Real Estate Finance Vocab Flashcards

Real Estate Finance Vocab Flashcards CovenantAn agreement between two or more persons by deed whereby one of the parties promises the performance of certain acts AgencyA relationship in which one party acts as a representative of another establishing fiduciary obligations First MortgageA loan with senior claim or first lien on a property EscheatThe reversion of an owner's property to the state upon death if there is no will or heirs AppurtenanceSomething which has been added to property Construction LoanA short term mortgage used to construct or rehabilitate property where only interest in charged and where money is advanced in construction draws as building progresses, holding back retainage and usually subject to obtaining a long term loan in advance for construction financing Credit ReportA detailed summary of the history of a person or business required by a lender prior to issuing a loan Abstract of TitleA history or summary of the details of the ownership of a piece of land; contains the record of transfers of title from one owner to the next as well as any restrictions or encumbrances on use Fixed Rate MortgageA loan whose interest charge does not change over time Assumable MortgageA mortgage whereby the buyer of property agrees o become liable for the payments of the seller's mortgage ArchitectOne who coordinates the design process, designs and oversees the construction or remodeling of property Commitment FeeA cost paid by a borrower to a lender to provide a mortgage in the future under agreed upon terms and conditions DepreciationA reduction in property value; also a tax expense item allowing for the recovery of an asset over time Bill of SaleA legal document transferring title of personal property from a seller to a buyer Debt ServiceThe amount of money needed on a periodic basis to meet mortgage principal and interest expenses Cash on Cash ReturnThe annual net cash flow after operating expenses divided by the cost of acquisition ComparableA step in determining value by viewing properties with similar characteristics in similar locations, recently sold CondemnationThe judicial process culminating in eminent domain Exclusive Right to SellA listing contract which gives the real estate broker the sole ability to sell property in return for consideration, for a specific and limited period of time

Escalator ClauseA statement providing for adjustment of payments in the event of certain specified contingencies DealerA person who regularly buys and sells real property in the normal course of business and whose income is taxed at ordinary rates AppraisalAn estimate of market value by a systematic process especially given by expert judgement or opinion, especially one that assesses effectiveness or usefulness Costs-SoftAll development costs except Hard Costs and includes architectural, engineering, insurance, legal, permitting, taxes, etc Estopple CertificateA declaration by the borrower stating the amount of debt owned After Tax Cash FlowNet operating income less debt service and takes on an annual basis Cloud on the TitleAny claim that might impair clear title to a property thus making the title on the property in doubt; impairment of the owner's rights Compound InterestInterest compounded on principal plus accrued interest Cancellation ClauseA unilateral ability in a lease or purchase and sales agreement which when executed terminates the agreement Agreement of SaleSame as a contract of purchase for property between a buyer and seller stating the terms and conditions necessary for the transfer of ownership Credit UnionA cooperative nonprofit organized to meet the financial needs of its members Exclusive AgencyA listing contract which gives a real estate broker the sole ability to sell property in return for consideration, for a specific and limited time but also allows the owner to sell themselves without owing a broker's fee EscrowThe process by which money is held by a fiduciary until all terms and conditions of the escrow agreement have been satisfied AbandonmentVacating and giving up the use of or rights in real property Certificate of OccupancyDocumentation issued by a municipality allowing occupancy and use of a property AlienationThe transfer of property to another Fiduciary RelationshipA relationship of trust Adjustable Rate MortgageA non-fixed rate loan where the lender can vary the interest rate up or down based on some predetermined underlying index Eminent DomainThe right of government to take private property for a public purpose upon payment of just compensation Accelerated Cost Recovery SystemA rapid depreciation method

BootThe value of a non real property like cash of personal property received or offered in a tax deferred exchange Federal Housing AdministrationA federal agency established to encourage improvement in the housing market and to provide insurance for home mortgages Due-on-sale ClauseAllows the lender to demand that a mortgage be paid in full upon transfer of ownership AccessThe means of entry to a property Blanket MortgageA single mortgage which encompasses and encumbers more than one piece of property Effective Gross IncomePotential gross income less vacancy and bad debt; actual rent collected Band of InvestmentA method of establishing a weighted capitalization rate based on the return of equity and the cost of debt Assessed ValueThe value of a property that serves as the basis for municipal tax calculation DeedA written instrument conveying title to real property EnchroachmentA building or part of a building that protrudes upon another person's property Chain of TitleThe record or history of conveyances and encumbrances on a piece of property from as far back as recorded until the present FixturePersonal property attached to real property that may or may not transfer with sale or lease Feasibility AnalysisA site specific study of physical and fiscal conditions CapitalizeTo convert a stream of income to a static value; to record an expenditure as an asset in order to depreciate said asset Fee SimpleThe largest bundle of rights and owner can have in property including the rights of borrowing, disposition, leasing, etc Absorption RateThe rate at which property for sale or lease in consumed in the market CondominiumA form of ownership evidenced by a unit deed in a multi-unit property whereby a unit is owned individually subject to an underlying master deed CooperativeA form of ownership where shareholders in the organization are entitled to occupy unit under the terms of a proprietary lease Debt Service Coverage RatioAnnual net operating income after expenses divided by the annual debt service Carrying CostsExpenses required on a property until it is ready for development or redevelopment DefaultFailure to fulfill the terms and conditions of a contract

Blended RateThe interest rate for a refinancing loan which includes both the original loan rate and the current market interest rate and which may or may not include any additional funds and their interest rate EstateThe quality nature and extent of one's interest in real estate Financial LeverageUse of a loan to exacerbate monetary returns AssignmentThe transfer of rights to another AmenitiesThe features of property which are not part if the space occupied which when taken together may create a more attractive atmosphere to guests or customers AmortizationThe process of retiring a debt to reduce a debt by making payments against the principal balance in installments or regular transfers AppreciationThe increase in value of a property over cost Capital GainsThe net adjusted price less the adjusted basis equaling the taxable profit from the sale of property DefeasanceA provision that voids any mortgage claim when the debt has been repaid Building CodesLocal ordinances which establish the manner, methods, materials, tolerances and assembles for construction and rehabilitation of property Adjusted BasisThe original basis less any depreciation taken Costs-HardReferred to as the "bricks and sticks", the cost of material and labor in construction Conventional MortgageA loan which is not insured by the Federal Housing Administration or not guaranteed by the Veteran's Administration Air RightsRights to build in or otherwise use space above ground or an existing structure Down PaymentThe initial equity portion of the purchase price AcknowledgementAn official recognition made before a notary public or official validating the genuineness of a signature and attesting that the signature was the result of a free act and deed Exculpatory ClauseThe provision in an agreement which holds one party harmless in event of default or misrepresentation and limits recourse to certain specified remedies Acceleration ClauseA clause in the terms of a loan or mortgage stipulating that payments must be made earlier than normal under specific circumstances Buyer's MarketA market where there is an oversupply relative to demand of real estate giving purchasers or users negotiating leverage AcreA measure of land equaling 43,560 square feet; a builder's acre is 40,000 square feet