Real Estate Glossary

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.

Land adjoining a river that would flood if the river overflowed its banks.

The ratio of the bulk area of a building to the land on which it is situated. Calculated by dividing the total square footage in the building by the square footage of land area.

A force that cannot be controlled or resisted. In other words, something beyond the control of the parties involved. Includes acts of God (e.g., flood, tornadoes, etc.) and acts of man (e.g., riots, strikes, arson, etc.).

A proceeding, in or out of court, designed to extinguish all rights, title, and interest of the owner(s) of property in order to sell the property to satisfy a lien against it.

A borrowing with an unconditional guaranty. Should the borrower become delinquent under a full recourse loan, he or she must accept full responsibility for the loan.

A rental rate that includes operating expenses and real estate taxes for the first year. The tenant is generally still responsible for any increases in operating expenses over the base year amount. See Also: Pass Throughs

Design of a structure or facility that increases its overall efficiency and provides maximum user acceptance; a parking concept plan showing traffic flow, stall geometry, and other features that determine the interior design of parking facilities.