A GLOSSARY OF REAL ESTATE TERMS

C


Cafeterias
A dining area where meals are served and eaten.
CAM & Utilities
Common Area Maintenance (CAM); Operational expenses related to the utilities and maintenance of retail and office properties; under a Triple-Net lease the Tenant is required to reimburse the Landlord for their proportionate amount (based on square footage) of this expense.
An expense line item that includes expenses for anticipated capital expenditures required to maintain a building and future capital improvements of major building systems (e.g. HVAC, parking lot, carpets, roof, etc.). Replacement reserves are typically calculated on a per unit basis (e.g. multifamily - per unit; office, retail, industrial - per square foot; etc.).
Capital
Accumulated wealth. A portion of wealth which is set aside for the production of additional wealth; specifically, the funds belonging to the partners or shareholders of a business, invested with the expressed intention of their remaining permanently in the business.
Taxable profit on the sale of an appreciated asset.
The cap rate is the rate of return on net operating income considered acceptable for an investor and used to determine the capitalized value. This rate should provide a return on, as well as a return of, capital; also known as "cap rate". Also, the ratio of the annual NOI to the property price (or value).
Caps are used on adjustable rate mortgages (ARM’s) to limit the interest rate and/or the payment. Most ARMs have a periodic cap that is around 2% per year and a life cap of around 5%-6% over the life of the loan. "Payment only" caps sometimes create negative amortization where the principal balance of the loan increases rather than decreases over time.
Cash flow is an accounting term that refers to the amounts of cash being received and spent by a business during a defined period of time.
In investing, the cash-on-cash return is the ratio of annual before-tax cash flow to the total amount of cash invested, expressed as a percentage.
Caveat Emptor
A legal term meaning "let buyer beware".
CBD Office
An Office subtype characterized by its location in a 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.
A certificate obtained by a veteran from a Veteran’s Administration office which states that the veteran is eligible for a VA insured loan.
Certificate of Occupancy
Document issued by a local governmental agency that states a property meets the local building standards for occupancy.
Certificate of Reasonable Value (CRV)
An appraisal of property for the purpose of insurance by the Veteran’s Administration.
Certificate of Title
A certification issued by a title company or a written opinion rendered by an attorney that the seller has good marketable and insurable title to the property which he is offering for sale. A certificate of title offers no protection against any hidden defects in the title which an examination of the public records could not reveal. The issuer of a certificate of title is liable only for damages due to negligence. The protection offered a homeowner under a certificate of title is not as great as that offered in a title insurance policy.
Certified Copy
A true copy, attested to be true by the officer holding the original.
Cestui Que Trust
One having an equitable interest in property with the legal title being vested to the trustee.
Chain of Title
The chronological order of conveyance of a parcel of land from the original owner to the present owner.
Chattel
Class A, B, C
A, A property classification for properties that are above average in terms of design, construction and finish; command the highest rental rates; have a superior location, in terms of desirability and/or accessibility; generally are professionally managed by national or large regional management companies.
B, A property classification for properties that frequently do not possess design and finish reflective of current standards and preferences; construction is adequate; command average rental rates; generally are well maintained by national or regional management companies; unit sizes are usually larger than current standards.
C, A property classification for properties that provide adequate functionality, exhibit some level of deferred maintenance; coma less desirable areas; generally managed by smaller, local property management companies; tenants provide a less stable income stream to property owners than Class A and B tenants.
Client
Person who employs the agent. Typically the seller is a client. The buyer can be a client (buyer’s broker) or customer (seller’s broker).
Closing
Conclusion of a real estate sale where the title of the property is transferred to the new owners and funds are transferred to the appropriate parties ( seller, old lender, real estate broker, etc.).
Closing Agent
A neutral third party that facilities the closing of a real estate transaction. The closing agent can be an escrow company, title company or attorney.
Closing Costs
Expenses incurred by the buyer/borrower and the seller in a real estate or mortgage transaction. There can be non-recurring costs that include a one time charge for points, appraisal fees, etc. or a prorating of recurring costs such as taxes and insurance incurred while the new buyer/borrower owns the real estate.
Closing Statement
Statement prepared for the buyer and seller itemizing all of the costs of a real estate transaction.
The ratio of the total amount borrowed on all mortgages against a property compared to the appraised value of the property. For example, if you have an $80,000 1st mortgage and a $10,000 2nd mortgage on a home with an appraised value of $100,000, the CLTV is 90% ($80,000+$10,000 = $90,000 / $100,000 = 90%).
(sometimes called the direct sales comparison approach) a method of determining the value of real property used by appraisers and real estate brokers that compares actual recent sales of similar local properties to arrive at an indicated value. Small differences in the properties are assigned positive or negative dollar values to allow for direct comparison.
Code of Ethics
Standards subscribed to by members of the National Association of Realtors.
Co-Maker
Equally responsible for repayment as the borrower.
Co-op
A Multifamily subtype; characterized by its method of multiple ownership in which a corporation or business trust entity holds title to a property, (usually an apartment complex) and grants occupancy rights to shareholder tenants through proprietary leases. Also called a "cooperative."
Property intended for use by all types of retail and wholesale stores, office buildings, hotels and service establishments.
Property that is solely used for business purposes.
Fee paid to a broker or other entity for services rendered. Real estate brokers and mortgage brokers receive a commission for the services they provide; a real estate broker secures a buyer for a property that is for sale and a mortgage broker secures a mortgage loan for the buyer to finance the purchase of a property. Commissions are generally paid as a percentage of the sales price in a real estate transaction or the loan amount in a mortgage transaction.
Commitment
A written promise to make or insure a loan for a specified amount and on specified items.
Common Area Maintenance
Identifies the method by which the tenant is responsible for payment or reimbursement of Common Area Maintenance (CAM) and utility charges.
Common Law
Rules based on usage as demonstrated by decrees and judgments from the courts.
Community Property
Property owned jointly by husband and wife.
Community Shopping Center
Open shopping center of 100,000 - 400,000 square feet. Tenants: Supermarket and/or department or discount store.
Condemnation
The taking of private property for public use by a government unit, against the will of the owner, but with payment of just compensation under the government’s power of eminent domain. Condemnation may also be a determination by a governmental agency that a particular building is unsafe or unfit for use.
Conditional Commitment
A lenders promise to issue a loan subject to certain conditions. Generally, the lender will not fund the loan until the conditions have been met.
Conditional Offer
Purchase offer in which the buyer proposes to purchase property only after certain events (sale of another home, finding a loan commitment, etc.) occur.
Condominium
A structure of two or more units, the interior space of which are individually owned.
Conduit
The financial intermediary that sponsors the conduit between the lender(s) originating loans and the ultimate investor. The conduit makes or purchases loans from 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 Healthcare subtype; similar to independent living, but features a community environment, with one or more meals per day prepared and served in a community dining room.
Consideration
Anything of value given to induce another to enter into a contract. Earnest money deposit on a sales contract is consideration.
Construction
An event resulting in the construction, renovation or rehabilitation of real estate.
Construction Costs
If the Loan Purpose is Construction, identifies the total cost of construction (including all hard costs and soft costs and land acquisition cost, if applicable).
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 takeā€“out or permanent loan is used to pay off the construction loan.
Contingency
Condition which must be satisfied before the buyer can consummate the purchase of a property. Contingencies are generally outlined in the purchase contract between the buyer and seller.
Contract of Purchase
An agreement between parties for the sale of real estate. In some states it is synonymous with a Purchase Agreement, Sales Agreement, or Land Contract. In Texas it is known as an Earnest Money Contract.
Contract of Sale
A purchase transaction in which the buyer receives possession of the property, but the seller retains title.
Contract Rent
Actual rent as specified in a rental or lease agreement, as opposed to actual market or economic rent. IN LoanSizer, options include $/Yr., $/SF/Yr., $/SF/Mo. Different from Market Rent which is the rental income that a property is likely to command in the under current market conditions. Market rent, also referred to as economic rent, may be either higher or lower than contract rent.
Contract Sales Price
The full purchase price as stated in the contract.
Conventional Loan
A mortgage loan that is not guaranteed or insured by the government. FHA and VA loans are not conventional loans.
Convertible ARMs
ARMs that have a provision allowing the borrower to convert the mortgage to a fixed rate term. The conversion feature is outlined in the mortgage note and has certain restrictions.
Conventional Mortgage
A loan neither insured by the FHA nor guaranteed by the VA.
Cooperative Housing
An apartment building or a group of dwellings owned by a corporation, the stockholders of which are the residents of the dwellings. It is operated for their benefit by their elected board of directors. In a cooperative, the corporation or association owns title to the real estate. A resident purchase stock in the corporation which entitles him to occupy a unit in the building or property owned by the cooperative. While the resident does not own his unit, he has an absolute right to occupy his unit for as long as he owns the stock.
Corporation
A borrowing entity structured as a group of people granted a charter legally recognizing them as a separate entity having its own rights, powers, privileges and liabilities distinct and separate from those of its members.
Cost Plus Contract
A building contract setting the builder’s profit at a set percentage of actual cost of labor and materials.
Cost Basis
Accounting figure that includes original cost of property plus certain expenses to purchase, money spent on permanent improvements and other costs, minus any depreciation claimed on tax returns over the years.
Counteroffer
A new offer made as a result of another offer, which cancels the original offer.
County
A division within a state, usually encompassing one or more cities or towns.
Covenant
An agreement written into deeds and other instruments promising performance or nonperformance of certain acts or stipulating certain uses or non users of the property.
Covered Parking Spaces
Parking spaces under a roof or other structure designated to the specific property and/or building.
Credit Rated
Identifies whether the tenant is an investment grade tenant with a BBB- rating or higher.
Credit Report Fee
A fee charged to obtain a credit report on the borrower or borrowing entity.
Current Index Yield
The corresponding yield of a published interest rate, such as the Prime Rate, LIBOR, Treasury Bill / Treasury Note rate, 11th District COFI, etc. Lenders use indexes to establish interest rates charged on mortgages or to compare investment returns. A final note rate typically includes an Index Yield plus a Spread.
Current Interest Rate
If the Loan Purpose is Refinance, identifies the current interest rate of the existing mortgage note.
Current Year
The current calendar year in which the analysis takes place; generally a partial year that results in a year-to-date representation.
Customer
Typically, the buyer (before buyer agency laws), as opposed to the principal (seller).