Real Estate Glossary

Not the same as the redemption period after a foreclosure sale, which is a right established by statute. Properly, the right to pay off the mortgage lien in default by payment of the principal, interest and costs due.

The participation by a lender in the equity ownership of a project as one of the conditions for granting a loan. Used by financial institutions to partially offset the effects of inflation. Also called "Equity Kicker."

A clause in a lease providing for increased rent at a future time. May be accomplished by several means such as (1) fixed increase - A provision that calls for a definite, periodic rental increase; (ii) Cost of living - A clause that ties the rent to a government cost of living index, with periodic adjustments as the index changes; or (iii) Direct expense - Rental adjustments based on changes in expenses paid by the landlord, such as tax increases, increased maintenance costs, etc.

A written agreement usually made between a buyer, seller and escrow agent. The escrow agreement sets forth the basic obligations of the parties, describes the objects deposited in escrow, and instructs the escrow agent concerning thc disposition of the objects deposited.

A statement concerning the status of an agreement and the performance of obligations under the agreement relied upon by a third party, including a prospective lender or purchaser. In the context of a lease, a statement by a tenant identifying that the lease is in effect and certifying that no rent has been prepaid and that there are no known outstanding defaults by the landlord (except those specified).

A written agreement between a real estate broker and a building owner in which the owner promises to pay a fee or commission to the broker if specified real property is sold or leased during a stated period. The broker may, or may not be the cause of the sale or lease.

Provision in a lease establishing the maximum level of operating expense(s) to be paid by the landlord. Expenses beyond this level are to be reimbursed by the tenant. May be applied to specific expenses only (e.g., property taxes or insurance).

A term usually found in appraisals that attempts to determine the cash price that would likely be negotiated between a willing seller and willing buyer in a reasonable amount of time. For a sale to be considered a reflection of "Fair Market Value," it must meet all the conditions of a fair sale whereby: (i) both buyer and seller act prudently, knowledgeably and under no necessity to buy or sell, i.e. other than in a forced or liquidation sale; (ii) the property must be offered on the open market for a reasonable amount of time, taking into consideration the property type and local market; and (iii) payment is made in cash or terms equivalent to cash. When a sale is unlikely, i.e., when it is unlikely to be completed within 12 months, the appraiser must discount all cash flows generated by the property to ascertain the estimate of Fair Value.

An analysis of needs, costs of recommended improvements, and anticipated revenue and costs; establishes the basis for the construction of an individual improvement or a complete system.

An estate of real property that the owner has unrestricted powers to dispose of and which can be left by will or inherited. Commonly used as a synonym for ownership.

The cost of credit as a dollar amount. It includes any charges payable by the borrower as a condition of the loan. The finance charge includes the total amount of interest, points, loan fees and other credit charges paid for the term of the loan.

A mortgage creating a lien against a property which has priority over all other voluntary liens which exist against the property. Foreclosure of a first mortgage lien will generally extinguish or cut off any second mortgage lien or other subordinate lien.

A clause occasionally inserted in a lease that gives a tenant the first opportunity to buy a property if the owner decides to sell. The owner must have a legitimate offer which the tenant can match or refuse.

Costs, such as rent, which do not fluctuate in proportion to the level of sales or production.

One- or two-story buildings with little or no common areas, high ceilings, load-bearing floors and loading dock facilities. Usually configured to allow a small amount of office space in combination with light assembly or warehouse/distribution uses.