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Acronyms, Abbreviations, and other Real Estate Jargon

These are some real estate terms we’ve run across while investing in Rhode Island for the past 10 years. We’ve deliberately simplified some of them for the sake of brevity. See also the legal disclaimer at the end.

Jump to acronyms/terms starting with: A B C D E F G H I J L M N O P Q R S T U V W

$/SF
Price per square foot, the rent or purchase price of a property divided by its usable square feet; a very basic way to compare properties, many real estate professionals recommend against using it
0x30
Mortgage term meaning zero 30 day late payments in last 12 months
1031
1031 tax-deferred exchange, a way to sell one property and buy another without paying tax
5-day
Five day demand notice (letter) for unpaid rent; see the RI Landlord-Tenant Handbook
ADS
Annual debt service, i.e., the total mortgage payments made in a year
Apt
Apartment
ARM
Adjustable rate mortgage, where payments may change over time as interest rates change
ARV
After repair value, the expected sale price after renovating a property
ATCF
After-tax cash flow; rental income after expenses and mortgage payments but after tax effects
B&S
Bargain and sale (deed), where the grantors (sellers) make no guarantees about the title whatsoever; essentially it says, “I’m not saying I own it, but if I do, I give you what I have, with no guarantees at all”
Boot
The money you get (and pay taxes on) from a 1031 exchange when it fails due to not identifying or closing on the replacement property in time
BOM
Back on market, a Multiple Listing Service (MLS) status indicating that a property had been under contract to sell, but the deal fell apart for some reason and the property is once again available
BPO
Broker’s price opinion, an estimate of a property’s price by an agent, which is faster & cheaper than a full appraisal; often used to determine listing price for bank-owned (REO) properties
BR
Bedroom, or (depending on context) Bankruptcy
BTCF
Before-tax cash flow; rental income after expenses and mortgage payments but before tax effects
CAM
Common area maintenance; everything an owner/landlord pays to maintain the “common areas”
Cap gain
Capital gain, the difference between sale price and initial purchase price + improvements; taxed at a lower rate than ordinary income but requires owning for at least a year, could also be a capital loss
Cap rate
Capitalization rate; rate of investment return on a property if you pay all cash (no mortgage), aka “unlevered rate of return”; NOI divided by purchase price
CCR
Cash on cash return; rate of return from dividing rental income after expenses and mortgage (BTCF) by total initial cost of the property
CC&R
Covenants, conditions and restrictions; special restrictions on how owners can use a property, often found with condominiums and planned unit developments
CD
Closing disclosure; a summary of loan terms for residential mortgages which must be given to buyers/borrowers at least 3 business days before closing (one of the TRID consumer protection rules)
CE, CLE
Continuing education or continuing legal education; classes real estate agents and attorneys need to take to renew their licenses; note non-agents may also take RIAR classes for a slightly higher fee
CMA
Competitive market analysis, an estimate of a property’s value done by an agent for a property owner, often as part of a listing presentation
CO
Certificate of occupancy, permits a building to be inhabited; for new buildings and heavy renovations
Comps
Comparable sales; similar properties in the same area sold recently, used to determine value
CPL
Closing protection letter; allows an attorney or escrow company to conduct a closing and issue a title insurance policy, protecting the buyer/lender from any fraud or dishonesty by the closing agent
DBA
“Doing business as”, usually when a sole proprietor does business under a different name; could also be a fictitious business name for a corporation or LLC
DBR
Division of Business Regulation, the RI agency responsible for many real estate agent requirements
DEHO
Deceased, heirs of; same as EST, indicates a property was owned by someone but s/he passed away and it’s now owned by the heirs of the deceased (who may or may not be known)
Dodd-Frank
Set of legislation enacted in 2010 to protect consumers and taxpayers from unscrupulous finance companies after the real estate crisis of 2008; also affected real estate investors
DOM
Days on market, how long a property has been listed in the MLS
DR
Dining room
Draw
An advance (or reimbursement) as part of the total amount of a construction loan; to reduce lender risk funds are given out in small chunks (draws) as phases of the project are verified completed
DSCR, DSR
Debt service coverage ratio, a measure of risk to the lender which should be at least 1.2; it is the annual mortgage payments (ADS) divided by net income (NOI)
DST
Delaware statutory trust, a way for multiple people to invest in property, similar to a limited partnership
DTI
Debt-to income ratio, one way of determining if a borrower can afford to get a mortgage
Due on sale
Section of mortgages indicating the entire mortgage becomes due if the property is sold or transferred
EGI
Effective gross income, gross rental income (PGI) after an allowance for vacancy is subtracted
EIK
Eat-in kitchen, a kitchen with enough space to eat in
E&O
Errors and omissions insurance, a special kind of insurance real estate agents, attorneys and other professionals must have
EMD
Earnest money deposit, a small portion of the purchase price given with an offer or P&S; the contract is not considered binding until the deposit has been received by the seller or her/his agent
EST
Estate; often seen in tax assessor records, indicates a property was owned by someone but s/he passed away and it’s now owned by their “estate”; the heirs may or may not be known
et ux, et vir
Latin for “and wife” or “and husband”; sometimes seen in deeds and tax assessor records
exec
Execution, aka “judgment”; an involuntary lien recorded against a property when a homeowner owes money to a creditor, ensuring the creditor gets paid if the property is sold or refinanced
FCRA
Fair credit reporting act, legislation controlling how landlords and property managers can obtain and manage credit information
FC
Foreclosure
FHA
Federal Housing Administration, insurer of FHA mortgages that are often easier to get and have lower required down payments than other types of mortgages
FHLMC
Federal Home Loan Mortgage Corporation (aka Freddie Mac), helps more mortgage loans get made by packaging mortgages into pools and selling them to investors
FIRE
Finance, insurance and real estate; three industries which are all affected by financial issues like interest rates and which also have a strong presence in NYC
FMV
Fair market value; the value when a property has adequate market exposure and buyers and sellers don’t know each other (an “arms length transaction”)
FMR
Fair market rents, a measure calculated annually by HUD and used to determine rents paid by Section 8 or other housing assistance programs
FNMA
Federal National Mortgage Association (aka Fannie Mae), helps more mortgage loans get made by packaging mortgages together and selling them to investors; similar to FHLMC but slightly different
FSBO
For sale by owner; when a property owner tries to sell a property without a real estate agent
GC
General contractor, like a “general manager” for renovation projects, s/he manages individual subcontractors like electricians and plumbers to get the overall project done
GIS
Geographic information system, a way of presenting data about a city/town with an interactive map, for example by turning on layers showing lot dimensions, wetlands, sewer lines, etc.
GLA
Gross living area, approximate sq ft of living/rental area; used in comps and calculating price per sq ft
Grantor
Giver, from land evidence records; the grantor “gives” an interest in real estate to the grantee; e.g., when selling a property, the seller is the grantor (giver) and the buyer is the grantee (receiver)
Grantee
Receiver, from land evidence records; the grantee “receives” an interest in real estate from the grantor; e.g., the owner gets loan funds and grants a mortgage (claim on the property) to the bank (grantee)
GRM
Gross rent multiplier, purchase price divided by gross rents (before expenses); crude measure used to compare prices of properties, doesn’t account for things like if the owner pays for utilities
GTOL
Gain to old lease; amount of current rent which is above market rent (this is uncommon)
HAP
Housing assistance payment, portion of a tenant’s rent paid by the Section 8 housing program; the difference between the HAP and the “contract rent” is paid by the tenant
HELOC
Home equity line of credit, a line of credit against a property which has a maximum amount and is secured by a mortgage; frequently have variable interest rates like adjustable rate mortgages (ARMs)
HOA
Home owners association, a group/committee of condominium owners, or property owners in planned communities, which handles shared expenses and agreed-upon rules and sets “HOA fees”
HOI
Home owners insurance, often used when proof of property insurance is requested
HUD
U.S. Department of Housing and Urban Development, or the HUD-1 closing statement (see TRID)
HVAC
Heating, ventilation and air conditioning; a set of environmental control equipment like boilers and central air conditioning which usually requires “HVAC specialists” for service
HW
Hot water
ISAOA ATIMA
Its successors and/or assigns, as their interests may appear; often in mortgage and insurance docs
ITL
Inheritance tax lien, an automatic lien placed against RI real estate when someone dies; can be discharged by filing Form T-77, Discharge of Lien Form (and paying any tax due, of course)
IRV
Shorthand for formula: net operating Income = capitalization Rate x Value; same as the formula for calculating capitalization rate: Rate = net operating Income / Value (price)
JT, JTROS
Joint tenancy with rights of survivorship; at death one’s share goes to the other owners
JV
Joint venture, an agreement between business entities to cooperate on a specific project only, instead of having an ongoing partnership which spans multiple projects
LBP
Lead based paint; highly poisonous, used to paint many houses built before 1978
LE
Life estate; ownership for the rest of one’s life, after which it goes to the “remaindermen
Legal use
How a property may be legally used (commercial, residential, industrial, manufacturing, etc.) and how many units may be rented/occupied; determined by city’s building department not tax assessor
Lien
Claim by one party against a property, recorded in land evidence records; may be voluntary (like a mortgage) or involuntary (like a judgment) and may or may not have a dollar amount specified
LOI
Letter of intent; a simple offer letter, preliminary to a full P&S and often used for 20+ unit properties
LOMA
Letter of Map Amendment, issued by FEMA when a property has been mistakenly mapped as being in a flood plain, but is actually on natural high ground above the base flood elevation
LL
Leased land; the owner only owns the building, not the underlying land, and s/he pays “land rent”
LLC
Limited liability company, a business entity that contains liability for activities within the company, protecting its members; similar to a corporation but no shareholders and fewer requirements
LP
Limited partnership, an investment structure with one General Partner who manages the investment (and has liability) and Limited Partners who do not manage the investment
LR
Living room
LTOL
Loss to old lease; amount that current rent is below the market rent, a common occurrence
LTV
Loan to value, a percentage of the mortgage loan amount divided by the property value; most banks will not go above 80% LTV, though a 65% or 70% is more common for private loans
MAO
Maximum allowable offer, the most an investor can pay for a property based on the ARV, renovation costs, holding costs, and necessary profit; if an investor goes above MAO s/he may lose money
MBR
Master bedroom
MBS
Mortgage backed securities, also CMBS for commercial MBS and RMBS for residential MBS; packages of mortgages sold to investors on Wall Street which allow more mortgage loans to be made
MBT
Massachusetts business trust, a way for multiple people to invest in property, like the Delaware statutory trust and similar to a limited partnership; aka unincorporated business organization (UBO)
Memo
Memorandum, a letter or notice recorded in land evidence records to notify the public of something regarding a property or entity, such as a “memorandum of trust” summarizing the terms of a trust
MLC
Municipal lien certificate, lists all taxes and bills owed to the city/town including property taxes, special assessments, and (often) water/sewer charges; obtained from city as part of a closing
MLO
Mortgage loan originator, a loan officer or mortgage broker licensed to originate (create) mortgages
MLS
Multiple listing service, the database REALTORS® use to list and sell property
Mortgage
A voluntary lien recorded against a property which is usually associated with a “promissory note” that describes the loan terms; the mortgage “secures” the note (loan) to the property
Mtg
Mortgage
NACHO
Acronym for the elements required to gain ownership of a property by adverse possession
NAR
National Association of REALTORS®, nationwide organization that owns the REALTOR® trademark and holds its members to a high standard of professionalism to protect the REALTOR® brand
NOD
Notice of default, a notice/letter sent by a bank to property owners advising them that their mortgage is in default; usually the first step in the foreclosure process
NOI
Net operating income, the rental income from a property after a vacancy allowance (like 5%) and operating expenses are subtracted; used in many calculations like cap rate and DSCR
Nominal
Change in name only, not a true “sale” between unrelated parties; seen in tax assessor records, often for a change in ownership between family members where no money is exchanged
Note
Promissory note, a document describing the terms of a loan such as interest rate, payment amount/frequency, etc.; may be unsecured, or secured by real estate (by recording a mortgage)
NMLS
National Mortgage Licensing System, a system which licenses financial service companies and professionals such as mortgage brokers; you can verify someone’s NMLS credentials
NNN
Triple net, a commercial lease where the tenant pays virtually all property expenses, usually seen with large commercial properties and companies such as Walgreens or CVS
NSF
Non-sufficient funds, usually stamped on a bounced check when it’s returned
OBO
Or best offer, such as “House has mold, uninhabitable, $30,000 OBO”
OO
Owner occupied
OOR
Owner of record; may refer to tax asssessor record or land evidence records
Op exp
Shorthand for operating expenses, all the expenses that go into renting out and maintaining a property; does not include mortgage payments since those are related to financing, not operations
PFS
Personal financial statement, something a borrower fills out for a loan application (and sometimes annually thereafter) which summarizes her/his income, expenses, assets & liabilities
PGI
Potential gross income, the yearly income a property could get, before subtracting vacancy/expenses
P&I
Principal and interest; basic components of every mortgage payment; early in a fixed-rate mortgage it’s mostly interest and then toward the end it becomes mostly principal
PITI
Principal, interest, taxes & insurance; the mortgage payment when it includes taxes and insurance
P&L
Profit and loss, a financial statement for a person, company, or property summarizing income and expenses for a period such as a quarter or year; also known as an income statement
PMI
Private mortgage insurance, an extra charge required on most conventional mortgages if the down payment is less than a 20%; after the home rises in value it’s possible to eliminate the PMI
POA, LPOA
Power of attorney or limited power of attorney, a document authorizing one person to sign legal documents like deeds on behalf of another (the principal)
POC
Paid outside of closing, a notation on some HUD items indicating they are not included in the totals but are related to the transaction and were paid before or after the closing
POF
Proof of funds; often required to make a “cash only” offer, especially through the MLS
Points
An extra amount paid at the beginning of a mortgage (usually at closing), each point is 1% of the loan amount; often used to get a lower interest rate (to “buy down” the rate)
PPM
Private placement memorandum, a (usually lengthy) document that must be given to potential investors by real estate syndicators, which summarizes the deal and risk factors
PPP
Pre-payment penalty, a clause in a commercial mortgage allowing the lender to charge an extra fee if you pay all or part of the mortgage early; not usually present in RI residential mortgages
P&S
Purchase and sales agreement, a legally binding agreement between buyer and seller describing the terms of sale; while RIAR provides one for REALTORS® to use, there is no single “standard” P&S
Prime
The prime rate, a variable rate that lending institutions use as a benchmark to determine interest rates offered to borrowers; often expressed as “prime +2%” or “prime -0.5%”
PUD
Planned unit development, a neighborhood of houses/units often developed together and which may have special rules residents must follow
Puffing
Legal “exaggeration” of a property’s characteristics, as opposed to outright misrepresentation, fraud, or concealing material defects which are all illegal
QC
Quitclaim (deed), where the grantors (sellers) guarantee good real estate title for their ownership period only; makes no guarantees for before that time, and includes no promise to “defend” the title
R1, R2, R3
Zoning or “use” codes for Residential single family, two-family, and three-family; codes vary by city/town so contact the building department for exact meanings or see online zoning ordinances
Refi
Refinance, to replace one loan (mortgage) with another; usually the new loan has a lower interest rate (payments), and/or the new loan is a higher amount, allowing the owner to receive cash at closing
REIA
Real estate investor association, a group of real estate investors such as RIREIG or Black Diamond REI that meets regularly to network, hear presentations, discuss landlording and legal issues, etc.
REIT
Real estate investment trust; makes investing in commercial real estate like buying stock; must pay out most of its rents to shareholders as dividends and treated as stock (not real estate) for taxes
REO
Bank-owned property; comes from the “real estate owned” bank department which takes over when a property goes to foreclosure and no one bids on it, so the bank becomes the owner
RIAR
Rhode Island Association of Realtors, local membership organization for REALTORS® that helps them with continuing education, MLS support, a library of standard forms, tools like lock boxes, etc.
RICIE
Rhode Island Commercial Information Exchange, a branch of the RI MLS for purely commercial properties (office, industrial, retail, manufacturing, storage, businesses, etc.)
RIGP
Rhode Island General Partnership, a business structure where partners have liability for each other’s actions; required to register in their cities/towns but due to ease of formation often don’t
RIHMFC
Rhode Island Housing and Mortgage Finance Corporation, a quasi-governmental, taxpayer-funded agency which assists homeowners and renters by administering various loan and rental programs
ROI
Return on investment, a general concept meaning the amount of income received each year (after all expenses), divided by the total initial investment; cap rate is a real estate specific measure of ROI
RPAC
REALTORS® Political Action Committee, a lobbying organization that supports pro-REALTOR® candidates and issues; its candidates/agendas usually align closely with real estate investors
RR
Right of redemption; in tax assessor records, indicates a property owner had unpaid property taxes and there is now a tax lien holder, but the owner still has the right to “redeem” (pay the back taxes)
RSF
Rentable square feet, the square footage actually usable by tenants, as opposed to common areas or other unusable areas; usually used as part of comparing properties by their rents per square foot
SD
Security deposit, an amount held by a landlord (which in RI cannot exceed one month’s rent]) to help ensure a tenant leaves an apartment in good condition (except for “normal wear and tear”)
SDIRA
Self-directed individual retirement account, a form of IRA which has special (strict) requirements, but allows someone to invest their IRA in real estate, mortgages, and other non-stock assets
SF, 2F
Single family, 2-family (duplex), etc. – 3F, 4F, and 5F are what you’d expect; investors tend to change to “unit” above 5 units, such as 6U for a 6 unit building or 12U for 12 units
SFH
Single family house
SFR
Single family residence
SO
Sole owner; sometimes seen in tax assessor records
SoS
Rhode Island Secretary of State, often mentioned in real estate for the corporate database, good standing certificates, and corporation/LLC annual report filings
SS
Stainless steel, or (depending on context) short sale, where a property sells for less than the mortgage balance (i.e., the lender loses money) and which may have tax/legal consequences for the owner
Subject to
Buying a property with an existing mortgage left in place; allows the buyer to bring much less money to closing since the mortgage isn’t paid off, but is risky in many ways (see “due on sale”)
T12
Trailing 12 months; a report of a property’s actual income and expenses for the past 12 months, as opposed to “pro forma” projections based on assumptions about the future
TAW
Tenancy at will; a month-to-month tenancy, tenant may or may not have an actual lease
TE, T-by-E
Tenants by the entirety; a special form of joint tenancy for spouses
TI, TIA
Tenant improvements allowance, part of commercial leases saying how much the landlord will pay for tenants to “build out” the rented unit and bring it from “white box” to finished space
TIC
Tenants in common; at death one’s share goes to one’s heirs, as opposed to joint tenants etc.
TRID
TILA (truth in lending act) RESPA (real estate settlement procedures act) Integrated Disclosures; new consumer protection regulations which took effect October 2015
TT
Tax title; seen in tax assessor records, indicates that the tax title holder paid the property owner’s back taxes and now holds a tax lien on the property
TTE
Trustee (abbreviation), the person in charge of managing a trust’s assets for the benefit of the beneficiaries; s/he has a fiduciary responsibility to the beneficiaries
TTM
Trailing twelve months of financial data on a property; see T12
UAD, u/a/d
Under agreement dated; usually used in conjunction with trusts, such as “The Happy Irrevocable Trust u/a/d Dec 31, 2008”, indicating when the trust agreement was created
UBIT, UBTI
Unrelated business income tax, a special tax a self-directed retirement account has to pay when it gets involved in investments that are non-passive (like operating businesses)
UBO
Unincorporated business organization, another name for a Massachusetts business trust
UFFI
Urea formaldehyde foam insulation, a method of insulation used in the 1970s which has been considered a hazardous material (though some disagree)
UST
Underground storage tanks for heating oil, usually removed by sellers before listing a property or as required by buyers; the main issue is whether they leaked oil into surrounding soil
VA
Veterans’ Administration, helps veterans get favorable VA home loans by guaranteeing part of the loan
W/D
Washer/dryer, used to indicate a house or apartment comes with these appliances or has hookups
WD
Warranty deed, where the grantors (sellers) guarantee good real estate title for their ownership period, and for previous owners as well; includes a promise to “defend” the title from any challenges

Disclaimer: Many of the above are legal terms and while the definitions are based on our personal experience, we are not attorneys and we could be wrong. We urge readers to consult an attorney before making real estate decisions.

Also note that REALTOR® is a registered trademark of the National Association of REALTORS®

Filed under: Reference — Anthony Thompson @ 10:23 pm November 18, 2016

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