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Real Estate Terminology

"As Is" Condition.
The seller will make no repairs to the house, condo or co-op before settlement.

Abandonment. Voluntary surrender of owned or leased property. Abandonment does not relieve obligations, such as payment of rent, unless the abandonment is accepted by the party to which the obligation is owed.

Acceptance. The act of agreeing to accept an offer.

Adjustable Rate Mortgage. (ARM). A loan that allows the interest rate to be changed periodically.

Adjustments. Incidental expenses that show up on the settlement sheet that you sign when you buy or sell a house.

Agency. The legal relationship in which the owner/ principal engages the broker/ agent in the sale of property.

Agent. Someone licensed by the state in which he works to sell real estate through a real estate broker.

Agreement Of Sale. A written agreement in which the seller agrees to sell and the buyer agrees to buy under specific terms and conditions.

Amortization. The payment of a debt, such as a mortgage, in installments that include both interest and principal.

Anchor Tenant. The main tenant in a shopping center.

Appraisal. An estimate of the value or quality of a property on a given date.

Assessed Value. The value placed on property for the basis of property taxes.

Assignment: An instrument by which a lessee transfers his interest to a third party. For all practical purposes, an assignment is synonymous with a sublease.

Assumable Loan. An existing mortgage that can be taken over by a buyer, usually on the same terms as those given to the original borrower.

Balloon Mortgage. A mortgage that has a substantial amount of principal due at the maturity of the note.

Base Rent. The minimum rent due under a lease that has a percentage or participation requirement.

Bearing Wall. One that supports a roof or upper story.

Bonus: Sometimes synonymous with "concession"; but generally refers to payment made by lessee by the lessor as additional consideration.

Bridge Loan. A loan that finances a mortgage between the end of one loan and the beginning of a new one.

Broker. A person who has met state real estate licensing standards and can conduct real estate transactions.

Builder Warranty. Typically a one-year protection plan that insures a newly built house against defects in the structure as well as the plumbing, electrical, heating and cooling system.

Buyers Broker. A real estate agent who represents the buyer for a fee.

Cancellation Clause. A contract provision that gives the right to terminate obligation upon the occurrence of specified conditions or events.

CAP. A limit on how much the rate of interest on an adjustable-rate mortgage can fluctuate during the life of the loan.

Closing Costs. Fees and expenses, not including the purchase price of a property, that are paid by the seller and buyer at the closing of a piece of property.

Closing. The meeting between buyer and seller at which the property legally changes hands. Closing is also known as settlement.

Common Areas Areas of a condominium or co-op that are used by all of the owners / residents.

Concession: An allowance, usually in the form of rent abatement, made to the lessee by the lessor. Concessions are made for a variety of reasons-to induce a tenant to sign a lease; as consideration of additional expenses of the tenant, as, for example moving expenses, rental obligations on lease of premises which tenant is vacating and so on.

Condominium. A housing unit in which each owner has title to his own living space and shares possession with other residents of such common areas as lawns and tennis courts.

Consumer Price Index. (CPI) A cost of living index published by the Bureau of Labor Statistics.

Contingency Clause. A condition upon which the execution of a sales contract depends. Example: a financing contingency means that the sale depends on the buyer's obtaining a mortgage: a purchase contingency means the sale depends on the buyer's selling his old house.

Conventional Loan. A fixed-rate, fixed term loan that is made without government insurance.

Cooperative. In a "co-op", the buyer own shares in the co-op corporation that owns the building. In turn he has the right to rent a co-op.

Cost Of Living Index. An indicator of current price level or goods and services as compared to a base year.

Covenants: clauses in the lease which define the rights and obligations of lessor and lessee.

Credit Report A report on the credit history of a consumer used by lenders to calculate the amount of money they will be willing to lend.

Current Yield. A measurement of investment return, being the percentage ratio of cash income over the investment cost.
[ Current yield = ( cash income / investment ) x 100

Deed. A legal document by which property title is transferred from one owner to another.

Double-Glazed Window. An insulating window with two panes of glass separated by an air space. Also called a thermal window.

Down Payment. The percentage of the purchase price of a house, condo, co-op or other real estate that the buyer must put up in cash before a lender will give him a mortgage for the rest.

Earnest Money. The deposit money given to the seller by the potential buyer as evidence in good faith in purchasing real estate.

Eave. The part of the roof that projects out over an exterior wall of a house.

Endorsement. A rider attached to a standard insurance policy that modifies the term of the contract.

Equity. The market value of your property minus the mortgage and any other liens against it.

Escalator Clause: A lease covenant providing for the tenant to pay any increase in taxes and/or operating expense above the amounts prevailing at the time of execution of the lease agreement. An escalator clause may also provides for a decrease in rental if there is a decline in real estate taxes or operating expenses.

Escrow. Money or other valuables left in trust with a third party until the fulfillment of a specific act or condition.

Exclusive Agency Listings. The designation of a broker to sell your house while you retain the right to sell it yourself: if you do, you wont owe the broker a commission.

Exclusive Right To Sell. The designation of a broker as the only broker who can sell your house. If you sell it, you still owe the broker a commission.

Extension: An agreement by which a lease is made effective for an additional period of time beyond its expiration date - usually synonymous with renewal.

Fair Market Value. The price that would very likely be negotiated between a willing buyer and seller.

Fannie Mac. Nickname for the Federal National Mortgage Association, which buys and sells FHA and VA mortgages.

FHA Mortgage. A loan insured by the Federal Housing Administration that requires only a 5% down payment.

Fixed-Rate Mortgage. A loan with an interest rate and monthly payments that do not vary during its life.

Fixture. Personal property that is permanently attached to real property.

Flashing. Metal strips that seal joints in roof valleys and at the bases of roof vents and chimneys.

Footing. A concrete base under the foundation wall that is deep enough to inhibit settling.

Freddie Mac. Nickname for the Federal Home Loan Mortgage Corporation, which buys and sells FHA, VA and conventional loans from members of the Federal Reserve System and Federal Home Loan Bank System.

Freehold. An interest in real state without a predetermined time span.

Gables. Triangles formed by two sloping roof ends.

General Contractor. A builder who oversees a renovation or the construction of a house or an addition.

Grading. The slop of the land around the foundation; proper grading causes water to flow away from the house.

Gross Area. The total area of a building usually measured from its outside walls.

Gross Lease: the antonym of net lease. One in which the owner pays taxes, insurance, maintenance, operating expenses, etc. The gross lease today is confined largely to apartments and older office buildings. In newer office buildings the tenant has escalation clauses covering taxes and operating expenses.

Ground-Fault Interrupter. (GFI) A super sensitive circuit breaker usually used in electrical outlets. A GFI prevents shocks by automatically cutting the current to appliances whenever there's a potentially dangerous leakage of electricity.

Gutters. Metal or fiberglass channels along the eaves that direct water form the roof into the down spouts.

Half-Bath. A small room containing a toilet and sink but no tub or shower.

Handyman's Special. A house usually sold in "as is" condition that needs a lot of fixing up.

Holdover Clause. A standard part of a contract with a real estate agent ensuring that even after the contract has expired, he will receive the full commission if someone to whom he has shown the house later tries to buy it directly from the owner.

Holdover Tenant. A tenant who remains in possession of a property after the expiration of the lease.

Home Inspector. A trained professional who evaluates the structural soundness of a house, recommends repairs and estimates their cost.

Homeowner's Warranty. A 10-year guarantee that covers major structural flows in a new house.

Index Lease. Lease that requires changing rent payments based on a published record of cost changes.

Joists. Beams that support the floors of a house.

Landscape Architect. A college graduate who has completed four to seven years of study in landscape architect and who creates a detailed plan of the yard, specifying the shrubs and trees that are required.

Landscape Contractor. The person who sells you the foliage the design calls for and plans it.

Lease: A contract transferring the right to possession and enjoyment of real estate for a definite period of time.

Leasehold - Lease Estate: the lessee's interest in the property created by the lease. The full designation for this interest is "leasehold estate" but it is commonly referred to as a leasehold.

Lease-Option Agreement. An arrangement by which you rent a house with an option to buy at the end of a specific period of time at an agreed upon price.

Lessee: the tenant.

Lessor: the owner - one who lets the property.

Lien. A claim against a property by creditors that usually must be settled before you can take title.

Listing Contract. An agreement between an owner and a licensed real estate broker that allows the broker to sell the property during a given time period.

Loan Application Fee. A lender's charge ranging from $75 to $300, that you must pay when you apply for mortgage.

Loan Application Fee. The charge payable to the lender when applying for a mortgage.

Loan Origination Fee. One to four points charged by lenders to cover their costs in processing you mortgage.

Loan Origination. The charge payable to the lender for processing a mortgage.

Maintenance. A monthly fee paid by condo and co-op owners for the upkeep of common areas.

Market Value. A property's market value is the highest the buyer is willing to pay and the lowest the seller will accept.

Master Lease. A controlling lease. Contrast with Sublease.

Mobile Home. A factory-built dwelling , sometimes on wheels, that is towed to a lot and placed on a foundation.

Modular Home. A housing that is shipped from the factory as individual rooms or groups of rooms that are clamped together or stacked at the building site.

Mortgage Insurance. A policy that insures the lender if a borrower defaults.

Mortgage. A lien on real estate given by the buyer as security for money borrowed from a lender.

Multiple Listing Service. A network of real estate brokers that give an agent a complete description on all the homes listed for sale with brokers in the area.

Negative Amortization. The month-by-month conversion of unpaid mortgage interest into additional loan principal so that the amount of the loan keeps growing with each payment instead of diminishing.

Net Leasable Area in a building or project. Floor space that may be rented to tenants. The area upon which rental payments are based. Generally excludes common areas and space devoted to heating cooling and other equipment for the building.

Net Lease: A lease in which a tenant pays a substantial part of cost of operating and maintenance. There are many variations in net lease transactions. For instance, if a lease provides for the tenant to pay all operating expenses, interior and exterior maintenance costs, insurance, real estate taxes, etc., it might be referred to as "100% net" or "net-net". If the lease provides for the tenant to maintain and operate the premises i.e.: "tenant must maintain the property in good condition and make all interior repairs." it may be referred to as "net-excepting for taxes, insurance and outside repairs". If the tenant pays all of the expenses the lease is called a "triple net lease".

Net Listing. A sales agreement in which the real estate agent's commission consists of the proceeds above an agreed upon sales price for the house. Net Listings are illegal in New York State.

Net Operating Income (NOI) Income from property or business after operating expenses have been deducted.

Nonconforming Use. A use that violates zoning regulations or codes but is allowed to continue because it began before the zoning restriction was enacted or is allowed as a variance.

Notice. Official communication of a legal action or one's intent to take action. OPERATING EXPENSES. Amounts paid to maintain property such as property taxes, utilities, hazard insurance. Excludes financing expenses and depreciation.

Open Listing. The designation of a broker to sell real estate, while allowing any broker who find a buyer to earn the full commission. Or the owner can sell the property and owe no commission.

Operating Lease. A lease between the lessee and the sublessee who actually occupies and uses the property. See sublease.

Option. The right to purchase or lease property under certain terms for a specified period of time.

Overage in leases for retail stores, amounts to be paid, based on gross sales, over the base rent.

Overall Rate Of Return (OAR) The percentage relationship of net operating income divided by the purchase price of the property. [ OAR = ( NOI / Purchase price ) x 100 ]

Panelized Home. A home made from wall, roof and floor panels that are shipped from the factory and fastened together at the site. Such a home is also known as prefabricated house.

Percent Lease: A lease wherein the tenant is required to pay as rental a specified percentage of the gross income from sales made upon premises. It usually specifies a minimum rental and i generally used for retail tenants.

Points. Fees charged by lenders and that are expressed as a percentage of the mortgage amount. One point equals 1% of the mortgage.

Precut Home. A house whose two-by-fours and other basic components are cut in a factory and shipped to the site for assembly.

Prelease. To obtain lease commitments in a building or complex prior to its being available for occupancy.

Prepayment Penalty. A fee, typically six months' worth of interest, charged by some lenders when a borrower pays off a mortgage ahead of schedule.

Primary Lease. A lease between an owner and a tenant whose interest has been all or in part sublet. See also Master Lease.

Prime Tenant: When one or more subleases have been made on a property, the original lessee is sometimes referred to as the prime tenant. See master lease.

Principal. A person who appoints another as a representative. Also refers to the capital sum lent on interest.

Quiet Enjoyment. The right of the person who is entitled to possession of property to use it without interference.

Realtor And Realtor Associate. Registered collective membership marks that identify real estate professionals who are members of the National Association Of Realtors' and subscibe to its strict Code of Ethics.

Reappraisal Lease. A lease where the rental level is periodically reviewed by independent appraisers.

Release Of Mechanic's Lien. A general contractors guarantee that all the subcontractors who worked on the project have been paid in full. Without the release, title to the house is not clear and in some cases cannot be transferred.

Relocation Clause. A lease stipulation that allows the landlord to move the tenant within the building.

Renewal Option: a lease covenant giving the lessee the right to extend the lease for an additional period of years on specified terms.

Rent. the consideration paid by the lessee for the possession and use of the property.

Replacement Cost. The price of a new item substituted for a damaged one.

Residual. Value or income remaining (if any) after deducting the amounts necessary to meet fixed obligations.

Restriction. A limitation placed upon the use of property.

Reversion. The right of the lessor to possess leased property upon the termination of a lease.

Rider. An amendment or attachment to a contract or lease.

Roll-Over Loan. A loan that is renewed at an established time at current market interest rates.

R-Value. The degree to which a material , such as insulation, can retain heat. The higher the R- value, the more effective the insulation.

Sandwich Lease: intermediary instrument in three or more leases on the same property, i.e., A lease to B, B subleases to C, C subleases to D;the agreement between B and C would be called a " sandwich Lease." Security Deposit: A sum of money, or equivalent, deposited by the lessee with the lessor or a trustee, as guarantee for performance under the lease terms.

Short-Form Lease: When either of the parties wishes to record a lease agreement but does not want the rentals and covenants to become public, a short-form document is sometimes used which recites the fact that the lease has been made between parties covering certain premises for a specified term. STOP CLAUSE in a lease, stipulates an amount of operating expense above which the tenant must pay. Usually the base amount for the first full year of the lease.

Stick-Built House. One built board by board from the ground up at the site.

Studs. Vertical wood timbers in walls. The builder's phrase "16 inches on center" refers to the distance between the centers of the studs.

Subcontractor. A specialist such as a plumber or a roofer who is hired by a general contractor to perform a specific task on a construction job.

Sublease; Sublessor; Sublessee. When a tenant is permitted to lease his interest to a third party. The original lessee becomes a sublessor. The new tenant is the sublessee. The new agreement between sublessor and sublessee is a sublease.

Surrender. The cancellation of a lease by mutual consent of lessor and lessee.

Survey. A measurement of a parcel of land to be sure the house is properly situated within the boundaries. Most lenders insist on a survey before they grant a mortgage.

Sweat Equity. The value added to your property by your own labor.

Tax Stop. Clause in a lease stipulates the base tax above which the lessee must pay all increase.

Teaser Loan. An exceptionally low come-on interest rate for an initial period - typically six months or a year - of an adjustable-rate loan.

Tenancy at Will - Month to Month Tenancy: lease agreement cancelable by either party on short notice-usually 30, 60 or 90 days.

Term - Long-Term Lease / Short Term Lease: In residential real estate there is no clear understanding as to what a short-term lease and what is a long- term lease. In commercial real estate a long-term lease is one for a period of 21 years or more.

Term-Lease Term: the specified duration of the lease, i.e., "The lease has a term of 10 years." When used in the plural, "terms" the word is then usually synonymous with the lease "covenants".

Third-Party Service. An arrangement by which a separate company contracts with your employer to buy the equity in your home when you are transferred to a new location. The third party then sells the house for you.

Title Insurance. A policy that protects the lender who has granted a mortgage on a house or condo, if there is a dispute about its title.

Title Search. The process of proving that the seller can transfer the title free and clear of liens and other encumbrances.

Title. Evidence of real estate ownership.

Townhouse. A home that has its own entrance but shares at least one exterior wall with a neighbor.

Transfer Tax. A state, city or county sales tax on a house or other real estate that the buyer, seller or both must pay at a settlement.

Triple Net Lease. Lease in which the tenant bears all of the operating expenses of the property.

Turnkey Project. Development where developer completes the entire project in behalf of the buyer or tenant.

VA MORTGAGE. A loan guaranteed by the Veterans Administration that allows an eligible veteran to buy a house without making a down payment.

Vacancy Rate. The percentage of a building that is not leased..