In real estate, 'ABLE' refers to the financial capability of a buyer to complete a transaction. Being ABLE indicates that the buyer has the necessary funds or financing arrangements to proceed with the purchase of a property.
An accommodation party is an individual who signs an agreement or promissory note without receiving any value in return, for the sole purpose of lending their name to help another person secure a loan or other arrangement.
An Acquisition, Development, and Construction (ADC) Loan is a short-term loan used to finance the acquisition of land, development of infrastructure, and construction of buildings.
An addendum, also known as a rider, is a supplemental document added to a primary contract to include additional terms or clarify existing conditions without rewriting the entire original document.
An after acquired clause is a provision in a mortgage loan that includes property subsequently purchased as security on the existing mortgage. This can complicate future financing and the restructuring of loans as additional acquired property becomes part of the original security.
An AML Adjustable Mortgage Loan is a type of mortgage that allows the interest rate to adjust periodically based on changes in a corresponding financial index that's associated with the loan. This type of mortgage is often chosen for its initial lower interest rates.
A blanket mortgage is a single mortgage that covers more than one parcel of real estate, often used by developers to finance multiple properties under a single loan.
Capital structure refers to the composition of capital invested in a property, reflecting the interests of those who contributed both debt and equity capital.
A cash purchase in real estate refers to acquiring property without the use of financing or loans, where the buyer pays the full purchase price in cash.
A conditional commitment is an agreement by a lender to provide a loan to a qualified borrower, subject to specific conditions that must be met. It serves as a binding commitment from the lender, provided that all pre-stipulated criteria and terms are satisfied.
A construction loan is a short-term loan used to finance the building of a home or other real estate project. It covers costs such as the purchase of land, materials, and labor until the project is completed.
A counteroffer involves the rejection of an initial offer to buy or sell a property, accompanied by a substitute offer with different terms. It is a critical component in real estate negotiations, encompassing factors like price, financing arrangements, closing costs, and more.
Debt capital refers to money loaned on a long-term basis that is used to finance an investment, including real estate. Unlike equity capital, debt capital must be repaid to the lenders with interest.
Deferred payments refer to the payments that are postponed and scheduled to be made at a future date. Commonly utilized in various financial contexts, it allows borrowers to delay payments of the principal or interest.
An equity kicker, also known simply as “kicker,” is a form of equity participation that lenders or investors can demand as part of a loan agreement. It provides the lender the right to share in the future success of the borrowing venture, typically in the form of a percentage of ownership or profits.
Equity participation entails property owners selling an interest in their property to an investor, who, in return, provides capital or financial support. It enables property owners to unlock capital without relinquishing full control.
A Fee Appraiser, also known as an Independent Fee Appraiser, is a professional who provides an objective evaluation of a property's market value based on current market conditions. This unbiased assessment is crucial for various real estate transactions and financing activities.
Financing is the process of borrowing money to purchase property. Various methods exist to acquire the necessary funds, which can involve different types of loans and arrangements.
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 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.
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.
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.
An interest rate is the percentage of a loan amount charged by the lender to the borrower for the use of the borrowed funds. It can also represent the rate of return on an investment. Understanding interest rates is crucial for real estate transactions as they significantly affect mortgage payments and the overall cost of borrowing.
An interest-only loan is a type of financing where the borrower only pays the interest on the principal balance at regular intervals until the loan reaches its maturity date, at which time the full principal amount becomes due. This type of loan does not require amortization during the length of the loan term.
Interim Financing is a short-term loan used when a property owner is unable or unwilling to arrange permanent financing. It often includes a CONSTRUCTION LOAN and is typically arranged for less than three years, allowing time for financial or market conditions to improve.
A loan lock, or locked-in interest rate, is an agreement between a mortgage lender and a borrower that secures a specified interest rate on a mortgage for a predetermined period, usually ranging from 30 to 60 days.
Market analysis involves studying supply and demand conditions in a specific area for a specific type of property or service. It aids developers in deciding project types and securing financing for proposed developments.
A mortgage is a legal agreement in which a lender provides a borrower with funds to purchase real estate. The property serves as collateral for the loan.
Mortgage Out refers to the practice of obtaining financing in excess of the cost to construct a project. During periods of relaxed monetary policy, developers could mortgage out by securing a permanent loan commitment based on a higher percentage of a project's completed value, allowing them to borrow more than the development costs.
Paper credit is a term used in real estate to describe a written obligation given or received instead of cash. It often includes negotiable instruments such as promissory notes or bonds.
A partially amortized loan is a type of loan that includes a regular payment schedule over a set period but does not fully pay off the principal within that time, resulting in a balloon payment at the end of the term.
The initial stage in which a lender evaluates a borrower's financial capability to approve a specific loan amount, providing prospective homebuyers confidence and an advantage during the home buying process.
Prepayment Privilege refers to the right of a borrower to retire a loan before its maturity date without incurring any prepayment penalty. This feature provides borrowers with the flexibility to pay off loans faster, potentially saving on interest costs over the life of the loan.
The preplanning stage of real estate development involves seeking financing and obtaining government approvals prior to beginning architectural drawings.
Prequalifying is an essential step in the home-buying process. It helps buyers estimate the maximum home price they can afford based on their income and liquid assets. While prequalifying does not promise or commit specific financing, it provides an outline of potential affordability.
A presale involves selling properties that are yet to be constructed, such as condominiums. It allows developers to secure financing and gauge market demand before actual construction begins.
A prime tenant in real estate is the tenant who occupies the most space within a shopping center or office building. These tenants are considered creditworthy and are essential in attracting additional customers or traffic.
The term 'Principal' in real estate can refer to the owner or user of the property, the client of an agent or broker, or the amount of money borrowed in a mortgage, excluding interest.
A professionally derived estimate of property value based on some expected future event, commonly used in real estate development and financing.
Purchase capital is the total amount of money used to acquire real estate, irrespective of its source, encompassing both equity and debt components.
A second mortgage is a subordinated lien created by a mortgage loan that enhances financing options by reducing the cash down payment requirement during a property purchase or refinancing.
Soft money refers to contributions that can be tax-deductible in a development or investment context. It also sometimes describes non-physical construction costs such as interest during construction, architectural fees, and legal fees.
In real estate, a 'spread' refers to several key financial differences, often pertaining to prices or interest rates, that can significantly impact transactions, investments, and profits.
Acquiring property with an existing mortgage, but the buyer does not become personally liable for the debt. Contrasted with assumption of mortgage.
A strong track record can significantly influence a developer's ability to secure financing and attract investors for new projects, ensuring successful and timely project completion.
An underlying mortgage refers to the first mortgage secured by a property when there's also a wraparound mortgage. It forms the basis of the total debt, while the wraparound mortgage includes additional financing layered on top of it.
Venture capital (VC) is a form of private equity and financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential.
