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Glossary of Real Estate Terms
This Glossary has
been provided as a courtesy to assist you in
gathering information relative to real estate.
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Earnest Money:
The monetary advance by a buyer of part of the
purchase price to indicate the intention and
ability of the buyer to carry out the contract. |
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Easement:
A right of use over the property of another
created by grant, reservation, agreement,
prescription or necessary implication. It is
either for the benefit of adjoining land
(“appurtenant”), such as the right to cross A to
get to B., or for the benefit of a specific
individual (“in gross”), such as a public
utility easement. |
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Economic Feasibility:
A building or project’s feasibility in terms of
costs and revenue, with excess revenue
establishing the degree of viability. |
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Economic Rent:
The market rental value of a property at a given
point in time, even though the actual rent may
be different. |
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Effective Gross Income (EGI):
Term used for an income-producing property,
derived from the potential gross income, less a
vacancy factor and a collection loss amount. |
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Effective Rent:
The actual rental rate to be achieved by the
landlord after deducting the value of
concessions from the base rental rate paid by a
tenant, usually expressed as an average rate
over the term of the lease. |
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Efficiency Factor:
Represents the percentage of Net Rentable Square
Feet devoted to the building’s common areas
(lobbies, rest rooms, corridors, etc.). This
factor can be computed for an entire building or
a single floor of a building. Also known as a
Core Factor or Rentable/Usable (R/U) Factor, it
is calculated by dividing the rentable square
footage by the usable square footage. |
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Eminent Domain:
A power of the state, municipalities, and
private persons or corporations authorized to
exercise functions of public character to
acquire private property for public use by
condemnation, in return for just compensation. |
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Encroachment:
The intrusion of a structure which extends,
without permission, over a property line,
easement boundary or building setback line. |
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Encumbrance:
Any right to, or interest in, real property held
by someone other than the owner, but which will
not prevent the transfer of fee title (i.e. a
claim, lien, charge or liability attached to and
binding real property). |
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Environmental Impact Statement:
Documents which are required by federal and
state laws to accompany proposals for major
projects and programs that will likely have an
impact on the surrounding environment. |
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Equity: (1)
A legal doctrine based on fairness, rather than
strict interpretation of the letter of the law.
(2) The market value of real property, less the
amount of existing liens. (3) Any ownership
investment (stocks, real estate, etc.) as
opposed to investing as a lender (bonds,
mortgages, etc.). |
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Equity Participation:
The right of a Lender to a share in the gross
profits, net profits or net proceeds in the
event of a sale or refinance of a property on
which the Lender has made a loan. Also
known as an “equity kicker.” |
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Escalation Clause:
A clause in a lease which provides for the rent
to be increased to reflect changes in expenses
paid by the landlord such as real estate taxes,
operating costs, etc. This may be accomplished
by several means such as fixed periodic
increases, increases tied to the Consumer Price
Index or adjustments based on changes in
expenses paid by the landlord in relation to a
dollar stop or base year reference. |
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Estoppel Certificate:
A signed statement certifying that certain
statements of fact are correct as of the date of
the statement and can be 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). |
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Escrow Agreement:
A written agreement made between the parties to
a contract and an escrow agent. The escrow
agreement sets forth the basic obligations of
the parties, describes the monies (or other
things of value) to be deposited in escrow, and
instructs the escrow agent concerning the
disposition of the monies deposited. |
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Exclusive Agency Listing:
A written agreement between a real estate broker
and a property owner in which the owner promises
to pay a fee or commission to the broker if
specified real property is leased during the
listing period. The broker need not be the
procuring cause of the lease. |
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Expense Ratio:
A comparison of the operating expenses to
potential gross income. This ratio can be
compared over time and with that of other
properties to determine the relative operating
efficiency of the property considered. |
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Expense Stop:
An agreed dollar amount of taxes and operating
expense (expressed for the building as a whole
or on a square foot basis) over which the tenant
will pay its prorated share of increases. May be
applied to specific expenses (e.g., property
taxes or insurance). |
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