GLOSSARY

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Real Estate Terms

Acreage

A 2 dimensional measure of land equaling 160 square rods, 10 square chains, 4,840 square yards, or 43,560 square feet

Adjustable Rate Mortgage (ARM)

A mortgage with an interest rate that changes periodically, according to an index that is selected when the mortgage is issued. The initial rate is lower than that of fixed-rate mortgages, but monthly payments can go up or down as the rate is adjusted

Adjustment Interval

The period of time between changes in the interest rate for an adjustable-rate mortgage. Typical adjustment intervals are 6 months and one year

Amenities

In appraisal, the non-monetary benefits derived from property ownership

Amortization Period

The period or length of time over which the principal portion of a mortgage loan is scheduled to be paid down through periodic payments

Anchored

Refers to a piece of commercial real estate property, which will serve as the main tenant in a shopping center

Anchors

A long term, credit worthy tenant. The presence of one or more “anchors” enhances the value and the ability to obtain financing for a shopping center

Annual Percentage Rate (APR)

An interest reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate, or advertised rate on the mortgage because it takes into account points and other credit costs. The APR allows home buyers to compare different types of mortgages based on the annual cost for each loan

Appraisal

An estimate of the value of a property made by a qualified professional called an appraiser

Assisted living

Type of senior housing that is typified by independent living and limited assistance to its renters

Assumability

A mortgage loan which can be transferred to another person without a change in the terms of the loan

Available SF

The square feet available for lease

Average Annual Occupancy

Percentage of currently rented units in a building, city, neighborhood, or complex

Average Daily Rate

A hotel rate used to evaluate the average daily rate of a hotel inclusive of vacancy and seasonality

Balloon Mortgage

One large payment for the remaining balance of a mortgage, due at a time specified in the contract

Basis Point (BP)

1/100 of 1% expressed as a margin over an index rate

Bankruptcy

A provision of federal law whereby a debtor surrenders his assets to the bankruptcy court and is relieved of the future obligation to repay his unsecured debts. Secured creditors (those holding deeds of trust or judgment liens) continue to be secured by the property, but they may not take other action to collect from the debtor. There are different types of bankruptcy chapters. The above is very general

Beneficiary

A person named to receive a benefit from a trust. A contingent beneficiary has conditions attached to his rights; usually someone else must die first

Borrowing Entity Type

The legal form under which property is owned

Bridge/Short Term Loan

A short-term or interim loan for borrowers who need time to find permanent financing or are repositioning a commercial property

Broker

An individual in the business of assisting in arranging funding or negotiating contracts for a client, but who does not loan the money himself

Building Permit

A document issued by government regulatory authority that allows a builder to construct or modify a structure

Building SF

The usable square footage of the building

Buy-down

When the lender and/or the home builder subsidize the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they will increase when the subsidy expires

Cap

The maximum at which an adjustable-rate mortgage may increase per year and/or the life of the loan, regardless of index changes

Caps (Payment)

Consumer safeguards which limit the amount of monthly payments the lender may charge on an adjustable rate mortgage

Capital Expenditures

Line items on a profit and loss statement that would not be expensed on an annual basis. This category would include replacement of major building systems, such as roofs, etc…

Capitalization Rate

The ratio of the first year NOI to the asking price (NOI/asking price). Not the rate of return

Carve Out

The definition used for the inclusion of recourse in loan documents for fraud and misrepresentation

Cash-Out Refinancing

When the principal amount of a new mortgage involved in refinancing is greater than the principal amount outstanding of the existing mortgage being refinanced and all, or a portion of the equity is being converted to cash

Caveat Emptor

Buyer beware. The buyer must inspect the property and satisfy himself that it is adequate for his needs. The seller is under no obligation to disclose defects, but may not actively conceal a known defect, or lie, if asked

Central Business District (CBD)

The downtown section of a city, generally consisting of retail, office, hotel, entertainment, and government land uses with some high-density housing

Certificate of Eligibility

The document given to qualified veterans which entitles them to VA guaranteed loans for homes, business, and mobile homes. Certificate of eligibility may be obtained by sending DD-214 (separation paper) to the local VA office with VA form 1880 (request for certificate of eligibility)

Certificate of Reasonable Value (CRV)

An appraisal issued by the Veterans Administration showing the property’s current market value

Certificate of Title

A written opinion by an attorney or title company setting forth the status of title to the property as shown on the public records. The certificate does not certify as to matters not of record and affords no protection, unless the author was negligent

Clearance

The distance between the building’s floor and the effective storage ceiling

Climate Controlled

An industrial and self-storage term that represents temperature controlled commercial space

Closing

The meeting between the buyer, seller and lender (or their agents) where the property and funds legally change hands

Closing Costs

The costs and fees associated with the official change in ownership of the property and with obtaining the mortgage, which is associated at the closing

Collateral

Property pledged to secure a loan

Commercial Mortgage Backed Security (CMBS)

A bond or other financial obligation secured by a pool of mortgage loans

Commercial Land

Development and transitional land acquired for investment use: land for lots, site selection, and assemblage of parcels

Commitment

A contract issued by a lender to make a loan on specific terms or conditions to a borrower or builder

Comparative Market Analysis

An estimate of the value of a property based on an analysis of sales of properties with similar characteristics

Condominium

A system of individual fee simple ownership of portions (units) in a multi-unit structure, combined with joint ownership of common areas. Each individual may sell or encumber his own unit

Conduit

The financial intermediary that sponsors the conduit between the lender(s) originating loans and the ultimate investor. The conduit makes or purchases the loan from the third party correspondents under standardized terms, underwriting and documents and then, when sufficient volume has been obtained, pools the loans for sale to investors in the CMBS market

Congregate Care

A type of senior housing typified by a central eating facility, smaller rooms, and a higher level of care for its tenants

Constant Maturity Treasure (CMT)

An index based on the U.S. treasury that is used in the pricing of debt for banks

Construction Loan

A short term loan to pay for the construction of commercial buildings. These loans typically provide periodic disbursements to the builder as each stage of the building is completed. When construction is completed, a take-out or permanent loan is used to pay off the construction loan

Construction Type

The type of construction used for a commercial building (i.e. concrete tilt-up, etc…)

Contingency

An element of an agreement that must be satisfied before the total agreement can be consummated

Cost of Funds Index (COFI)

Index used to determine interest rate changes for adjustable rate mortgages. It is based on the cost of funds of the 11th district of the federal home loan bank

Coupon

The coupon on U.S. government securities expressed as an annual percentage of face value. It is the interest rate the U.S. government promises to pay to the holder on an ongoing basis until maturity

Covenant

A written agreement or restriction on the use of land or promising certain acts. Homeowner associations often enforce restrictive covenants governing architectural controls and maintenance responsibilities. However, land could be subject to restrictive covenants, even if there is no homeowners association

Conventional Loan

A mortgage not insured by the FHA or guaranteed by the VA or deferred interest: when a mortgage is written with a monthly payment that is less than required to satisfy the note rate, the unpaid interest is deferred by adding it to the loan balance

Credit Report

A report documenting the credit history and current status of a borrower’s credit standing

Credit Tenant

A tenant who has obtained a debt rating by S&P or Moody’s of “BBB”- or better

Credit Tenant Net Lease

A lease with a tenant that has a credit rating of BBB- or better

Debt Service

The periodic payments (principal and interest) made on a loan

Debt Service Coverage Ratio (DSCR) (or Debt Coverage Ratio)

Measure of a mortgaged property’s ability to cover monthly payments defined as the ratio of net operating income over the periodic payments (principal and interest) made on a loan. A DSCR of less than 1.0 means that there is insufficient cash flow generated by the property to cover required debt payments

Debt-to-Income Ratio

The ratio, as expressed as a percentage, which results when a borrower’s monthly payment obligation on long-term debts is divided by his or her net effective income(FHA/VA loans) or gross monthly income(conventional loans)

Deed

The written document conveying real property. Once recorded at the courthouse, the original piece of paper is not needed to convey title in the future

Deed of Trust

A voluntary lien to secure a debt deeding the property to trustees who foreclose, sell the property at public auction. In the event of default on the note, the deed of trust secures. In many states this document is used in place of a mortgage to secure the payment of a note

Default

Failure to meet legal obligations in a contract, specifically failure to make the monthly payments on a mortgage

Defeasance Clause

A clause in a mortgage that gives the borrower the right to prepay a commercial mortgage by purchasing U.S. Treasuries in an escrow account to pay off ongoing debt service

Delinquency

Failure to make payments on time. This can lead to foreclosure

Density

The number of buildings or persons occupying a certain area of land, generally an acre

Delivery

The final, unconditional and absolute transfer of a deed to the grantee so that the grantor may not revoke it. A deed signed, but held by the grantor does not pass title

Department of Veterans Affairs

An independent agency of the federal government which guarantees long-term, low-or-no-down payment mortgages to eligible veterans

Depreciation (Accounting)

Allocating the cost of an asset over its estimated useful life

Depreciation (Appraisal)

A charge against the reproduction cost (new) of an asset for the estimated wear and obsolescence. Depreciation may be physical, functional, or environmental

Discount Rate

The rate of interest that the Federal Reserve charges member banks for loans

Distribution Warehouse (also called Light Industrial)

Generally the least intense industrial use of a property. Office use is limited to management tasks for the distribution or warehouse facility, or about 15 percent of total space

Dock high

Existence and/or number of dock level doors

Double-Wide

A mobile home consisting of two units which have been fastened together along their length

Down Payment

Money paid to make up the difference between the purchase price and the mortgage amount. Down payments usually are 10 to 20 percent of the sales price on conventional

Due Diligence

The legal definition: a measure of prudence, activity or assiduity, as is property to be expected from, and ordinarily exercised by, a reasonable and prudent person under the particular circumstances. In CMBS due diligence is the foundation of the process because of the reliance securities investors must place on the specific expertise of the professionals involved in the transaction

Due-on-Sale Clause

A provision in a mortgage or deed of trust that allows the lender to demand immediate payment of the balance of the mortgage if the mortgage holder sells the home

Easement

The right to use the land of another for a specific limited purpose

Effective Gross Income

Gross income of a building if fully rented, less an allowance for estimated vacancies

Eminent domain

The power of the state to take private property for public use upon payment of just compensation

Encroachment

The physical intrusion of a structure or improvement on the land of another. Examples include a fence or driveway over the property line

Engineering Report

Report generated by an architect or engineer describing the current physical condition of the property and its major building systems, i.e.- HVAC, parking lot, roof, etc… the report also determines an amount for calculating replacement reserves, if needed

Entitlement

The VA home loan benefit is called entitlement. Entitlement for a VA guaranteed home loan. This is also known as eligibility

Environmental Report

Report generated by qualified environmental firms to determine potential environmental hazards in a building’s region or within the building itself

Environmental Risk

Risk of loss of collateral value and of lender liability due to the presence of hazardous materials, such as asbestos, PCB’s radon or leaking underground storage tanks (lusts) on a property

Equal Credit Opportunity Act (ECOA)

A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs

Equity

The difference between the fair market value and current indebtedness, also referred to as “owners interest”

Equity Loan,

A loan for an equity position which represents an ownership position in a property, or a loan for the participation in the profits of the commercial property

Equity Sharing

A form of joint ownership between an owner/occupant and an owner/investor. The investor takes depreciation deductions for his share of the ownership. The occupant receives a portion of the tax write-offs for interest and taxes and a part of his monthly payment is treated as rent. The co-owners divide the profit upon sale of the property

Earnest Money

Money given by a buyer to a seller as part of the purchase price to bind a transaction or assure payment

Escrow

A special account set up by the lender in which money is held to pay for the taxes and insurance: Or a third party who carries out the instructions of both the buyer and seller to handle the paperwork at the settlement

Eurodollar

U.S. dollar denominated deposits at commercial banks outside of the United States

Extended stay

A hotel that caters to a business traveler on an extended lodging period

Fair market value

An appraisal term for the price which a property would bring in an competitive market, given a willing seller and willing buyer, each having a reasonable knowledge of all pertinent facts, with neither being under any compulsion to buy or sell

Farm

Land dues for agricultural purposes for crop and livestock farming

Farmers Home Administration (FMHA)

Provides financing to farmers and other qualified borrowers who are unable to obtain loans elsewhere

Federal Funds (Fed Funds)

Fed funds are the interest rate charged by those banks with excess reserves on hand (reserves over and above the minimum required by the Federal Reserve) to those banks in need of overnight loans to meet reserve requirements. Since it is set daily, the federal funds rate is the most sensitive indicator of the direction of interest rates

Federal Home Loan Mortgage Corporation (FHLMC)

Provides a secondary market for saving and loans by purchasing their conventional loans. Also known as “Freddie Mac”

Federal Housing Administration (FHA)

A division of the department of housing and urban development. Its main activity is the insuring of residential mortgage loans made by private lenders. FHA also sets standards for underwriting mortgages

Federal National Mortgage Association (FNMA)

Secondary mortgage institution, which is the largest single holder of home mortgages in the United States. FNMA buys VA, FHA, and conventional mortgages from primary lenders. Also known as “Fannie Mae”

FHA Loan

A loan insured by the federal housing administration open to all qualified home purchasers. There are limits to the size of FHA loans

FHA Mortgage Insurance

Requires a small fee (up to 3.8 percent of the loan amount) paid at closing, or a portion of the fee added to each monthly payment of an FHA loan to insure the loan with FHA. On a 9.5 percent $75,000.00 30-year fixed rate FHA loan, this fee would amount to either $2,850 at closing or an extra $31 a month for the life of the loan. In addition, FHA mortgage insurance requires an annual fee of 0.5 percent of the current loan amount, paid in monthly installments. The lower the down payment, the more years the fee must be paid

Firm Commitment

A promise by FHA to insure a mortgage loan for a specified property and borrower. A promise from a lender to make a mortgage loan

Fit-Out

Tenant improvements within a commercial property

Fixed-Rate Mortgage

A mortgage with an interest rate that remains constant for the life of the loan

Fixtures

Personal property for which some reason, such as the manner of attachment, has become realty. Such property is also referred to as chattel real

Flex Space

An industrial property, which has both an office and industrial component

Floor-to-Area Ratio (FAR)

The relationship between the total amount of floor space in a multi-story building and the base of that building. FAR’s are dictated by zoning leas, in effect, stipulate the maximum number of stories a building may have

Foreclosure

The process by which a lender takes back a property on which the mortgagee has defaulted. A servicer may take over a property from a borrower on behalf of a lender. A property usually goes into the process of foreclosure if payments are more than 90 days past due

Foundation

The concrete slab beneath the property, which holds the property in place

Franchise

A business arrangement undertaken for the purpose of marketing a product or service. One party (the franchiser) provides marketing and selling expertise for a fee to another party (the franchisee) who in turn sells the product or service in the marketplace

Franchise Fees

The fee is usually an initial purchase requirement plus an ongoing percentage of gross sales of the business

Freestanding Retail

A building which contains only one retail business. Fast-food franchises and retail stores are often freestanding buildings

Freestanding

The commercial building meant to be occupied by one single user

Full Service

A hotel definition that represents services provided to its guests outside of lodging (i.e.-room service, concierge services, and restaurants)

General Business

Includes all of business assets and equipment, may include property or land

General Partnership

In a partnership, a partner whose liability is not limited. All partners in an ordinary partnership are general partners. A limited partnership must have at least one general partner

Good Faith Deposit

A deposit made by a purchaser of real estate to evidence and honesty

Government National Mortgage Association (GNMA)

Provides sources of funds for residential mortgages, insured or guaranteed by FHA or VA. Also known as “Ginnie Mae”

Government Subsidized

Rents that are partly paid by the government (e.g. section 8 residential subsidies)

Grade Level Door

A door at the ground level at the foundation

Ground Level

Existence and/or number of ground level doors

Graduated Payment Mortgage (GPM)

A type of flexible payment mortgage where the payments increase for a specified period of time and then level off. This type of mortgage has negative amortization built into it.

Guaranty

A promise by one party to pay a debt or perform an obligation contracted by another if the original party fails to pay or perform according to a contract

Hazard Insurance

A form of insurance in which the insurance company protects the insured’s specified losses, such as fire, windstorm, and the like

High Rise Office

A commonly used expression referring to an office building that is high enough to require an elevator

Housing Expenses-To-Income Ratio

The ratio, expressed as a percentage, which results when a borrower’s housing expenses are divided by his/her net effective income (FHA/VA loans) or gross monthly income(conventional loans)

Impound

The portion of the borrower’s monthly payments held by the lender or service to pay taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also known as “reserves”

Index

An economic indicator, usually a published interest rate

Industrial

Property used for industrial purpose, such as factories

Industrial for Lease

Industrial space available

Interest

The sum paid for borrowing money, which pays the lender’s costs for doing business

Interest Rate

The sum charged for borrowing money, expressed as a percentage

Interest Rate Cap

Limits the interest rate or the interest rate adjustment to a specified maximum. This protects the borrower from increasing interest rates

Interim Financing

A construction loan made during completion of a building or a project. A permanent loan usually replaces this loan after completion

Investor

A money source for a lender

Joint Ownership Agreement

An agreement between owners defining their rights, ownership, monetary obligations and responsibilities. This could be between an investor and an occupant, or the occupants. If an investor is involved, the investor does not take depreciation deductions and none of the occupant’s payment is deemed rent for tax purposes

Joint Tenancy

A property owned by two or more persons. Joint tenants with the common law right of survivorship means the survivor inherits the property without reference to the decedent’s will. Creditors may sue to have the property divided to settle claims against one of the owners

Joint Venture

An agreement by two or more individuals, or entities to engage in a single project, or undertaking. Joint ventures are used in real estate development as a means of raising capital and spreading risk. For all practical purposes, a joint venture is similar to a general partnership, however, once the purpose of the joint venture has been accomplished, the entity ceases to exist

Lease Assignment

An agreement between the commercial property owner and the lender that assigns lease payments directly to the lender

Lease Type

Gross, triple net (NNN), net (NN), hybrid, etc…

Leasehold Improvements

The cost of improvements for a leased property, often paid by the tenant

Leasing Commissions

An amount earned by a real estate broker or leasing agent for his services

Lessee

Tenant in a building

Lien

A claim or charge against property. Property is said to be encumbered by a lien and the lien must be removed to clear title

Limited Liability Company (LLC)

The restriction of one’s potential losses to the amount invested. The absence of personal liability. Provided to stockholders in a corporation and limited partners of a limited partnership

Limited Partnership

One in which there is at least one partner who is passive and limits liability to the amount invested and at least one partner whose liability extends beyond monetary investment

Limited Service

A hotel that offers lodging services only

Loan Processing Fee

A fee charged by a lender, to prepare all the documents associated with your mortgage

Loan-to-Value Ratio (LTV)

The ratio between the principal amount of the mortgage balance, at origination or thereafter, to the current value of the underlying real estate collateral. The ratio is commonly expressed to a potential borrower as the percentage of value a lending institution is willing to finance. The ratio is dynamic and varies by lending institution, property type, geographic location, property size, etc…

Lock-Out Period

A period of time after loan origination during which a borrower cannot prepay the mortgage loan

London Interbank Offered Rate (LIBOR)

The rate that the most creditworthy international banks dealing in Eurodollars charge each other for large loans. Rates are quoted in monthly increments out to 1 year

Lot Size

Total square footage of the land

Low-Rise Office

A commonly used expression referring to an office building that is too low to require an elevator

Mall

(Also called super regional center) An enclosed shopping center with three or more major department stores which draws from a large trade area 12 or more miles

Management Fee

The agreed-upon compensation paid to a property management company for managing a real estate project. The fee is usually based on a percentage of effective gross income

Manufacturing

(Also called heavy industrial) Auto making, textiles, steel, chemicals, and food processing are typical uses of such properties. Typically zero to five percent office space

Margin

The amount that is added to an index rate to determine the total interest rate marketing expenses- expenses accrued to market commercial properties

Market Value

The highest price that a buyer would pay and the lowest price that a seller would accept on a property. Market value may be different from the price a property could actually be sold for at a given time

Monthly Treasury Average (MTA)

This index is an average of the monthly one-year Treasury adjusted to constant maturity for the past 12 months. Yields on Treasury securities at constant maturity are determined by the U.S. Treasury from the daily yield curve. That is based on the closing market-bid yields on actively traded Treasury securities in the over-the-counter market

Maturity

The termination period of a note (e.g. – a 25 year mortgage has maturity of 25 years. In sales law, the date a note becomes due

Retail

A property type which sells goods to consumers

Reverse Annuity Mortgage

Form of mortgage in which the lender makes periodic payments to the borrower using the borrower’s equity in the home as satisfaction of mortgage: the document issued by the mortgagee when the mortgage loan is paid in full. Also called “release of mortgage”

Reversionary Value (RV)

The value of property at the expiration of a certain time period. In transportation, recreational vehicle

Sales Broker

Commercial real estate broker that represents client in the sale or purchase of commercial real estate property

Second Mortgage

A mortgage that is second in priority because of the time recording the mortgage or of the subordination of the mortgage

Secondary Mortgage Market

The buying and selling of first mortgaged or trust deeds by banks, insurance companies, government agencies, and other mortgagees. This enables lenders to keep an adequate supply of money for new loans

Self-Amortizing Mortgage

One that will retire itself through regular principal and interest payments. Contrast with balloon mortgage or interest-only loan

Self-Storage (Also called Mini-Storage)

Provides personal storage for lease by consumers

Senior housing

(Includes assisted living, congregate care, senior apartments and skilled nursing centers) Multi-residential property specifically designed for care of senior citizens and/or physically disabled persons

Servicing

All the steps and operations a lender performs to keep a loan in good standing, such as collection of payments, payment of taxes, insurance, property inspections and the like

Shadow Anchored

An unanchored shopping center located near an anchored shopping center

Shared Appreciation Mortgage

Mortgage in which a borrower receives a below-market interest rate in return for which the lender (or another investor such as a family member or other partner) receives a portion of the future appreciation in the value of the property. May also apply to mortgages where the borrowers share the monthly principal and interest payments with another party in exchange for a part of the appreciation

Simple interest

Interest in which is computed only on the principal balance

Single Wide

A mobile home consisting of one unit

Site Work

The location or place of a plot of ground set aside for a particular type of land use

Skilled Nursing

A type of senior housing which offers on-site medical care

Sole Proprietorship

Ownership of a business, with no formal entity as a vehicle or structure

Spread

Number of basis points over a base rate index

Sprinkler

Existence of fire suppression systems in the building

Stabilized Operating Property

The income generated on an annual basis from the commercial property is stable, consistent and reliable

Strip Center

A string of stores in a commercial area, totaling 30,000 square feet, without central leasing, management, or theme

Structural/Engineering Report

A property condition report that outlines the current structural stability or instability of a property. The report will outline immediate costs needed to repair the property, as well as a maintenance program to maintain the property at its current status

Suburban

Describes a town or unincorporated developed area in a close proximity to a city. Suburbs, largely residential, are often dependent on the city for employment and support services; generally characterized by low-density development relative to the city

Survey

A measurement of land, prepared by a registered land surveyor, showing the location of the land with reference to know points, its dimensions, and the location and dimensions of any building

Sweat Equity

Equity created by a purchaser performing work on a property being purchased

Tax & Insurance Impound

Monthly deposits that a lender may require to be included with principal and interest payments for the payment of taxes and insurance

Tenant

One who is given possession of real estate for a fixed period or at will

Tenants by The Entirety

A husband and wife own the property with the common law right of survivorship; if one dies, the other automatically inherits

Tenant Improvements (TI)

The expense to physically improve the property to attract new tenants to new or vacated space which may include new improvements or remodeling. May be paid by tenant, landlord, or both. Typically, tenants are provided with a market rate TI allowance ($/sq.ft.)That the owner will contribute towards improvements. The tenant must pay for amounts above the TI allowance desired by the tenant

Tenants in Common

Two or more persons own the property with no right of survivorship. If one dies, his interest passes to his heirs, not necessarily the co-owner. Either party, or a creditor of one, may sue to partition the property

Term

The length of a mortgage

Third Party Costs

Costs resulting from third party reports, whether it be appraisal reports, environmental reports or structural engineering reports

Timberland

Land used for production of forest stands for commercial use

Title

The actual legal document conferring ownership of a piece of real estate

Title Insurance

An insurance policy that insures you against errors in the title search- essentially guaranteeing your and your lenders, financial interest in the property

Title Search

An examination of municipal records to determine the legal ownership of property. Usually is performed by a title company

Total Annual Operating Income

Total yearly income less operating expenses, adjustments, etc… but before mortgage payments, tenant improvements and leasing commissions

Total Annual Room Income

A hotel definition that represent the gross annual receipts from room revenue

Traffic Count

The amount of incoming and outgoing traffic a retailer or self-storage building generates over a fixed period of time

Triple Net Lease (NNN)

A lease that requires the tenant to pay for property taxes, insurance and maintenance in addition to the rent (also referred to as “net lease”)

Triple Wide

A mobile home consisting of three units which have been fastened together along their length

Truth in Lending

Federal law requiring disclosure of the annual percentage rate to home buyers shortly after they apply for the loan

Two-Step Mortgage

Mortgage in which the borrower receives a below-market interest rate for a specified number of years (most often 7 to 10), and then receives a new interest rate adjusted (within certain limits) to market conditions at the same time. The lender sometimes has the option to call the loan due with 30 days notice at the end of seven or 10 years. (Also called “super seven” or “premier” mortgage)

Underwriting

The decision whether to make a loan to a potential home buyer based on credit, employment, assets, and other factors and the matching of the risk to an appropriate rate and term or loan amount

U.S. Treasury Bill

Treasury bills, or t-bills, are short term securities with maturities of up to one year. They are issued by the U.S. government at a discount from face value. The price is quoted in yield, not dollars. At maturity, t-bills are redeemed for full face value. T-bills are issued in 3 month, 6 month, and 1 year maturities and are backed by the full faith and credit of the U.S. government

Unanchored

A tenant in a shopping center, which doesn’t have an anchored tenant

U.S. Treasury Bond

Treasury bonds are long term securities with maturities greater than 10 years. Treasury bonds are coupon bearing severities that pay interest on a semi-annual basis. Treasury bonds are backed by the full faith and credit of the U.S. government

U.S. Treasury Note

Treasury notes are intermediate term securities issued with 2, 3, 5, and 10 year maturities. Treasury notes are coupon bearing securities that pay interest on a semi-annual basis. Treasury notes are backed by the full faith and credit of the U.S. government

Usury

Interest charged in excess of the legal rate established by law

Vacancy

Unoccupied units as a percentage of the total number

Vacancy Percent

The percent of all units or space that is unoccupied or not rented. On a pro-forma income statement a projected vacancy rate is used to estimate the vacancy allowance, which is deducted from potential gross income to derive effective gross income

VA Loans

Long term, low-or no down payment loan guaranteed by the department of veterans affairs. Restricted to individuals qualified by military service or other entitlements

VA Mortgage Funding Fee

Premium of up to 1-7/8% (depending on the size of the down payment) paid on a VA-backed loan. On a $75,000 fixed-rate mortgage with no down payment, this would amount to $1,406 either paid at closing or added to the amount financed

Verification of Deposits

Document signed by the borrower’s financial institution verifying the status and balance of his/her financial accounts

Verification of Employment

Document signed by the borrower’s employer verifying his/her position and salary

Warehouse Fee

Many mortgage firms must borrow funds on a short term basis in order to originate loans which are to be sold later in the secondary mortgage market (or to investors). When the prime rate of interest is higher on short-term loans than on mortgage loans, the mortgage firm has an economic loss which is offset by charging a warehouse fee

Wraparound

Wraparound results when an existing assumable loan is combined with a new loan, resulting in an interest rate somewhere between the old rate and the current market rate. The payments are made to a second lender or the previous homeowner, who then forwards the payments to the first lender after taking the additional amount off the top. The debt secured includes an existing debt already on the property. The payments made to the holder of the wraparound include payments due on the existing loan and the holder must forward the appropriate portion of each payment on the existing note holder

Yield

The rate of return on a security, taking into consideration annual interest payments, purchase price, redemption value, and the time remaining until maturity

Yield Maintenance

A prepayment premium that allows investors to attain the same yield as if the borrower made all scheduled mortgage payments until maturity. Yield maintenance premiums are designed to make investors indifferent to prepayments and to make refinancing unattractive and uneconomical to borrowers

Yield to Average Life

Yield calculation used, in lieu of “yield to maturity” or “yield to call”, where books are retired systematically during the life of the issue, as in the case of a “sinking fund”, with contractual requirements. Because the issuer will buy its own bonds on the open market to satisfy its sinking fund requirements if the bonds are trading below par, there is, to that extent, automatic price support for such bonds; therefore they tend to trade on a yield-to-average-life basis

Yield to Maturity (YTM)

Concepts used to determine the rate of return an investor will receive if a long-term interest-bearing investment, such as a bond is held to its maturity date. It takes into account purchase price, redemption value, time to maturity, coupon yield and the time between interest payments. Recognizing time value of money, it is the discount rate at which the present value of all future payments would equal the present price of the bond (also referred to as “internal rate of return”). It is implicitly assumed that coupons are reinvested at the YTM rate. YTM can be approximated using a bond value table (also referred to as a “bond yield table”) or can be determined using a programmable calculator equipped for bond mathematics calculations