Welcome to the Lexicon of Real Estate Terms
Navigating the world of real estate can be daunting, especially with the myriad of terminology that pervades the industry. Our Lexicon of Real Estate Terms is here to simplify your experience, providing you with more than 3,300 terms and definitions and 33,000 Quizes to help you feel comfortable using modern real estate language.
This comprehensive guide serves as a quick reference for various audiences, whether you are a home buyer or seller, a real estate professional, a business student, an investor, or an attorney. We understand that mastery of the language is crucial in making informed decisions in the real estate market, and our lexicon is designed to empower you.
What You’ll Find in Our Lexicon:
Our lexicon includes detailed definitions for real estate topics from A to Z. Whether you’re looking to understand key concepts for personal knowledge or to enhance your professional repertoire, you’ll find terms related to:
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Appraisal: Learn about the process of determining a property’s market value.
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Architecture: Explore different styles and terminologies that define building design.
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Brokerage: Understand the role of real estate brokers and the services they provide.
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Construction: Familiarize yourself with the terms used in the building process.
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Debenture: Discover financial instruments that could impact real estate investments.
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Flood Plain: Understand the risks and regulations associated with properties in flood-prone areas.
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Negative Amortization: Get insights into loan types that increase in balance over time.
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Security Instrument: Learn about the agreements that secure a loan against a property.
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Subprime Loan: Understand the implications of loans given to borrowers with poor credit.
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Underlying Mortgage: Familiarize yourself with the financial obligations tied to a property.
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Zoning: Get to grips with laws that define how land can be used.
In addition to these definitions, our lexicon provides a wealth of resources, including:
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Common abbreviations used in real estate communications.
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Mathematical formulas essential for calculating mortgage payments, investment returns, and more.
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Charts and diagrams to visually represent complex concepts and processes.
Why Use Our Lexicon?
By utilizing this resource, you’ll gain confidence in your understanding of real estate terminology. Whether you’re conducting research, preparing for a transaction, or simply looking to expand your knowledge base, our lexicon ensures you have access to the information you need at your fingertips.
Join us in diving into the intricate world of real estate language, and empower yourself with the terminology that shapes the industry. Feel free to explore and reference frequently; your journey into mastering real estate has just begun!
A finder's fee refers to money paid to an individual who identifies or connects a buyer and seller or lender and borrower, facilitating a transaction. While finder's fees are permissible in certain jurisdictions under specific conditions, they cannot be substantial and get mistaken for a broker's commission.
A provision in a lease for an office or retail space that provides a certain sum or amount per square foot to the tenant to customize the space.
A Finished Lot refers to a parcel of land that has been prepared for immediate construction with essential infrastructure, legal clearances, and utilities in place.
Fire insurance is a type of property insurance that covers damage and losses caused by fire. It is typically part of a broader homeowner’s insurance policy and is essential for protecting real estate investments against fire-related incidents.
A fire stop is a construction feature designed to prevent the spread of fire throughout a structure. It typically involves barriers made from fireproof materials, often interspersed within walls and floors to compartmentalize sections of a building, enhancing fire safety and containment.
Materials, construction elements, and designs specified to withstand exposure to flames for a defined period, contributing to enhanced safety and containment during a fire.
Fireproof construction refers to the use of materials that have a high degree of resistance to fire, thereby reducing the risk of damage or destruction due to fire. These materials can either be noncombustible or protected by other noncombustible materials.
A firm commitment is an irrevocable agreement in which one party commits to performing a specific act, typically in the context of lending, ensuring that financing will be provided under predefined terms.
A first mortgage, also known as a senior mortgage, is a mortgage that has priority as a lien over all other mortgages and is satisfied first in cases of foreclosure.
The First Refusal Right, also known as Right of First Refusal (ROFR), grants the holder the opportunity to enter a transaction—such as purchasing or leasing property—before the owner can enter into a similar transaction with a third party.
First-Time Home Buyers are individuals or households entering the real estate market to purchase a home for the first time or after an extended period of renting. Various programs and incentives often exist to assist these buyers, particularly those who meet specific criteria such as income limits.
First-Year Depreciation allows property owners to take a larger depreciation deduction in the first year than what is typically provided under regular depreciation schedules, thereby accelerating tax benefits.
Fiscal policy refers to the government's decisions regarding taxation, government spending, and borrowing, designed to influence the economy. It aims to manage economic fluctuations by adjusting public finance mechanics such as federal budgets and deficits.
A fiscal year is a continuous 12-month period used for financial reporting that starts on any date after January 1st and ends one year later, distinct from the calendar year.
The term Fiscal Year (FY) is used in business and finance to signify a one-year period chosen for accounting and financial reporting purposes. Unlike the calendar year that runs from January 1 to December 31, a fiscal year can start and end on any dates as chosen by the organization.
Fixed assets, also known as tangible assets or property, plant, and equipment, are long-term physical assets held by a business for use in its operations and not for sale. These assets provide value to the operations of a company over several years.
A fixed bid is an estimated cost, based on plans and specifications, that also stands as the actual cost of the job, regardless of any fluctuations in the actual cost of materials and labor.
Fixed expenses in real estate management refer to costs that remain constant regardless of occupancy levels, which contrast with variable expenses that fluctuate based on usage or occupancy.
A Fixed Payment Mortgage is a loan secured by real property that features periodic payments of interest and principal that remain constant over the term of the loan. It is a subset of Fixed Rate Mortgages but maintains a fixed payment schedule throughout its term.
A Fixed-Price Lease-Purchase Option is a contractual agreement where a tenant has the option to purchase the leased property at a predetermined price after or during the lease term.
A fixed-rate mortgage, or FRM, is a loan secured by real property featuring an interest rate that remains constant for the term of the loan. It contrasts with an adjustable-rate mortgage (ARM) in that the interest rate does not fluctuate based on market conditions or an index.
A fixer-upper refers to a property that requires repairs, renovations, or updates, often purchased at a lower price with the intention of improving it for resale or personal use.
Fixtures Improvements refer to personal property that has been attached to the land in such a manner that it becomes part of the real estate. Decisions regarding whether an item is a fixture often involve assessments of intent, method of annexation, the relation of the parties, and the adaptation of the article.
A flag lot is a method of subdividing land into individual parcels in such a way that compliance with local subdivision regulations can be avoided. Owners define each lot with a minimal amount of road frontage to gain exemptions and avoid regulatory compliance and expenses.
In real estate terms, a Flat can refer either to a single-level apartment or a type of mortgage or lease with level payments.
A flat fee broker is a licensed real estate broker who charges a predetermined fixed fee for providing brokerage services instead of a conventional commission percentage based on the property's sales price.
A Flat Lease is a rental agreement that stipulates a constant rental payment over the lease period, without any variations or escalations.
The landmark 1990 court decision regarding a lender’s exposure to liability for environmental cleanup if the lender acquires the property by foreclosure.
Flex space refers to a type of industrial property that can be easily converted to accommodate various uses, including office space, research laboratories, or industrial activities. This versatility makes it ideal for businesses with dynamic space needs.
A Flexible Payment Mortgage (FPM) allows borrowers to choose among several monthly payment options including lower interest-only and minimum payments, providing greater flexibility and control over mortgage expenses.
A flexible-payment mortgage is a financing option that allows borrowers to make varying monthly payments but ensures that the total repayments are sufficient to amortize the loan over its term.
FLIP involves the purchase and immediate resale of property, often within hours or days, aiming for quick profit. It can carry a negative connotation when associated with illegal activities that exploit innocent parties.
Flipping a loan involves repeatedly refinancing an existing mortgage, often luring the borrower with seemingly better interest rates while charging substantial fees for the new loan and prepayment penalties for the old loan. This predatory lending practice can lead to excessive debt and ultimately default and foreclosure for the borrower.
In real estate and finance, 'FLOAT' refers to the period between a transaction (such as a deposit or withdrawal) and the time it's credited or deducted, the difference between a variable interest rate and its pegged index, and the act of incurring a debt through loans or bonds.
A floating rate is an interest rate on a loan, bond, or other fixed-income security that fluctuates over time according to a specific benchmark or index. This rate is not fixed and can change throughout the term of the financial instrument.
Flood insurance is an insurance policy that covers property damage specifically due to natural flooding. Although offered by private insurers, it is largely subsidized by the federal government.
A floodplain is a level land area subject to periodic flooding from a contiguous body of water. Floodplains often play a crucial role in environmental balance and can influence real estate development and insurance costs.
In real estate, a 'Floor' is a provision in the contract of an adjustable-rate mortgage (ARM) that sets a minimum interest rate for the loan, ensuring it does not fall below a specified level regardless of market conditions.
Floor duty, also known as floor time, refers to the period during which a real estate salesperson is required to be present in the office to handle phone calls and visits from potential clients who have no previous relationship with the agency.
Floor load capacity refers to the weight that a building's floors can support, usually measured per square foot. This is a crucial consideration, particularly for industrial properties, where heavy equipment or large quantities of materials may be stored or used.
A floor loan is the minimum amount of money that a lender is willing to advance to a borrower during the initial stage of a financing agreement. It is commonly used in real estate development contexts for construction loans to manage risks until certain conditions are met.
A floor plan is a scaled diagram of a room or building viewed from above. The floor plan may depict an entire building, a single floor of a building, or a single room. It may also include measurements, furniture, appliances, or anything necessary for the purpose of the plan.
The Floor-Area Ratio (FAR) is a measure of building density that assesses the total floor area of a building in relation to the size of its land parcel. It is commonly used in urban planning to control the massing of buildings and to ensure appropriate land use.
The floor-area ratio (FAR) measures the relationship between the total square footage of a building and the square footage of the land area on which it is built. FAR is regulated by zoning codes and can significantly impact land value and development potential.
Flopping is a fraudulent practice used by fraudsters to undervalue a property intentionally to induce a lender to make a short sale, thereby benefiting the fraudster at the detriment of the property owner and the lender.
In the context of real estate and construction, a FLUE (Fireplace and Chimney Flue) is a chamber in a fireplace that helps direct smoke and airborne soot through the chimney to the outside air.
The Federal National Mortgage Association (FNMA), commonly known as Fannie Mae, is a government-sponsored enterprise (GSE) that buys and sells existing residential mortgages, facilitating liquidity within the mortgage market and enabling more Americans to achieve homeownership.
The footprint of a building refers to the shape, orientation, and outline of the ground floor area of a structure within a given plot of land. It influences the overall arrangement and environmental impact of the building on the site.
For Sale By Owner (FSBO) refers to a property sale conducted directly by the owner without the use of a real estate agent. This approach allows sellers to avoid paying commission fees but requires them to handle all aspects of the sale process.
A policy of restraint in taking legal action to remedy a default or breach of contract, generally in the hope that the default will be cured, given additional time.
Force majeure refers to an inevitable or unforeseeable event beyond the control of a contractual party, which prevents the performance of contractual obligations, often included in contracts as a protective clause to release the affected party from liability due to non-performance or delayed performance.
A forced sale, also known as a distress sale, occurs when the owner of a property is compelled to sell, often at a price lower than the market value, typically due to urgent circumstances such as financial distress, legal judgments, or repossession.
Foreclosure is the legal process through which a lender attempts to recover the remaining balance on a loan from a borrower who has stopped making payments, typically by selling the asset used as collateral.
A foreclosure sale is the public auction of a mortgaged property following the foreclosure of the loan secured by that property. This process is designed to recoup the unpaid loan balance through the sale of the collateral property.
Foreclosure schemes involve deceiving homeowners who are at risk of defaulting on their mortgage loans into transferring their deeds and paying fees under falsified pretenses that the shyster will save their homes from foreclosure. The fraud involves the shyster profiting while leaving the loans unpaid.
Forfeiture refers to the loss of money or anything else of value because of failure to perform under a contract. It often occurs in legal and real estate contexts, where breaching a contract can result in the forfeiting party losing their rights to certain property or assets.
FORM 1065 is a federal income tax form used by partnerships and certain other entities to report their income, gains, losses, deductions, and credits. The information on FORM 1065 is used to calculate the individual tax responsibilities of the partners or members.
Form 1098 is a form that lenders are required by the Internal Revenue Service to send to mortgage borrowers, showing the amount of interest paid during the past year.
The Form 1099 is a series of documents regulated by the Internal Revenue Service (IRS) used to report various types of income other than salaries, wages, and tips. The form covers various income sources, including dividends, interest, and nonemployee compensation.
Form appraisal utilizes standardized forms, such as the Fannie Mae Form 1004, Form 2055, and the Uniform Residential Appraisal Report (URAR), to provide a systematic approach to real estate valuation.
Form K-1 is a tax document used to report the incomes, deductions, and credits of a partnership's partners, estate's beneficiaries, and S corporation's shareholders. It helps these individuals report their share of the business's income on their personal tax returns.
A Four-Plex is a type of residential building configuration that contains four separate dwelling units. It offers opportunities for both living in one unit and renting out the others or renting all four units for income.
An appraisal principle stating that the value distribution of a uniformly deep commercial lot is such that 40% lies in the front quarter, 30% in the next quarter, 20% in the third quarter, and 10% in the last quarter. This rule is essential in assessing property value for compensation in eminent domain cases.
Fracking, also known as hydraulic fracturing, is an oil and gas well drilling technique used to enhance the flow of natural resources. While it significantly boosts well production, it has sparked debates due to its environmental implications.
Fractional interest refers to a way of owning real estate where the owner possesses a portion or 'fraction' of the total asset, typically involving less than complete control over the whole property. This form of ownership is common in scenarios where multiple parties share the rights and responsibilities associated with a single piece of real estate.
A fractured condominium refers to a housing development in which some units are rented out as apartments while others are sold and occupied as owner-occupied condominiums. This situation typically arises when a developer's attempt to sell a majority of units as condos fails, resulting in a mixed-use scenario.
A frame house is a type of residential structure built using a wooden frame, typically covered with siding or veneer materials that provide both aesthetic appeal and added durability.
A franchise is an arrangement between a franchisor and franchisee where the franchisee acquires the right to use the franchisor’s business model, brand, and support in exchange for a fee. This often includes both an initial fee and an ongoing percentage of the franchisee's gross sales.
Fraud and flipping is an illegal real estate practice involving the purchase and immediate resale of property, typically to deceive and defraud lenders or other stakeholders by inflating the property's value artificially.
Fraud in real estate involves the intentional use of deception for financial gain, leading to losses for another party. Understanding how to identify and address fraud is crucial in protecting one's investment.
Freddie Mac (Federal Home Loan Mortgage Corporation) is a government-sponsored enterprise (GSE) that buys and securitizes mortgages to ensure a reliable and affordable supply of mortgage funds across the country.
Freddie Mac is a government-sponsored entity that purchases residential mortgage loans in the secondary market to provide liquidity, stability, and affordability to the U.S. housing market.
A free and clear title, also known as a clear title, refers to a property that is free of any encumbrances, such as mortgage debt or liens, that could affect the ownership rights of the buyer.
Free rent refers to the occupancy of a space without payment, typically used as a promotional tool or as part of a compensation package. It is commonly seen in real estate where landlords might offer rent-free periods as an incentive to tenants or include free rent as part of employment agreements.
Freehold refers to an interest in real estate without a predetermined time span, giving the holder indefinite ownership and rights to the property.
A freestanding building is an independent structure not attached to any other structures, often distinct and self-standing.
French Provincial is a French-style formal housing architecture featuring 1½- to 2½-story structures with balanced designs, high steep hip roofs, and curve-headed upper windows that break through the cornice.
"Friable" refers to materials—most importantly asbestos—that can be easily crumbled, pulverized, or reduced to powder by hand pressure. When asbestos is in a friable state, it releases fibers or particles into the air, which can then be inhaled or ingested, posing significant health risks, such as lung diseases, including asbestosis and mesothelioma.
Frictional vacancy refers to the short-term, transitional unemployment situation in real estate when properties are vacant due to tenants moving in or out. It represents the natural turnover rate within the market.
A front foot is a standard measurement of land length, applied along the frontage at the street line. It is often used for lots of generally uniform depth in commercial or downtown areas.
Front money refers to the initial capital required to begin a real estate development project. It includes funds needed for tasks like site acquisition, planning, permit acquisition, and securing loan commitments.
The front-end ratio is the proportion of a borrower's gross monthly income that goes toward housing costs, and it is utilized during the mortgage underwriting process to assess default risk.
Frontage refers to the linear distance that a piece of land directly abuts along a defined edge, such as a lake, river, street, or highway. It is a significant factor in real estate appraisal, as it often correlates with the desirability and value of a property.
FSBO refers to properties on the market being sold directly by the owner, without representation by a real estate broker. This approach often aims to save on commission fees.
FSG (Full Service Gross) is a type of lease in which the landlord covers all property-related expenses. These expenses typically include taxes, insurance, maintenance, utilities, and more. FSG leases simplify budgeting for tenants and offer peace of mind by mitigating unexpected costs.
The Full Amortization Term is the amount of time it will take for a mortgage to be fully paid off through periodic payments of principal and interest. It specifies the duration within which the loan balance will reach zero, taking into account both the repayment of principal and the interest charges.
Full Disclosure is a requirement that compels parties involved in a transaction to reveal all pertinent information that could impact the party receiving the information, ensuring fair and transparent dealings.
A Full Service Gross (FSG) lease requires the property owner to cover all operating expenses, making it easier for tenants to manage costs, as opposed to a net lease where the tenant is responsible for additional expenses.
A fully amortized loan is a type of loan repayment structure where regular payments of both principal and interest are made over the course of the loan term, resulting in the total loan being paid off by the end of the term.
The fully indexed rate in the context of adjustable-rate mortgages (ARMs) refers to the interest rate determined by the sum of the current value of an index and a margin applied to the loan. This rate dictates the monthly mortgage payments after initial rate periods and caps are considered.
Functional Depreciation, also known as Functional Obsolescence, refers to the loss of property value due to its outdated or inefficient design, which adversely affects its utility, desirability, or functionality.
A style of house commonly seen post–World War II, which emphasizes functional design, the use of modern materials, and seamless integration of indoor and outdoor spaces.
Functional obsolescence is an appraisal term that refers to the loss of value from all causes within a property except those due to physical deterioration.
Functional vacancy refers to the phenomenon in real estate where space remains intentionally vacant due to it being uneconomical to market or part of a broader investment strategy.
Fundamental Demand Analysis is an element of Market Analysis where the demand for a property or property type is forecast based on expected changes in underlying demographic and economic factors for the market area.
Funding a loan involves the process of supplying the agreed-upon amount of money for a loan. After loan approval and commitment, the lender forwards the necessary cash at the closing stage.
A nominal fee charged by the Department of Veterans Affairs to those receiving a mortgage guaranteed by the VA, which helps to fund the VA loan program.
Funds From Operations (FFO) is a key financial performance metric used by real estate investment trusts (REITs) to show the cash generated from their operations, which is then available for distributions to shareholders.
Funds From Operations (FFO) is a measure of the profitability of a Real Estate Investment Trust (REIT) derived from net income adjusted for non-cash items such as depreciation and amortization. It is widely regarded as a more accurate indicator of a REIT's performance than GAAP net income.
Furniture, Fixtures, and Equipment (FF&E) are vital items that wear out more rapidly than other components in commercial properties like hotels or motels, and typically have a useful life of around 7 years.
