Decision intelligence
Real Estate Glossary
Clear definitions for the terms behind property, financing and investment decisions.
17 terms
- Appraisal gap
The difference between a property’s appraised value and contract price. Contract language determines how that difference affects the transaction.
Explore this topic ↗- Escalation clause
An offer provision that can increase price under specified conditions, generally up to a stated limit. Exact terms matter.
Explore this topic ↗- Concession
A negotiated benefit, credit or cost paid by one party for another, subject to contract and financing requirements.
Explore this topic ↗- Cap rate
Annual net operating income divided by purchase price or value. It excludes the effect of financing.
Explore this topic ↗- NOI
Net operating income: property income after vacancy and operating expenses, before debt service, income tax, depreciation and capital expenditures.
Explore this topic ↗- Cash-on-cash return
Annual pre-tax cash flow divided by cash invested. Be explicit about closing costs, initial work and reserves included in the denominator.
Explore this topic ↗- IRR
Internal rate of return: the discount rate that makes the net present value of a series of cash flows equal to zero. Results depend on timing and exit assumptions.
Explore this topic ↗- DSCR
Debt service coverage ratio: income available for debt service divided by required debt service. A lender’s calculation may differ from a simple property model.
Explore this topic ↗- LTV
Loan-to-value ratio: the loan balance divided by the property value used for that calculation.
Explore this topic ↗- Absorption rate
A measure of sales pace relative to available inventory over a defined period. Always check the source’s methodology.
Explore this topic ↗- 1031 exchange
A qualifying exchange of business or investment real property that may defer recognition of gain. Professional tax and legal coordination is essential.
Explore this topic ↗- Reserve study
An assessment of major shared components, their expected replacement needs and a funding plan, commonly used by associations.
Explore this topic ↗- Special assessment
An additional association charge for expenses beyond regular dues, often tied to major work or funding needs.
Explore this topic ↗- RELO
Shorthand for relocation. In a transaction, an employer or relocation company may introduce additional procedures or documentation.
Explore this topic ↗- ALTA
American Land Title Association, an industry association associated with standardized title and settlement forms.
Explore this topic ↗- Title insurance
Coverage for certain title risks under a specific policy’s terms and exclusions. Owner and lender policies serve different interests.
Explore this topic ↗- Bridge loan
Short-term financing used to connect a purchase or other transaction with a later source of repayment, such as a property sale.
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