Real Estate Terms
Residential & Commercial
Absorption Rate: a term commonly used in real estate, is the rate at which homes sell in an area over a time period. An absorption rate greater than 20% is associated with a sellers market while an absorption rate below 15% is associated with a buyer’s market.
Application Fee: The fee that a mortgage lender charges to apply for a mortgage to cover processing costs.
Appraiser: A professional who conducts an analysis of the property, including examples of sales of similar properties in order to develop an estimate of the value of the property. The analysis is called an “appraisal.”
Amortization: one where if you make every payment according to the original schedule on your term loan, your loan will be fully paid off by the end of the term. The word amortization simply refers to the amount of principal and interest paid each month over the course of your loan term.
Asset: Everything of value an individual owns.
Assignment: Is a legal term whereby an individual, the “assignor,” transfers rights, property, or other benefits to another known as the “assignee.”
Building: A structure with a roof and walls, such as a house, school, store, or factory.
Build-to-suit: A property developed specifically for a certain tenant to occupy, with structural features, systems, or improvement work designed specifically for the needs of that tenant.
Broker: A person who represents another person or a company during a buying or selling process.
CBD: Central Business District
$10,000 valued at a 5% Cap is worth: 10,000
/
$0.5 = $200,000)
Cap Rate: Short for “capitalization rate,” the cap rate refers to the ratio of Net Operating Income (NOI) to property asset value. (e.g. A building with a NOI of
$10,000 valued at a 5% Cap is worth: 10,000
/
$0.5 = $200,000)
Client: A client has a contractual relationship with a salesperson or broker.
Closing date: The completion of the real estate transaction between buyer and seller. The buyer signs the mortgage documents and the closing costs are paid. Also known as the settlement date.
Closing Costs: The costs to complete the real estate transaction. These costs are in addition to the price of the home and are paid at closing. They include points, taxes, title insurance, and financing costs.
Co-broke: Means to split commission with another broker.
Commitment letter: A letter from your lender stating the amount of the mortgage, the number of years to repay the mortgage (the term), the interest rate, the loan origination fee, the annual percentage rate and the monthly charges.
Concession: Something given up or agreed to in negotiating the sale of the house. For example, the sellers may agree to help pay for closing costs.
Condominium: A unit in a multi-unit building. The owner of a condominium unit owns the unit itself and has the right, along with other owners, to use the common areas but does not own the common elements such as the exterior walls, floors and ceilings or the structural systems outside of the unit; these are owned by the condominium association. There are usually condominium association fees for building maintenance, property upkeep, taxes and insurance on the common areas and reserves for improvements.
Contingency: A plan for something that may occur but is not likely. For example, your offer may be contingent on the home passing a home inspection. It the home does not pass inspection, you're protected.
Cooperative: Housing cooperatives are owned by shareholders but in some cases they can be owned by a non-profit organization.
Counter-offer: An offer made in response to a previous offer. For example, after the buyer presents their first offer, the seller may make a counter-offer with a slightly higher sale price.
Customer: A person who is provided services by a real estate professional, but who is not a client
Credit score: A computer-generated number that summarizes your credit profile and predicts the likelihood that you'll repay future debts.
Deed: The legal document transferring ownership or title to a property
Delivery/Delivery Date: The time when a building completes construction and receives a certificate of occupancy.
Down payment: A portion of the price of a home, usually between 3-20%, not borrowed and paid up front.
Escrow: The holding of money or documents by a neutral third party before closing. It can also be an account held by the lender (or servicer) into which a homeowner pays money for taxes and insurance.
Full Service Rental rate: A rental rate that includes all operating expenses such as utilities, electricity, janitorial services, taxes, and insurance.
Fixed-rate mortgage: A mortgage with an interest rate that does not change during the entire term of the loan.
Home inspection: A professional inspection of a home to determine the condition of the property. The inspection should include an evaluation of the plumbing, heating and cooling systems, roof, wiring, foundation and pest infestation.
Homeowners insurance: A policy that protects you and the lender from fire or flood, which damages the structure of the house; a liability, such as an injury to a visitor to your home; or damage to your personal property, such as your furniture, clothes or appliances
Interest: The cost you pay to borrow money. It is the payment you make to a lender for the money it has loaned to you. Interest is usually expressed as a percentage of the amount borrowed.
Lock-in rate: A written agreement guaranteeing a specific mortgage interest rate for a certain amount of time.
Landlord: The owner of a property that is rented or leased to a tenant.
Landlord Representation: When a broker represents an owner/landlord in a typical lease transaction between an owner/landlord and a tenant.
LOI: Letter of Intent
Mortgage: A loan using your home as collateral. In some states the term mortgage is also used to describe the document you sign [to grant the lender a lien on your home]. The amount of your mortgage is usually the purchase price of the home minus your down payment.
Mortgage rate: The cost or the interest rate you pay to borrow the money to buy your house.
Modified Gross Rental Rate: A rental rate that includes some of the operating expenses such as electricity, utilities, taxes, janitorial services, and insurance, but not all. Often the tenant will pay for janitorial and utilities while the other operating expenses will be included in the rental rate. It is important to clarify this with the owner or broker.
Net Lease: the tenant pays a portion or all of the taxes, insurance fees, and maintenance costs for a property in addition to rent. Net leases are commonly used in the commercial real estate sector.
Offer: A formal bid from the homebuyer to the home seller to purchase a home.
Open house: When the seller's real estate agent opens the seller's house to the public.
PM: Property Manager. An individual who oversees all operational aspects of a building. Once a tenant signs a lease, it is the Property Manager who will assist the tenant with any questions, the build-out of the space, and any on-going issues once they have moved in.
PSF: Per Square Foot
Punch List: A final checklist of work that needs to be done to a property before the end of construction.
Pre approval letter: A letter from a mortgage lender indicating that you qualify for a mortgage of a specific amount. It also shows a home seller that you're a serious buyer.
Pre-leased Space: Space that has been leased to a tenant and announced for future development but is not yet under construction.
Pre qualification letter: A letter from a mortgage lender that states that you're pre-qualified to buy a home, but does not commit the lender to a particular mortgage amount.
Property Tax Grievance: the basic complaint that the property is subject to an “Unequal Assessment” because owners of comparable properties have received lower assessments and thus will pay lower taxes
Purchase Agreement: is the final document used to transfer a property from the seller to the buyer, while a purchase and sale agreement specifies the terms of the transaction. Parties will sign a purchase agreement after both parties have complied with the terms of the purchase and sale agreement.
Second Generation Space: Space that has had a prior tenant and therefore has modifications (such as walls, doors, ceiling treatments, etc.) that can often be used by a subsequent tenant.
Shell Space: A building space that has an unfinished interior and requires improvements.
Sublease/sublet space: Space that has been leased by a tenant and is being offered for lease back to the market by that tenant.
RFP: Request for Proposal
ROI: Return on Investment
RSF: Rentable Square Feet
Tenant: A person, business, or group that pays rent to an owner or landlord for the right to use/occupy a property or space.
Tenant representation: When a broker represents a tenant in a typical lease transaction between a tenant and an owner/landlord.
TI: Tenant Improvement
Title: The right to, and the ownership of, property. A title or deed is sometimes used as proof of ownership of land.
Triple Net Rental Rate: A rental rate that excludes all operating expenses such as electricity, utilities, taxes, janitorial services, and insurance. These expenses are expected to be paid directly by the tenant.
Vacancy Rate: The percentage of physically vacant space divided by the total amount of existing inventory.
Warranties: Written guarantees of the quality of a product and the promise to repair or replace defective parts free of charge.