Amenity –A feature that enhances property value.

Appraisal- is an opinion or estimate of value. Also refers to the process by which a value estimate is obtained.

Appraiser- One qualified by education, training, and experience to estimate the value of real and personal property.

ARM- An Adjustable Rate Mortgage- a mortgage who interest rate and monthly payments vary throughout its life.

Arm’s Length Transaction- A transaction in which the parties (whom may be related or have had a previous relationship with one another) now act entirely independent of each other, deal with each other as strangers, and have no reason for collusion.

Assets – a property or right owned, tangible or intangible, that has monetary value and is capable of providing future benefits to its owner.

 

 

Balance sheet – is a report of financial position of a business at a specific point in time, showing its assets, liabilities, and owner’s equity.

Balloon mortgage – is a mortgage with periodic installments of principal and interest that do not fully amortize the loan.  The balance of the mortgage is due in a lump sum at a specified date usually at the end of the term.

Bankruptcy – court proceedings to relieve the debts of an individual or business unable to pay its creditors.

Bid or Offer –The price at which a seller will sell particular securities. In the securities and commodities trade the highest price offered for a security or commodity at a given time. Also call a “quotation” or “quote.” In real estate a bid, is also known as an offer. 

Borrower – one who received funds in the form of a loan with the obligation of repaying the loan in full with interest.

Building code- Regulations based on safety and health standards that govern design, construction, and materials used in construction.

 

 

Cash flow – cash received less cash paid out, before any consideration for income taxes. 

Cash reserves – reserves normally kept by the owner of the property to fund any operating shortfall or capital improvements that are required for the property.

Closing- In real estate, the delivery of a deed, the signing of a note, and the disbursement of funds necessary to consummate a sale or loan transaction. 

Common area-An area owned by the owners or tenants of a complex or subdivision, for the common use of all the residents.

Comparables / Comps – properties used for comparative purposes in the appraisal process that have similar characteristics to the subject property.

Concessions- Are a discount or other inducement given by a landlord or seller to a prospective tenant or buyer to induce them to sign a lease or purchase property.

Conforming – mortgages that fall within Fannie Mae and Freddie Mac’s loan limits.  If you borrow less than this amount, you’ll get a lower interest rate than on so-called non-conforming or jumbo loans.

Construction loan – a short term, interim loan for financing the cost of construction.  The lender advances funds to the builder at periodic intervals as work progresses.

Contingencies- or Contingency – a clause in a contract that requires the completion of a certain act or the occurrence of a certain event.

Cost approach to value- is a valuation approach in which the value of a property is determined by computing the replacement value of improvements, deprecation, and the value of land.

 

Debt service- is the borrowers periodic mortgage payments comprised of principal and/or interest on the unpaid mortgage balance.

Deed- the document by which title to real property is transferred or conveyed from one party to another. 

Deed-in-Lieu – a deed given by a borrower/ mortgagor to a lender/ mortgagee to satisfy a debt and avoid foreclosure.

Deed restrictions – a limitation on the use of real property added to the deed by the property owner.

Defaults – a breach of nonperformance of the terms of a note, the covenants of a mortgage, or the terms of other loan documents.

Delinquencies – failure of a borrower to make timely payments specified under a loan agreement.

Down payment  - a portion of the sale price paid a seller by a buy to close a sales transaction, with the understanding that the balance will be paid at settlement.  Down payment is also the difference between the sales price of real estate and the mortgage amount.

Due diligence review- is an examination by a purchaser of a servicing portfolio. Generally the reviewer will look at credit quality and underwriting of the loan collateral underlying the servicing rights; correctness and completeness of the loan documents; the seller’s servicing practices and methodologies; and the accuracy of the portfolio of offering document. As used here, a re- underwriting of the loan in line with borrowers request to determine the feasibility of the request by lender.

 

 

Easement- A right to the limited use or enjoyment of land held by another, including, for example, an interest in land to enable sewer or other utility lines to be laid, or to allow access to a property.

Encroachment- is an improvement that illegally violates another’s property or right to use that property. 

Encumbrance- anything that affects or limits the fee simple title to property, such as mortgages, leases, easements. Or restrictions.

 

 

Fannie Mae – Federal National Mortgage Association – the nation’s largest mortgage investor created in 1968 by an amendment to Title III of the National Housing Act (12 USC 1716 et. Seq. this stockholder – owner corporation, a portion of whose board of directors is appointed by the President of the US, supports the secondary market mortgages on residential property with mortgage purchase and securitization programs.

Fee simple- the greatest possible interest a person can have in real estate, including the right to dispose of property or pass it on to one’s heirs.

FICO scores – (Fair Isaac Corporation) A credit score is a number lenders use to help them decided if “ I give the person a loan how likely is it that I will get paid back on time.” A score is a snapshot of the credit risk at a particular point in time. The most widely used credit scores are FICO scores – based solely on information in consumer credit reports maintained at the credit reporting agencies, Experian, Equifax, and Trans Union.

Financial statement – a financial report including a balance sheet and an income statement. 

Fixed rate – a mortgage that allows you to lock in an interest rate for the entire term of the mortgage.

Flood insurance- Insurance that reimburses the policyholder for damage to property caused by the peril of flood.

Foreclosures – a legal procedure in which a mortgaged property is sold in a legal process to pay the outstanding debt in case to default.

Freddie Mac – Federal Home Loan Mortgage Corporation – created by Congress in Title II of the Emergency Home Finance Act of 1070 (12 USC 1451 et seq.).  This stockholder-owned corporation, a portion of whose board of directors is appointed by President of the United States, supports the secondary market in mortgages on residential and multifamily properties with mortgage purchase and securitization programs.

 

 

Hazard Insurance- Insurance coverage, which provides compensation to the insured in case of property loss or damage.

 

 

Income Approach –the appraisal technique used to estimate the real property value by capitalizing net income.

Income approach to value- the appraisal technique used to estimate real property value by capitalizing net income.

Installment loan – the periodic payment that a borrower agrees to pay a mortgage lender.

Interest rates – percentage paid for the use of money, usually expressed as an annual percentage.

 

 

Judgments – are a final determination by a court of the rights and claims of the parties to an action.

 

 

Landlord –the owner or lessor of real property.

Leasing – (derived from the word Lease) –A written document containing the conditions under which the possession and use of real and/or personal property are given by the owner to another for a state period and consideration.

Lessee- One holding rights of possession and use of property under the terms of a lease.   Also known as a tenant.

Lessor- One who leases property to a lessee. Also called a “Landlord”.

Lender (s) – person or entity that invests in or originates loans, such as a mortgage banker, credit union, commercial bank, or savings and loan.  In commercial property usage, the lender may be a life insurance company, bank or pension fund that provides the funds and in whose name the loan is closed.

Liabilities – an accounting term signifying money owed or expected to be owed to another party. 

License- Generally, permission by a lawful authority to do an act, which, without such permission, would be illegal. In real property, a privilege to enter for a specified purpose (e.g., to collect rents), but does not confer on or vest in the licensee any title or estate in the property.

Liens – a legal hold or claim of a creditor on the property of another, as security for a debt.  Liens may be against real or personal property.

Loan Officer – one who originates loans. 

LTV – Loan-to-Value – is the ratio of the amount of the loan to the appraised value or sales price of real property, which is commonly expressed as a percentage.

 

 

Market-Current supple and demand characteristics of a commodity in a given geographic/economic setting.

Market Value- The highest price that a buyer and the lowest price that a seller would accept, neither one being compelled to buy or sell. Also called “fair market value”.

MIP  - Mortgage Insurance Premium – the amount paid by a mortgagor for mortgage insurance either to FHA or a private mortgage insurance company.

Mortgage – a pledge of property, usually real property, as security for a debt.  In many states, this document is a deed of trust.  The document may contain the terms of repayment of the debt.  By further extension, “mortgage” may be used to describe both the mortgage proper and the separate promissory note evidencing the debt and providing the debt’s repayment.

 

 

Negative cash flow- the deficit that is created when expenditures required to maintain an investment exceed income received on the property.

Net operating income (NOI) – The amount remaining after total operating expenses (excluding interest payments) are deducted from effective gross income.

Net worth – the value of all assets, including cash, less the total liabilities.  Often used as an underwriting guideline to indicate creditworthiness and financial strength.

Non-conforming – loans not acceptable to Fannie Mae and/ or Freddie Mac.

Note – a general term for any kind of paper or document signed by a borrower that is an acknowledgment of the debt, and is, by inference, a promise to pay.  When the note is secured by a mortgage, it is called a mortgage note and the mortgagee is named as the payee.

 

 

Payoff letter- is a statement detailing the unpaid principal balance, accrued interest, outstanding late charges, legal fees, and all other amounts necessary to pay off the lender in full.

Plans and Specifications- are Architectural and engineering drawings and specifications for construction of a building or project. They include a description of materials to be used and the manner in which they are to be applied.

 

 

Sales comparison approach to value / Market Approach to Value- is the most reliable method of appraising real property that requires using the market prices and property features of similar, nearby comparable properties that have sold within the recent past (usually 1 year) to arrive at a market value of the property being appraised.

Satisfaction of mortgage- the recorded instrument the lender provides to evidence payment in full of the mortgage debt.

Secondary Mortgage Market  - the market where lenders and investors buy and sell existing mortgages or mortgage-backed securities, thereby provides greater availability of funds for additional mortgage lending.   

Survey- is a measurement of land, prepared by a registered land surveyor, showing the location of the land with reference to known points, its dimensions, and the location and dimensions of any improvements.

 

 

Tenant- One who is not the owner but occupies real property under consent of the owner and in subordination to the owner’s title. The tenant in entitled to exclusive possession, use, and enjoyment of the property, usually for a time and amount specified in the lease.

Terms – the period of time between the commencement date and termination date of a note, mortgage, legal document, or other contract.

 

 

Zoning- the creation of districts by local governments in which specific types of property uses is authorized.