a property once the borrower is in default in a mortgage arrangement.

Forward Commitments Contractual agreements to perform certain financing duties according to any stated conditions.

Four Quadrants of the Real Estate Capital Markets The four market types that consist of Private Equity, Public Equity, Private Debt, and Public Debt.

Freddie Mac See: Federal Home Loan Mortgage Corporation.

Front-End Ratio The measurement a lender uses to compare a borrower’s monthly housing expense to gross monthly income.

Full Recourse A loan on which the responsibility of a loan is transferred to an endorser or guarantor in the event of default by the borrower.

Full-Service Rent A rental rate that includes all operating expenses and real estate taxes for the first year.

Fully Amortized ARM An ARM with a monthly payment that is sufficient to amortize the remaining balance at the current interest accrual rate over the amortization term.

Fully Diluted Shares The number of outstanding common stock shares if all convertible securities were converted to common shares.

Future Proposed Space The space in a commercial development that has been proposed but is not yet under construction, or the future phases of a multi-phase project that has not yet been built.

General Contractor The main person or business that contracts for the construction of an entire building or project, rather than individual duties.

General Partner The member in a partnership who holds the authority to bind the partnership and shares in its profits and losses.

Gift Money a buyer has received from a relative or other source.

Ginnie Mae See: Government National Mortgage Association.

Going-In Capitalization Rate The rate that is computed by dividing the expected net operating income for the first year by the value of the property.

 

Good Faith Estimate A lender’s or broker’s estimate that shows all costs associated with obtaining a home loan including loan processing, title, and inspection fees.

Government Loan A mortgage that is insured or guaranteed by the FHA, the Department of Veterans Affairs (VA), or the Rural Housing Service (RHS).

Government National Mortgage Association (GNMA) Also known as Ginnie Mae. A government-owned corporation under the U.S. Department of Housing and Urban Development (HUD) which performs the same role as Fannie Mae and Freddie Mac in providing funds to lenders for making home loans, but only purchases loans that are backed by the federal government.

Grace Period A defined time period in which a borrower may make a loan payment after its due date without incurring a penalty.

Graduated Lease A lease, usually long-term, in which rent payments vary in accordance with future contingencies.

Graduated Payment Mortgage A mortgage that requires low payments during the first years of the loan, but eventually requires larger monthly payments over the term of the loan that become fixed later in the term.

Grant To give or transfer an interest in a property by deed or other documented method.

Grantee The party to whom an interest in a property is given.

Grantor The party who is transferring an interest in a property.

Gross Building Area The sum of areas at all floor levels, including the basement, mezzanine, and penthouses included in the principal outside faces of the exterior walls without allowing for architectural setbacks or projections.

Gross Income The total income of a household before taxes or expenses have been subtracted.

 

Gross Investment in Real Estate (Historic Cost) The total amount of equity and debt that is invested in a piece of real estate minus proceeds from sales or partial sales.

Gross Leasable Area The amount of floor space that is designed for tenants’ occupancy and exclusive use.

Gross Lease A rental arrangement in which the tenant pays a flat sum for rent, and the landlord must pay all building expenses out of that amount.

Gross Real Estate Asset Value The total market value of the real estate investments under management in a fund or individual accounts, usually including the total value of all equity positions, debt positions, and joint venture ownership positions.

Gross Real Estate Investment Value The market value of real estate investments that are held in a portfolio without including debt.

Gross Returns The investment returns generated from operating a property without adjusting for adviser or manager fees.

Ground Rent A long-term lease (e.g. 99 years) in which rent is paid to the land owner, normally to build something on that land.

Growing-Equity Mortgage A fixed-rate mortgage in which payments increase over a specified amount of time with the extra funds being applied to the principal.

Guarantor The part who makes a guaranty.

Guaranty An agreement in which the guarantor promises to satisfy the debt or obligations of another, if and when the debtor fails to do so.

Hard Cost The expenses attributes to actually constructing property improvements.

Hazard Insurance Also known as Homeowners’ Insurance or Fire Insurance. A policy that provides coverage for damage from forces, such as fire and wind.

Highest and Best Use The most reasonable, expected, legal use of a piece of vacant land or improved property that is physically possible, supported appropriately, financially feasible, and that results in the highest value.

High-Rise In a suburban district, any building taller than six stories. In a business district, any building taller than 25 stories.

Holdbacks A portion of a loan funding that is not dispersed until an additional condition is met, such as the completion of construction.

Holding Period The expected length of time, from purchase to sale, that an investor will own a property.

Hold-Over Tenant A tenant who retains possession of the leased premises after the lease has expired.

Home Equity Conversion Mortgage (HECM) Also referred to as a Reverse Annuity Mortgage. A type of mortgage in which the lender makes payments to the owner, thereby enabling older homeowners to convert equity in their homes into cash in the form of monthly payments.

Home Equity Line An open-ended amount of credit based on the equity a homeowner has accumulated.

Home Equity Loan A type of loan that allows owners to borrow against the equity in their homes up to a limited amount.

Home Inspection A pre-purchase examination of the condition a home is in by a certified inspector.

Home Inspector A certified professional who determines the structural soundness and operating systems of a property.

Home Price The price that a buyer and seller agree upon, generally based on the home’s appraised market value.

Homeowners’ Association (HOA) A group that governs a community, condominium building, or neighborhood and enforces the covenants, conditions, and restrictions set by the developer.

Homeowners’ Association Dues The monthly payments that are paid to the homeowners’ association for maintenance and communal expenses.

Homeowners’ Insurance A policy that includes coverage for all damages that may affect the value of a house as defined in the terms of the insurance policy.

Homeowner’s Warranty A type of policy homebuyers often purchase to cover repairs, such as heating or air conditioning, should they stop working within the coverage period.

Homestead The property an owner uses as his primary residence.

Housing Expense Ratio The percentage of gross income that is devoted to housing costs each month.

HUD Housing and Urban Development. A federal agency that oversees a variety of housing and community development programs, including the FHA.

HUD Median Income The average income for families in a particular area, which is estimated by HUD.

HUD-1 Settlement Statement Also known as the Closing Statement or Settlement Sheet. An itemized listing of the funds paid at closing.

HUD-1 Uniform Settlement Statement A closing statement for the buyer and seller that describes all closing costs for a real estate transaction or refinancing.

HVAC Heating, Ventilating, and Air Conditioning.

Hybrid Debt A position in a mortgage that has equity-like features of participation in both cash flow and the appreciation of the property at the point of sale or refinance.

Implied Cap Rate The net operating income divided by the sum of a REIT’s equity market capitalization and its total outstanding debt.

 

Impounds The part of the monthly mortgage payment that is reserved in an account in order to pay for hazard insurance, property taxes, and private mortgage insurance.

Improvements The upgrades or changes made to a building to improve its value or usefulness.

Incentive Fee A structure in which the fee amount charged is based on the performance of the real estate assets under management.

Income Capitalization Value The figure derived for an income-producing property by converting its expected benefits into property value.

Income Property A particular property that is used to generate income but is not occupied by the owner.

Income Return The percentage of the total return generated by the income from property, fund, or account operations.

Index A financial table that lenders use for calculating interest rates on ARMs.

Indexed Rate The sum of
the published index with a margin added.

Indirect Costs Expenses of development other than the costs of direct material and labor that are related directly to the construction of improvements.

Individual Account Management The process of maintaining accounts that have been established for individual plan sponsors or other investors for investment in real estate, where a firm acts as an adviser in obtaining and/or managing a real estate portfolio.

Inflation Hedge An investment whose value tends to increase at a greater rate than inflation, contributing to the preservation of the purchasing power of a portfolio.

Inflation The rate at which consumer prices increase each year.

Initial Interest Rate The original interest rate on an ARM which is sometimes subject to a variety of adjustments throughout the mortgage.

Initial Public Offering (IPO) The first time a previously private company offers securities for public sale.

Initial Rate Cap The limit specified by some ARMs as the maximum amount the interest rate may increase when the initial interest rate expires.

Initial Rate Duration The date specified by most ARMs at which the initial rate expires.

Inspection Fee The fee that a licensed property inspector charges for determining the current physical condition of the property.

Inspection Report A written report of the property’s condition presented by a licensed inspection professional.

Institutional-Grade Property A variety of types of real estate properties usually owned or financed by tax-exempt institutional investors.

Insurance Binder A temporary insurance policy that is implemented while a permanent policy is drawn up or obtained.

Insurance Company Separate Account A real estate investment vehicle only offered by life insurance companies, which enables an ERISA-governed fund to avoid creating unrelated taxable income for certain types of property investments and investment structures.

Insured Mortgage A mortgage that is guaranteed by the FHA or by private mortgage insurance (PMI).

Interest Accrual Rate The rate at which a mortgage accrues interest.

Interest Only Loan A mortgage for which the borrower pays only the interest that accrues on the loan balance each month.

Interest Paid over Life of Loan The total amount that has been paid to the lender during the time the money was borrowed.

Interest Rate The percentage that is charged for a loan.

 

Interest Rate Buy-Down Plans A plan in which a seller uses funds from the sale of the home to buy down the interest rate and reduce the buyer’s monthly payments.

Interest Rate Cap The highest interest rate charge allowed on the monthly payment of an ARM during an adjustment period.

Interest rate ceiling The maximum interest rate a lender can charge for an ARM.

Interest Rate Floor The minimum possible interest rate a lender can charge for an ARM.

Interest The price that is paid for the use of capital.

Interest-Only Strip A derivative security that consists of all or part of the portion of interest in the underlying loan or security.

Interim Financing Also known as Bridge or Swing Loans. Short-term financing a seller uses to bridge the gap between the sale of one house and the purchase of another.

Internal Rate of Return (IRR) The calculation of a discounted cash-flow analysis which is used to determine the potential total return of a real estate asset during a particular holding period.

Inventory The entire space of a certain proscribed market without concern for its availability or condition.

Investment Committee The governing body that is charged with overseeing corporate pension investments and developing investment policies for board approval.

Investment Manager An individual or company that assumes authority over a specified amount of real estate capital, invests that capital in assets using a separate account, and provides asset management.

Investment Policy A document that formalizes an institution’s goals, objectives, and guidelines for asset management, investment advisory contracting, fees, and utilization of consultants and other outside professionals.

Investment Property A piece of real estate that generates some form of income.

Investment Strategy The methods used by a manager in structuring a portfolio and selecting the real estate assets for a fund or an account.

Investment Structures Approaches to investing that include unleveraged acquisitions, leveraged acquisitions, traditional debt, participating debt, convertible debt, triple-net leases, and joint ventures.

Investment-Grade CMBS Commercial Mortgage-Backed Securities that have ratings of AAA, AA, A, or BBB.

Investor Status The position an investor is in, either taxable or tax-exempt.

Joint Liability The condition in which responsibility rests with two or more people for fulfilling the terms of a home loan or other financial debt.

Joint Tenancy A form of ownership in which two or more people have equal shares in a piece of property, and rights pass to the surviving owner(s) in the event of death.

Joint Venture An investment business formed by more than one party for the purpose of acquiring or developing and managing property and/or other assets.

Judgment The decision a court of law makes.

Judicial Foreclosure The usual foreclosure proceeding some states use, which is handled in a civil lawsuit.

Jumbo Loan A type of mortgage that exceeds the required limits set by Fannie Mae and Freddie Mac each year.

Junior Mortgage A loan that is a lower priority behind the primary loan.

Just Compensation The amount that is fair to both the owner and the government when property is appropriated for public use through Eminent Domain.

Landlord’s Warrant The warrant a landlord obtains to take a tenant’s personal property to sell at a public sale to compel payment of the rent or other stipulation in the lease.

Late Charge The fee that is imposed by a lender when the borrower has not made a payment when it was due.

Late Payment The payment made to the lender after the due date has passed.

Lead Manager The investment banking firm that has primary responsibility for coordinating the new issuance of securities.

Lease A contract between a property owner and tenant that defines payments and conditions under which the tenant may occupy the real estate for a given period of time.

Lease Commencement Date The date at which the terms of the lease are implemented.

Lease Expiration Exposure Schedule A chart of the total square footage of all current leases that expire in each of the next five years, without taking renewal options into account.

Lease Option A financing option that provides for homebuyers to lease a home with an option to buy, with part of the rental payments being applied toward the down payment.

Leasehold The limited right to inhabit a piece of real estate held by a tenant.

Leasehold State A way of holding a property title in which the mortgagor does not actually own the property but has a long-term lease on it.

Leasehold Interest The right to hold or use property for a specific period of time at a given price without transfering ownership.

Lease-Purchase A contract that defines the closing date and solutions for the seller in the event that the buyer defaults.

Legal Blemish A negative count against a piece of property such as a zoning violation or fraudulent title claim.

Legal Description A way of describing and locating a piece of real estate that is recognized by law.

Legal Owner The party who holds the title to the property, although the title may carry no actual rights to the property other than as a lien.

Lender A bank or other financial institution that offers home loans.

Letter of Credit A promise from a bank or other party that the issuer will honor drafts or other requests for payment upon complying with the requirements specified in the letter of credit.

Letter of Intent An initial agreement defining the proposed terms for the end contract.

Leverage The process of increasing the return on an investment by borrowing some of the funds at an interest rate less than the return on the project.

Liabilities A borrower’s debts and financial obligations, whether long- or short-term.

Liability Insurance A type of policy that protects owners against negligence, personal injury, or property damage claims.

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.

London InterBank Offered Rate (LIBOR) The interest rate offered on Eurodollar deposits traded between banks and used to determine changes in interest rate for ARMs.

Lien A claim put by one party on the property of another as collateral for money owed.

Lien Waiver A waiver of a mechanic’s lien rights that is sometimes required before the general contractor can receive money under the payment provisions of a construction loan and contract.

Life Cap A limit on the amount an ARM’s interest rate can increase during the mortgage term.

Lifecycle The stages of development for a property: pre-development, development, leasing, operating, and rehabilitation.

Lifetime Payment Cap A limit on the amount that payments can increase or decrease over the life of an ARM.

Lifetime Rate Cap The highest possible interest rate that may be charged, under any circumstances, over the entire life of an ARM.

Like-Kind Property A term that refers to real estate that is held for productive use in a trade or business or for investment.

Limited Partnership A type of partnership in which some partners manage the business and are personally liable for partnership debts, but some partners contribute capital and share in profits without the responsibility of management.

Line of Credit An amount of credit granted by a financial institution up to a specified amount for a certain period of time to a borrower.

Liquid Asset A type of asset that can be easily converted into cash.

Liquidity The ease with which an individual’s or company’s assets can be converted to cash without losing their value.

Listing Agreement An agreement between a property owner and a real estate broker which authorizes the broker to attempt to sell or lease the property at a specified price and terms in return for a commission or other compensation.

Loan An amount of money that is borrowed and usually repaid with interest.

Loan Application A document that presents a borrower’s income, debt, and other obligations to determine credit worthiness, as well as some basic information on the target property.

Loan Application Fee A fee lenders charge to cover expenses relating to reviewing a loan application.

Loan Commitment An agreement by a lender or other financial institution to make or insure a loan for the specified amount and terms.

Loan Officer An official representative of a lending institution who is authorized to act on behalf of the lender within specified limits.

Loan Origination The process of obtaining and arranging new loans.

Loan Origination Fee A fee lenders charge to cover the costs related to arranging the loan.

Loan Servicing The process a lending institution goes through for all loans it manages. This involves processing payments, sending statements, managing the escrow/impound account, providing collection services on delinquent loans, ensuring that insurance and property taxes are made on the property, handling pay-offs and assumptions, as well as various other services.

Loan Term The time, usually expressed in years, that a lender sets in which a buyer must pay a mortgage.

Loan-to-Value (LTV) The ratio of the amount of the loan compared to the appraised value or sales price.

Lock-Box Structure An arrangement in which the payments are sent directly from the tenant or borrower to the trustee.

Lock-In A commitment from a lender to a borrower to guarantee a given interest rate for a limited amount of time.

Lock-In Period The period of time during which the borrower is guaranteed a specified interest rate.

Lockout The period of time during which a loan may not be paid off early.

Long-Term Lease A rental agreement that will last at least three years from initial signing to the date of expiration or renewal.

Loss Severity The percentage of lost principal when a loan is foreclosed.

Lot One of several contiguous parcels of a larger piece of land.

Low-Documentation Loan A mortage that requires only a basic verification of income and assets.

Low-Rise A building that involves fewer than four stories above the ground level.

Lump-Sum Contract A type of construction contract that requires the general contractor to complete a building project for a fixed cost that is usually established beforehand by competitive bidding.

Magic Page A story of projected growth which describes how a new REIT will achieve its future plans for funds from operations or funds available for distribution.

Maintenance Fee The charge to homeowners’ association members each month for the repair and maintenance of common areas.

Maker One who issues a promissory note and commits to paying the note when it is due.

Margin A percentage that is added to the index and fixed for the mortgage term.

Mark to Market The act of changing the original investment cost or value of a property or portfolio to the level of the current estimated market value.

Market Capitalization A measurement of a company’s value that is calculated by multiplying the current share price by the current number of shares outstanding.

Market Rental Rates The rental income that a landlord could most likely ask for a property in the open market, indicated by the current rents for comparable spaces.

Market Study A forecast of the demand for a certain type of real estate project in the future which includes an estimate of the square footage that could be absorbed and the rents that could be charged.

Market Value The price a property would sell for at a particular point in time in a competitive market.

Marketable Title A title that is free of encumbrances and can be marketed immediately to a willing purchaser.

Master Lease The primary lease that controls other subsequent leases and may cover more property than all subsequent leases combined.

Master Servicer An entity that acts on behalf of a trustee for security holders’ benefit 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 at which the total principal balance of a loan is due.

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

Meeting Space The space in hotels that is made available to the public to rent for meetings, conferences, or banquets.

Merged Credit Report A report that combines information from the three primary credit-reporting agencies including: Equifax, Experian, and Trans Union.

Metes and Bounds The surveyed boundary lines of a piece of land described by listing the compass directions (bounds) and distances (metes) of the boundaries.

Mezzanine Financing A financing position somewhere between equity and debt, meaning that there are higher-priority debts above and equity below.

Mid-Rise Usually, a building which shows four to eight stories above ground level. In a business district, buildings up to 25 stories may also be included.

Mixed-Use A term referring to space within a building or project which can be used for more than one activity.

Modern Portfolio Theory (MPT) An approach of quantifying risk and return in an asset portfolio which emphasizes the portfolio rather than the individual assets and how the assets perform in relation to each other.

Modification An adjustment in the terms of a loan agreement.

Modified Annual Percentage Rate (APR) An index of the cost of a loan based on the standard APR but adjusted for the amount of time the borrower expects to hold the loan.

Monthly Association Dues A payment due each month to a homeowners’ association for expenses relating to maintenance and community operations.

Mortgage An amount of money that is borrowed to purchase a property using that property
as collateral.

Mortgage Acceleration Clause A provision enabling a lender to require that the rest of the loan balance is paid in a lump sum under certain circumstances.

Mortgage Banker A financial institution that provides home loans using its own resources, often selling them to investors such as insurance companies or Fannie Mae.

Mortgage Broker An individual that matches prospective borrowers with lenders that the broker is approved to deal with.

Mortgage Broker Business A company that matches prospective borrowers with lenders that the broker is approved to deal with.

Mortgage Constant A figure comparing an amortizing mortgage payment to the outstanding mortgage balance.

Mortgage Insurance (MI) A policy, required by lenders on some loans, that covers the lender against certain losses that are incurred as a result of a default on a home loan.

Mortgage Insurance Premium (MIP) The amount charged for mortgage insurance, either to a government agency or to a private MI company.

Mortgage Interest Deduction The tax write-off that the IRS allows most homeowners to deduct for annual interest payments made on real estate loans.

Mortgage Life and Disability Insurance A type of term life insurance borrowers often purchase to cover debt that is left when the borrower dies or becomes too disabled to make the mortgage payments.

Mortgagee The financial institution that lends money to the borrower.

Mortgagor The person who requests to borrow money to purchase a property.

Multidwelling Units A set of properties that provide separate housing areas for more than one family but only require a single mortgage.

National Association of Real Estate Investment Trusts (NAREIT) The national, non-profit trade organization that represents the real estate investment trust industry.

National Council of Real Estate Investment Fiduciaries (NCREIF) A group of real estate professionals who serve on committees, sponsor research articles, seminars and symposiums, and produce the NCREIF Property Index.

NCREIF Property Index (NPI) A quarterly and yearly report presenting income and appreciation components.

Negative Amortization An event that occurs when the deferred interest on an ARM is added, and the balance increases instead of decreases.

Net Asset Value (NAV) The total value of an asset or property minus leveraging or joint venture interests.

Net Asset Value Per Share The total value of a REIT’s current assets divided by outstanding shares.

Net Assets The total value of assets minus total liabilities based on market value.

Net Cash Flow The total income generated by an investment property after expenses have been subtracted.

 

Net Investment in Real Estate Gross investment in properties minus the outstanding balance of debt.

Net Investment Income The income or loss of a portfolio or business minus all expenses, including portfolio and asset management fees, but before gains and losses on investments are considered.

Net Operating Income (NOI) The pre-tax figure of gross revenue minus operating expenses and an allowance for expected vacancy.

Net Present Value (NPV) The sum of the total current value of incremental future cash flows plus the current value of estimated sales proceeds.

Net Purchase Price The gross purchase price minus any associated financed debt.

Net Real Estate Investment Value The total market value of all real estate minus property-level debt.

Net Returns The returns paid to investors minus fees to advisers or managers.

Net Sales Proceeds The income from the sale of an asset, or part of an asset, minus brokerage commissions, closing costs, and market expenses.

Net Square Footage The total space required for a task or staff position.

Net Worth The worth of an individual or company figured on the basis of a difference between all assets and liabilities.

No-Cash-Out Refinance Sometimes referred to as a Rate and Term Refinance. A refinancing transaction which is intended only to cover the balance due on the current loan and any costs associated with obtaining the new mortgage.

No-Cost Loan A loan for which there are no costs associated with the loan that are charged by the lender, but with a slightly higher interest rate.

No-Documentation Loan A type of loan application that requires no income or asset verification, usually granted based on strong credit with a large down payment.

Nominal Yield The yield investors receive before it is adjusted for fees, inflation, or risk.

Non-Assumption Clause A provision in a loan agreement that prohibits transfering a mortgage to another borrower without approval from the lender.

Non-Compete Clause A provision in a lease agreement that specifies that the tenant’s business is the only one that may operate in the property in question, thereby preventing a competitor moving in next door.

Non-Conforming Loan Any loan that is too large or does not meet certain qualifications to be purchased by Fannie Mae or Freddie Mac.

Non-Discretionary Funds The funds that are allocated to an investment manager who must have approval from the investor for each transaction.

Non-Investment-Grade CMBS Also referred to as High-Yield CMBS. Commercial Mortgage-Backed Securities that have ratings of BB or B.

Non-Liquid Asset A type of asset that is not turned into cash very easily.

Non-Performing Loan A loan agreement that cannot meet its contractual principal and interest payments.

Non-Recourse Debt A loan that limits the lender’s options to collect on the value of the real estate in the event of a default by the borrower.

Nonrecurring Closing Costs Fees that are only paid one time in a given transaction.

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

Note Rate The interest rate that is defined in a mortgage note.

Notice of Default A formal written notification a borrower receives once the borrower is in default stating that legal action may be taken.

Offer A term that describes a specified price or spread to sell whole loans or securities.

One-Year Adjustable Rate Mortgage An ARM for which the interest rate changes annually, generally based on movements of a published index plus a specified margin.

Open Space A section of land or water that has been dedicated for public or private use or enjoyment.

Open-End Fund A type of commingled fund with an infinite life, always accepting new investor capital and making new investments in property.

Operating Cost Escalation A clause that is intended to adjust rents to account for external standards such as published indexes, negotiated wage levels, or building-related expenses.

Operating Expense The regular costs associated with operating and managing a property.

Opportunistic A phrase that generally describes a strategy of holding investments in underperforming and/or undermanaged assets with the expectation of increases in cash flow and/or value.

Option A condition in which the buyer pays for the right to purchase a property within a certain period of time without the obligation to buy.

Option Arm Loan A type of mortgage in which the borrower has a variety of payment options each month.

Original Principal Balance The total principal owed on a mortgage before a borrower has made a payment.

Origination Fee A fee that most lenders charge for the purpose of covering the costs associated with arranging the loan.

Originator A company that underwrites loans for commercial and/or multi-family properties.

Out-Parcel The individual retail sites located within a shopping center.

Overallotment A practice in which the underwriters offer and sell a higher number of shares than they had planned to purchase from the issuer.

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

Parking Ratio A figure, generally expressed as square footage, that compares a building’s total rentable square footage to its total number of parking spaces.

Partial Payment An amount paid that is not large enough to cover the normal monthly payment on a mortgage loan.

Partial Sales The act of selling a real estate interest that is smaller than the whole property.

Partial Taking The appropriating of a portion of an owner’s property under the laws of eminent domain.

Participating Debt Financing that allows the lender to have participatory rights to equity through increased income and/or residual value over the balance of the loan or original value at the time the loan is funded.

Party in Interest Any party that may hold an interest, including employers, unions and, sometimes, fiduciaries.

Pass-Through Certificate A document that allows the holder to receive payments of principal and interest from the underlying pool of mortgages.

Payment Cap The maximum amount a monthly payment may increase on an ARM.

Payment Change Date The date on which a new payment amount takes effect on an ARM or GPM, usually in the month directly after the adjustment date.

Payout Ratio The percentage of the primary earnings per share, excluding unusual items, that are paid to common stockholders as cash dividends during the next 12 months.

Pension Liability The full amount of capital that is required to finance vested pension fund benefits.

Percentage Rent The amount of rent that is adjusted based on the percentage of gross sales or revenues the tenant receives.

Per-Diem Interest The interest that is charged or accrued daily.

Performance Bond A bond that contractor posts to guarantee full performance of a contract in which the proceeds will be used for completing the contract or compensating the owner for loss in the event of nonperformance.

Performance Measurement The process of measuring how well an investor’s real estate has performed regarding individual assets, advisers/managers, and portfolios.

Performance The changes each quarter in fund or account values that can be explained by investment income, realized or unrealized appreciation, and the total return to the investors before and after investment management fees.

Performance-Based Fees The fees that advisers or managers receive which are based on returns to investors.

Periodic Payment Cap The highest amount that payments can increase or decrease during a given adjustment period on an ARM.

Periodic Rate Cap The maximum amount that the interest rate can increase or decrease during a given adjustment period on an ARM.

Permanent Loan A long-term property mortgage.

Personal Property Any items belonging to a person that is not real estate.

PITI Principal, Interest, Taxes, Insurance. The items that are included in the monthly payment to the lender for an impounded loan, as well as mortgage insurance.

PITI Reserves The amount in cash that a borrower must readily have after the down payment and all closing costs are paid when purchasing a home.

Plan Assets The assets included in a pension plan.

Plan Sponsor The party that is responsible for administering an employee benefit plan.

Planned Unit Development (PUD) A type of ownership where individuals actually own the building or unit they live in, but common areas are owned jointly with the other members of the development or association. Contrast with condominium, where an individual actually owns the airspace of his unit, but the buildings and common areas are owned jointly with the others in the development or association.

Plat A chart or map of a certain area showing the boundaries of individual lots, streets, and easements.

Pledged Account Mortgage (PAM) A loan tied to a pledged savings account for which the fund and earned interest are used to gradually reduce mortgage payments.

Point Also referred to as a Discount Point. A fee a lender charges to provide a lower interest rate, equal to one percent of the amount of the loan.

Portfolio Management A process that involves formulating, modifying, and implementing a real estate investment strategy according to an investor’s investment objectives.

Portfolio Turnover The amount of time averaged from the time an investment is funded until it is repaid or sold.

Power of Attorney A legal document that gives someone the authority to act on behalf of another party.

Power of Sale The clause included in a mortgage or deed of trust that provides the mortgagee (or trustee) with the right and power to advertise and sell the property at public auction if the borrower is in default.

Pre-Approval The complete analysis a lender makes regarding a potential borrower’s ability to pay for a home as well as a confirmation of the proposed amount to be borrowed.

Pre-Approval Letter The letter a lender presents which states the amount of money they are willing to lend a potential buyer.

Preferred Shares Certain stocks that have a prior distributions claim up to a defined amount before the common shareholders may receive anything.

Preleased A certain amount of space in a proposed building that must be leased before construction may begin or a certificate of occupancy may
be issued.

Prepaid Expenses The amount of money that is paid before it is due, including including taxes, insurance, and/or assessments.

Prepaid Fees The charges that a borrower must pay in advance regarding certain recurring items, such as interest, property taxes, hazard insurance, and PMI, if applicable.

Prepaid Interest The amount of interest that is paid before its due date.

Prepayment The money that is paid to reduce the principal balance of a loan before the date it is due.

Prepayment Penalty A penalty that may be charged to the borrower when he pays off a loan before the planned maturity date.

Prepayment Rights The right a borrower is given to pay the total principal balance before the maturity date free of penalty.

Prequalification The initial assessment by a lender of a potential borrower’s ability to pay for a home as well as an estimate of how much the lender is willing to supply to the buyer.

Price to Earnings Ratio The comparison that is derived by dividing the current share price by the sum of the primary earnings per share from continuing operations over the past year.

Primary Issuance The preliminary financing of an issuer.

Prime Rate The best interest rate reserved for a bank’s preferred customers.

Prime Space The first-generation space that is available for lease.

Prime Tenant The largest or highest-earning tenant in a building or shopping center.

Principal The amount of money originally borrowed in a mortgage, before interest is included and with any payments subtracted.

Principal Balance The total current balance of mortgage principal not including interest.

Principal Paid over Life of Loan The final total of scheduled payments to the principal which the lender calculates to equal the face amount of the loan.

Principal Payments The lender’s return of invested capital.

Principle of Conformity The concept that a property will probably increase in value if its size, age, condition, and style are similar to other properties in the immediate area.

Private Debt Mortgages or other liabilities for which an individual is responsible.

Private Equity A real estate investment that has been acquired by a noncommercial entity.

Private Mortgage Insurance (PMI) A type of policy that a lender requires when the borrower’s down payment or home equity percentage is under 20 percent of the value of the property.

Private Placement The sale of a security in a way that renders it exempt from the registration rules and requirements of the SEC.

Private REIT A real estate investment company that is structured as a real estate investment trust and which places and holds shares privately rather than publicly.

Pro Rata The proportionate amount of expenses per tenant for the property’s maintenance and operation.

Processing Fee A fee some lenders charge for gathering the information necessary to process the loan.

Production Acres The portion of land that can be used directly in agriculture or timber activities to generate income, but not areas used for such things as machinery storage or support.

Prohibited Transaction Certain transactions that may not be performed between a pension plan and a party in interest, such as the following: the sale, exchange or lease of any property; a loan or other grant of credit; and furnishing goods or services.

Promissory Note A written agreement to repay the specific amount over a certain period of time.

Property Tax The tax that must be paid on private property.

Prudent Man Rule The standard to which ERISA holds a fiduciary accountable.

Public Auction An annouced public meeting held at a specified location for the purpose of selling property to repay a mortgage in default.

Public Debt Mortgages or other liabilities for which a commercial entity is responsible.

Public Equity A real estate investment that has been acquired by REITs and other publicly traded real estate operating companies.

Punch List An itemized list that documents incomplete or unsatisfactory items after the contractor has declared the space to be mostly complete.

Purchase Agreement The written contract the buyer and seller both sign defining the terms and conditions under which a property is sold.

Purchase Money Transaction A transaction in which property is acquired through the exchange of money or something of equivalent value.

Purchase-Money Mortgage (PMM) A mortgage obtained by a borrower which serves as partial payment for a property.

Qualified Plan Any employee benefit plan that the IRS has approved as a tax-exempt plan.

Qualifying Ratio The measurement a lender uses to determine how much they are willing to lend to a potential buyer.

Quitclaim Deed A written document that releases a party from any interest they may have in a property.

Rate Cap The highest interest rate allowed on a monthly payment during an adjustment period of an ARM.

Rate Lock The commitment of a lender to a borrower that guarantees a certain interest rate for a specific amount of time.

Rate-Improvement Mortgage A loan that includes a clause which entitles a borrower to a one-time-only cut in the interest rate without having to refinance.

Rating Agencies Independent firms that are engaged to rate securities’ creditworthiness on behalf of investors.

Rating A figure that represents the credit quality or creditworthiness of securities.

Raw Land A piece of property that has not been developed and remains in its natural state.

Raw Space Shell space in a building that has not yet been developed.

Real Estate Agent An individual who is licensed to negotiate and transact the real estate sales.

Real Estate Fundamentals The factors that drive the value of property.

Real Estate Settlement Procedures Act (RESPA) A legislation for consumer protection that requires lenders to notify borrowers regarding closing costs in advance.

Real Property Land and anything else of a permanent nature that is affixed to the land.

Real Rate of Return The yield given to investors minus an inflationary factor.

Realtor A real estate agent or broker who is an active member of a local real estate board affiliated with the National Association of Realtors.

Recapture The act of the IRS recovering the tax benefit of a deduction or a credit that a taxpayer has previously taken in error.

Recorder A public official who records transactions that affect real estate in the area.

Recording The documentation that the registrar’s office keeps of the details of properly executed legal documents.

Recording Fee A fee real estate agents charge for moving the sale of a piece of property into the public record.

Recourse The option a lender has for recovering losses against the personal assets of a secondary party who is also liable for a debt that is in default.

Red Herring An early prospectus that is distributed to prospective investors that includes a note in red ink on the cover stating that the SEC-approved registration statement is not yet in effect.

Refinance Transaction The act of paying off an existing loan using the funding gained from a new loan which uses the same property as security.

Regional Diversification Boundaries that are defined based on geography or economic lines.

Registration Statement The set of forms that are filed with the SEC (or the appropriate state agency) regarding a proposed offering of new securities or the listing of outstanding securities on a national exchange.

Regulation Z A federal legislation under the Truth in Lending Act that requires lenders to advise the borrower in writing of all costs that are associated with the credit portion of a financial transaction.

Rehab Short for Rehabilitation. Refers to an extensive renovation intended to extend the life of a building or project.

Rehabilitation Mortgage A loan meant to fund the repairing and improving of a resale home or building.

Real Estate Investment Trust (REIT) A trust corporation that combines the capital of several investors for the purpose of acquiring or providing funding for real estate.

Remaining Balance The amount of the principal on a home loan that has not yet been paid.

Remaining Term The original term of the loan after the number of payments made has been subtracted.

Real Estate Mortgage Investment Conduit (REMIC) An investment vehicle that is designed to hold a pool of mortgages solely to issue multiple classes of mortgage-backed securities in a way that avoids doubled corporate tax.

Renewal Option A clause in a lease agreement that allows a tenant to extend the term of a lease.

Renewal Probability The average percentage of a building’s tenants who are expected to renew terms at market rental rates upon the lease expiration.

Rent Commencement Date The date at which a tenant is to begin paying rent.

Rent Loss Insurance A policy that covers loss of rent or rental value for a landlord due to any condition that renders the leased premises inhabitable, thereby excusing the tenant from paying rent.

Rent The fee paid for the occupancy and/or use of any rental property or equipment.

Rentable/Usable Ratio A total rentable area in a building divided by the area available for use.

Rental Concession See: Concessions.

Rental Growth Rate The projected trend of market rental rates over a particular period of analysis.

Rent-Up Period The period of time following completion of a new building when tenants are actively being sought and the project is stabilizing.

Real Estate Owned (REO) The real estate that a savings institution owns as a result of foreclosure on borrowers in default.

Repayment Plan An agreement made to repay late installments or advances.

Replacement Cost The projected cost by current standards of constructing a building that is equivalent to the building being appraised.

Replacement Reserve Fund Money that is set aside for replacing of common property in a condominium, PUD, or cooperative project.

Request for Proposal (RFP) A formal request that invites investment managers to submit information regarding investment strategies, historical investment performance, current investment opportunities, investment management fees, and other pension fund client relationships used by their firm.

Rescission The legal withdrawing of a contract or consent from the parties involved.

Reserve Account An account that must be funded by the borrower to protect the lender.

Resolution Trust Corp. (RTC) The congressional corporation established for the purpose of containing, managing, and selling failed financial institutions, thereby recovering taxpayer funds.

Retail Investor An investor who sells interests directly to consumers.

Retention Rate The percentage of trailing year’s earnings that have been dispersed into the company again. It is calculated as 100 minus the trailing 12-month payout ratio.

Return on Assets The measurement of the ability to produce net profits efficiently by making use of assets.

Return on Equity The measurement of the return on the investment in a business or property.

Return on Investments The percentage of money that has been gained as a result of certain investments.

Reverse Mortgage See: Home Equity Conversion Mortgage.

Reversion Capitalization Rate The capitalization rate that is used to derive reversion value.

Reversion Value A benefit that an investor expects to receive as a lump sum at the end of an investment.

Revolving Debt A credit arrangement which enables a customer to borrow against a predetermined line of credit when purchasing goods and services.

Revenue Per Available Room (RevPAR) The total room revenue for a particular period divided by the average number of rooms available in a hospitality facility.

Right of Ingress or Egress The option to enter or to leave the premises in question.

Right of Survivorship The option that survivors have to take on the interest of a deceased joint tenant.

Right to Rescission A legal provision that enables borrowers to cancel certain loan types within three days after they sign.

Risk Management A logical approach to analyzing and defining insurable and non-insurable risks while evaluating the availability and costs of purchasing third-party insurance.

Risk-Adjusted Rate of Return A percentage that is used to identify investment options that are expected to deliver a positive premium despite their volatility.

Road Show A tour of the executives of a company that is planning to go public, during which the executives travel to a variety cities to make presentations to underwriters and analysts regarding their company and IPO.

Roll-Over Risk The possibility that tenants will not renew their lease.

Sale-Leaseback An arrangement in which a seller deeds a property, or part of it, to a buyer in exchange for money or the equivalent, then leases the property from the new owner.

Sales Comparison Value A value that is calculated by comparing the appraised property to similar properties in the area that have been recently sold.

Sales Contract An agreement that both the buyer and seller sign defining the terms of a property sale.

Second Mortgage A secondary loan obtained upon a piece of property.

Secondary Market A market in which existing mortgages are bought and sold as part of a mortgages pool.

Secondary (Follow-On) Offering An offering of stock made by a company that is already public.

Second-Generation or Secondary Space Space that has been occupied before and becomes available for lease again, either by the landlord or as a sublease.

Secured Loan A loan that is secured by some sort of collateral.

Securities and Exchange Commission (SEC) The federal agency that oversees the issuing and exchanging of public securities.

Securitization The act of converting a non-liquid asset into a tradable form.

Security The property or other asset that will serve as a loan’s collateral.

Security Deposit An amount of money a tenant gives to a landlord to secure the performance of terms in a lease agreement.

Seisen (Seizen) The ownership of real property under a claim of freehold estate.

Self-Administered REIT A REIT in which the management are employees of the REIT or similar entity.

Self-Managed REIT See: Self-Administered REIT.

Seller Carry-Back An arrangement in which the seller provides the financing to purchase a home.

Seller Financing A type of funding in which the borrower may use part of the equity in the property to finance the purchase.

Senior Classes The security classes who have the highest priority for receiving payments from the underlying mortgage loans.

Separate Account A relationship in which a single pension plan sponsor is used to retain an investment manager or adviser under a stated investment policy exclusively for that sponsor.

Servicer An organization that collects principal and interest payments from borrowers and manages borrowers’ escrow accounts on behalf of a trustee.

Servicing The process of collecting mortgage payments from borrowers as well as related responsibilities.

Setback The distance required from a given reference point before a structure can be built.

Settlement or Closing Fees Fees that the escrow agent receives for carrying out the written instructions in the agreement between borrower and lender and/or buyer and seller.

Settlement Statement See: HUD-1 Settlement Statement.

Shared-Appreciation Mortgage A loan which enables a lender or other party to share in the profits of the borrower when the borrower sells the home.

Shared-Equity Transaction A transaction in which two people purchase a property, one as a residence and the other as an investment.

Shares Outstanding The number of shares of outstanding common stock minus the treasury shares.

Site Analysis A determination of how suitable a specific parcel of land is for a particular use.

Site Development The implementation of all improvements that are needed for a site before construction may begin.

Site Plan A detailed description and map of the location of improvements to a parcel.

Slab The flat, exposed surface that is laid over the structural support beams to form the building’s floor(s).

Social Investing A strategy in which investments are driven in partially or completely by social or non-real estate objectives.

Soft Cost The part of an equity investment, aside from the literal cost of the improvements, that could be tax-deductible in the first year.

Space Plan A chart or map of space requirements for a tenant which include wall/door locations, room sizes, and even furniture layouts.

Special Assessment Certain charges that are levied against real estates for public improvements to benefit the property in question.

Special Servicer A company that is hired to collect on mortgages that are either delinquent or in default.

Specified Investing A strategy of investment in individually specified properties, portfolios, or commingled funds are fully or partially detailed prior to the commitment of investor capital.

Speculative Space Any space in a rental property that has not been leased prior to construction on a new building begins.

Stabilized Net Operating Income Expected income minus expenses that reflect relatively stable operations.

Stabilized Occupancy The best projected range of long-term occupancy that a piece of rental property will achieve after existing in the open market for a reasonable period of time with terms and conditions that are comparable to similar offerings.

Step-Rate Mortgage A loan which allows for a gradual interest rate increase during the first few years of the loan.

Step-Up Lease (Graded Lease) A lease agreement which specifies certain increases in rent at certain intervals during the complete term of the lease.

Straight Lease (Flat Lease) A lease agreement which specifies an amount of rent that should be paid regularly during the complete term of the lease.

Strip Center Any shopping area that is made up of a row of stores but is not large enough to be anchored by a grocery store.

Subcontractor A contractor who has been hired by the general contractor, often specializing in a certain required task for the construction project.

Subdivision The most common type of housing development created by dividing a larger tract of land into individual lots for sale or lease.

Sublessee A person or business that holds the rights of use and occupancy under a lease contract with the original lessee, who still retains primary responsibility the lease obligations.

Subordinate Financing Any loan with a priority lower than loans that were obtained beforehand.

Subordinate Loan A second or third mortgage obtained with the same property being used as collateral.

Subordinated Classes Classes that have the lowest priority of receiving payments from underlying mortgage loans.

Subordination The act of sharing credit loss risk at varying rates among two or more classes of securities.

Subsequent Rate Adjustments The interest rate for ARMs that adjusts at regular intervals, sometimes differing from the duration period of the initial interest rate.

Subsequent Rate Cap The maximum amount the interest rate may increase at each regularly scheduled interest rate adjustment date on an ARM.

Super Jumbo Mortgage A loan that is over $650,000 for some lenders or $1,000,000 for others.

Surety A person who willingly binds himself to the debt or obligation of another party.

Surface Rights A right or easement that is usually granted with mineral rights which enabling the holder to drill through the surface.

Survey A document or analysis containing the precise measurements of a piece of property as performed by a licensed surveyor.

Sweat Equity The non-cash improvements in value that an owner adds to a piece of property.

Synthetic Lease A transaction that is considered to be a lease by accounting standards but a loan by tax standards.

Taking Similar to condemning, or any other interference with rights to private property, but a physical seizure or appropriation is not required.

Tax Base The determined value of all property that lies within the jurisdiction of the taxing authority.

Tax Lien A type of lien placed against a property if the owner has not paid property or personal taxes.

Tax Roll A record, that contains the descriptions of all land parcels and their owners, that is located within the county.

Tax Service Fee A fee that is charged for the purpose of setting up monitoring of the borrower’s property tax payments by a third-party.

Teaser Rate A small, short-term interest rate offered on a mortgage in order to convince the potential borrower to apply.

Tenancy by the Entirety A form of ownership held by spouses in which they both hold title to the entire property with right of survivorship.

Tenancy in Common A type of ownership held by two or more owners in an undivided interest in the property with no right of survivorship.

Tenant (Lessee) A party who rents a piece of real estate from another by way of a lease agreement.

Tenant at Will A person who possesses a piece of real estate with the owner’s permission.

Tenant Improvement (TI) Allowance The specified amount of money that the landlord contributes toward tenant improvements.

Tenant Improvement (TI) The upgrades or repairs that are made to the leased premises by or for a tenant.

Tenant Mix The quality of the income stream for a property.

Term The length that a loan lasts or is expected to last before it is repaid.

Third-Party Origination A process in which another party is used by the lender to originate, process, underwrite, close, fund, or package the mortgages it expects to deliver to the secondary mortgage market.

Timeshare A form of ownership involving purchasing a specific period of time or percentage of interest in a vacation property.

Time-Weighted Average Annual Rate of Return The regular yearly return over several years that would have the same return value as combining the actual annual returns for each year in the series.

Title The legal written document which provides someone ownership in a piece of real estate.

Title Company A business that determines that a property title is clear and that provides title insurance.

Title Exam An analysis of the public records in order to confirm that the seller is the legal owner, and there are no encumbrances on the property.

Title Insurance A type of policy that is issued to both lenders and buyers to cover loss due to property ownership disputes that may arise at a later date.

Title Insurance Binder A written promise from the title insurance company to insure the title to the property, based on the conditions and exclusions shown in the binder.

Title Risk The potential impediments in transfering a title from one party to another.

Title Search The process of analyzing all transactions existing in the public record in order to determine whether any title defects could interfere with the clear transfer of property ownership.

Total Acres The complete amount of land area that is contained within a real estate investment.

Total Assets The final amount of all gross investments, cash and equivalents, receivables, and other assets as they are presented on the balance sheet.

Total Commitment The complete funding amount that is promised once all specified conditions have been met.

Total Expense Ratio The comparison of monthly debt obligations to gross monthly income.

Total Inventory The total amount of square footage commanded by property within a geographical area.

Total Lender Fees Charges which the lender requires for obtaining the loan, aside from other fees associated with the transfer of a property.

Total Loan Amount The basic amount of the loan plus any additional financed closing costs.

Total Monthly Housing Costs The amount that must be paid each month to cover principal, interest, property taxes, PMI, and/or either hazard insurance or homeowners’ association dues.

Total of All Payments The total cost of the loan after figuring the sum of all monthly interest payments.

Total Principal Balance The sum of all debt, including the original loan amount adjusted for subsequent payments and any unpaid items that may be included in the principal balance by the mortgage note or by law.

Total Retail Area The total floor area of a retail center that is currently leased or available for lease.

Total Return The final amount of income and appreciation returns per quarter.

Townhouse An attached home that is not considered to be a condominium.

Trade Fixtures Any personal property that is attached to a structure and used in the business but is removable once the lease is terminated.

Trading Down The act of purchasing a property that is less expensive than the one currently owned.

Trading Up The act of purchasing a property that is more expensive than the one currently owned.

Tranche A class of securities that may or may not be rated.

Trans Union Corporation One of the primary credit reporting bureaus.

Transfer of Ownership Any process in which a property changes hands from one owner to another.

Transfer Tax An amount specified by state or local authorities when ownership in a piece of property changes hands.

Treasury Index A measurement that is used to derive interest rate changes for ARMs.

Triple Net Lease A lease that requires the tenant to pay all property expenses on top of the rental payments.

Trustee A fiduciary who oversees property or funds on behalf of another party.

Truth-in-Lending The federal legislation requiring lenders to fully disclose the terms and conditions of a mortgage in writing.

Turn Key Project A project in which someone other than the owner is responsible for the construction of a building or for tenant improvements.

Two- to Four-Family Property A structure that provides living space for two to four families while ownership is held in a single deed.

Two-Step Mortgage An ARM with two different interest rates: one for the loan’s first five or seven years and another for the remainder of the loan term.

Under Construction The time period that exists after a building’s construction has started but before a certificate of occupancy has been presented.

Under Contract The period of time during which a buyer’s offer to purchase a property has been accepted, and the buyer is able to finalize financing arrangements without the concern of the seller making a deal with another buyer.

Underwriter A company, usually an investment banking firm, that is involved in a guarantee that an entire issue of stocks or bonds will be purchased.

Underwriters’ Knot An approved knot according to code that may be tied at the end of an electrical cord to prevent the wires from being pulled away from their connection to each other or to electrical terminals.

Underwriting The process during which lenders analyze the risks a particular borrower presents and set appropriate conditions for the loan.

Underwriting Fee A fee that mortgage lenders charge for verifying the information on the loan application and making a final decision on approving the loan.

Unencumbered A term that refers to property free of liens or other encumbrances.

Unimproved Land See: Raw Land.

Unrated Classes Usually the lowest classes securities.

Unrecorded Deed A deed that transfers right of ownership from one owner to another without being officially documented.

Umbrella Partnership Real Estate Investment Trust (UPREIT) An organizational structure in which a REIT’s assets are owned by a holding company for tax reasons.

Usable Square Footage The total area that is included within the exterior walls of the tenant’s space.

Use The particular purpose for which a property is intended to be employed.

VA Loan A mortgage through the VA program in which a down payment is not necessarily required.

Vacancy Factor The percentage of gross revenue that pro forma income statements expect to be lost due to vacancies.

Vacancy Rate The percentage of space that is available to rent.

Vacant Space Existing rental space that is presently being marketed for lease minus space that is available for sublease.

Value-Added A phrase advisors and managers generally use to describe investments in underperforming and/or undermanaged assets.

Variable Rate Mortgage (VRM) A loan in which the interest rate changes according to fluctuations in particular indexes.

Variable-Rate Also called adjustable-rate. The interest rate on a loan that varies over the term of the loan according to a predetermined index.

Variance A permission that enables a property owner to work around a zoning ordinance’s literal requirements which cause a unique hardship due to special circumstances.

Verification of Deposit (VOD) The confirmation statement a borrower’s bank may be asked to sign in order to verify the borrower’s account balances and history.

Verification of Employment (VOE) The confirmation statement a borrower’s employer may be asked to sign in order to verify the borrower’s position and salary.

Vested Having the right to draw on a portion or on all of a pension or other retirement fund.

Veterans Administration (VA) A federal government agency that assists veterans in purchasing a home without a down payment.

Virtual Storefront A retail business presence on the Internet.

Waiting Period The period of time between initially filing a registration statement and the date it becomes effective.

Warehouse Fee A closing cost fee that represents the lender’s expense of temporarily holding a borrower’s loan before it is sold on the secondary mortgage market.

Weighted-Average Coupon The average, using the balance of each mortgage as the weighting factor, of the gross interest rates of the mortgages underlying a pool as of the date of issue.

Weighted-Average Equity The part of the equation that is used to calculate investment-level income, appreciation, and total returns on a quarter-by-quarter basis.

Weighted-Average Rental Rates The average ratio of unequal rental rates across two or more buildings in a market.

Working Drawings The detailed blueprints for a construction project that comprise the contractual documents which describe the exact manner in which a project is to be built.

Workout The strategy in which a borrower negotiates with a lender to attempt to restructure the borrower’s debt rather than go through the foreclosure proceedings.

Wraparound Mortgage A loan obtained by a buyer to use for the remaining balance on the seller’s first mortgage, as well as an additional amount requested by the seller.

Write-Down A procedure used in accounting when an asset’s book value is adjusted downward to reflect current market value more accurately.

Write-Off A procedure used in accounting when an asset is determined to be uncollectible and is therefore considered to be a loss.

Yield Maintenance Premium A penalty the borrower must pay in order to make investors whole in the event of early repayment of principal.

Yield Spread The difference in income derived from a commercial mortgage and from a benchmark value.

Yield The actual return on an investment, usually paid in dividends or interest.

Zoning Ordinance The regulations and laws that control the use or improvement of land in a particular area or zone.

Zoning The act of dividing a city or town into particular areas and applying laws and regulations regarding the architectural design, structure, and intended uses of buildings within those areas.

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