Terms Beginning With - B
Property Development & Investment Glossary, Terms & Definitions
B Loan
With an AB Structure, the subordinate tranche.
B Notes
In a CMBS structure, a subordinate tranche.
B Pieces
CMBS tranches with a rating of BB or below, which are considered below investment grade.
Back-door approach
A preliminary financial feasibility assessment in which the maximum amount of equity funding that investors may commit to a project given their minimum acceptable current return is estimated.
Back-to-back escrow
When one person buys and sells two properties at the same time, an escrow is set up to help them do both things. John Lark must sell his two-bedroom home in order to get the $20,000 down payment for a new three-bedroom home. It’s possible for John to set up a “escrow” that will close the sale of his old home and then use the money to buy a new one. An escrow company could do this for him.
Back-to-back lease
A deal made by a landlord as a concession to a potential tenant, in which the landlord agrees to take over the tenant’s existing lease in exchange for the tenant agreeing to rent space from the landlord in the landlord’s business building (office building, industrial park). As a concession, I will say this:
Backfill
When foundation walls are done, they need to be filled in around them. They also need to be filled in with earth or a chosen material, like aggregate.
(An excavated hole) should be refilled with the stuff dug out of it.
Backflow
The inadvertent flow of water into a plumbing system’s supply pipes.
Backing
The frame is used to support the lumber that are mounted between the walls.
Backing Frame
This is a piece of timber installed between the studs of a wall to offer additional support for handrail brackets, cabinets, and towel bars. This approach allows items to be screwed and put into solid wood rather than a fragile drywall, which could cause anything connected to the wall to fall off.
Backing, Carpet
The part of a carpet that is facing the ground.
Backout
A frame contractor’s work was used to prepare for a Rough Frame Inspection.
Backup Block
A non-exposed structural wall that backs a finished surface in the construction of a wall system.
Backup contract
An agreement to invest in property that takes effect if a previous deal fails to fulfill its obligations.
Backup offer
It is an offer to buy from a person who already has a deal with someone else; this is a second offer. Sometimes, the seller accepts the backup offer only if the first buyer doesn’t buy the item in a certain amount of time. It’s important for the seller to be careful, though, when the time for the buyer to do what they agreed to has passed. Make sure that the seller has done everything they agreed to do, or that they’ve given the first buyer a full and adequate offer of that performance. Sellers should not agree to sell the same property to two different people, or they could be legally bound to do so. The best thing to do is to get a release from the person who bought it.
If the real estate agent wants the seller-client to break a contract in order to accept a better second offer, he or she should be careful. The agent could be sued by the first buyer for the crime of intentionally interfering with a deal.
Buyers should think about reserving the right to back out of the backup offer at any time before the seller cancels the first contract. In this way, the buyer has some flexibility as he or she looks for more homes.
Real estate purchase contract that becomes active if the current contract fails to close.
Backward pass
The estimation of network operations’ late conclusion and late start dates. It is computed by reversing the scheduling logic from the project’s finish date.
Bad debt allowance
An allowance used to lower the possible gross revenue; it is calculated based on the likelihood that some of the rental income would be uncollectible.
Bailment
The bailor gives the bailee personal property with the understanding that the bailee will return the property or account for the property when the bailment is done, like leaving a car with a parking attendant. People who store things in a mini warehouse may have to follow a set of rules called bailment law.
Describes a common law relationship in which actual possession of personal property, or a chattel, is transferred from one person (the ‘bailor’) to another (the ‘bailee’), who then has possession of the property.
Balance sheet
A balance sheet is a financial summary that lists all resources, obligations, and equities, with the assets matching the liabilities and equity.
If you or your business have assets, liabilities, and net worth (the difference between assets and liabilities) at a certain date, this is called a financial statement. It is a very quick look at the business. Most lenders want to see a balance sheet from a person who wants to get money for real estate, usually on a form that comes with the loan application. Some lenders also want to see a profit and loss statement that shows income and expenses. Some states have passed false statement laws to punish people who make up statements that are used in the process of getting a loan.
Balcony
Platform: A railing or parapet that surrounds a platform that comes out from the wall of a building and is used by tenants or people who want to get outside and get to upper floors. When a balcony is roofed and enclosed and has operable windows, it is part of the room that it serves.
Ballast
A transformer regulates the current to the bulbs and supplies enough voltage to turn them on.
Balloon
A loan that is not completely amortized over time, with the remaining principle balance paid at the conclusion of the period.
Balloon frame wall
This diagram shows how to frame a gable wall and how to build it.
Balloon Framing
Platform framing, in which each story is framed separately, is a timber framework that extends the full height of the structure from foundation plate to rafter plate.
Balloon loan
A loan repayment plan during which the unpaid principal sum is due at a certain point in time.
A loan with an amortization duration that is longer than the loan term. A balloon payment is required to pay off the remaining loan debt in full since the loan balance will not be zero at the conclusion of the loan period.
Balloon mortgage
A balloon loan is another term for a loan with a fixed interest rate.
Balloon payment
Paying off the debt in full with a big final payment that’s bigger than the previous installments; paying off the debt in full with the last payment. Balloon payments are often used in second mortgages (to keep payments low when paying first and second mortgages at the same time) and in other situations where the monthly payment doesn’t cover the full principal balance over the life of the debt. Partial amortized loans are sometimes called loans that have a lump sum payment at the end of the term, like a note or a debt.
For example, Mr. Clay sells his condo studio apartment for $150,000, with a down payment of $15,000 and a balance of $135,000 that he will pay back over 30 years at a 10% interest rate. He will pay $809.39 per month (amortized over 30 years), and the balance will be due in full at the end of five years. After five years of payments, if the buyer makes them all at once, they’ll owe only $9,376.40. The buyer will have to pay $125,623.60 in the final balloon payment. If the buyer chooses to pay off the contract in a shorter amount of time, the balloon payment will be bigger. Charts can show how much of a fully amortized loan still needs to be paid and how much the balloon payment will be. When federal truth-in-lending rules are in place, the amount of a balloon payment must be clearly stated in the agreement.
Baluster
It is one of a group of small poles that hold up the handrail on stairs.
Balusters Vertical
A railing can be supported by any of a variety of closely spaced supports. Various symmetrical supports, such as furniture legs or spindles, swell toward the bottom or top of the structure.
Band
In the electromagnetic spectrum, a certain frequency or range of frequencies.
Band of investment
An economic valuation that calculates the overall rate of interest by considering debt and credit rates.
Band of investment (BOI)
An appraisal method used to figure out how much money a buyer has to put down on a home and how much money he or she has to put down on a home. This is the sum of the buyer’s mortgage and equity positions. This method is used a lot to figure out the right discount (risk) rate. Equity investors want to get the best deal on financing so that they can get the most benefit from leverage.
The range of investment for a specific property is based on the mortgage and equity rates that market data shows to be true for similar properties. The right “CAP rate” is the sum of the mortgage requirement rate (a constant that shows how much interest and how much of the property’s value is owned by the mortgage) and the equity rate (a constant that shows how much of the property’s value is owned by the equity) (the anticipated cash flow to the equity investment, as indicated by comparable sales). There are many ways to think about how much each part of a property’s interest or ownership is worth. For example, each part is multiplied by the return rate needed to get money to invest in that type of investment.
Band of investment technique
A method for determining a property’s weighted average cost of capital. Each source’s cost is weighted by a factor equal to the proportion of total money obtained from that source.
Band or box sill
Parts of foundations that are made up of piers and beams. When the boards are put together, they make a right angle. The joist is placed at the same angle. This perpendicular placement gives the foundation the rigidity it needs.
Bank
A banking instrument that is permitted to offer a wide range of financial services.
Bank insurance fund (BIF)
It was the name of a fund run by the Federal Deposit Insurance Corporation (FDIC). It got money from commercial and savings banks to cover their deposits. There is now only one fund for deposit insurance. The Federal Deposit Insurance Act of 2005 abolished BIF and created a single fund for deposit insurance.
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Bankruptcy
When a person is unable to pay their debts, they seek help from the courts.
A state of financial insolvency in which a person’s liabilities exceed their assets and the person can’t pay their debts right now. Because some debtors choose to file for bankruptcy on their own, it can either be voluntary or forced, like when a debtor can’t pay $1,000 or more.
The debtor’s assets are given to a court-appointed trustee or receiver, who sells them to pay the debtor’s general creditors. When someone files for federal bankruptcy, all of their assets become the property of the trustee or receiver. This means that when someone files for bankruptcy, they won’t have to pay any more of their debts. The exceptions are debts that aren’t on the bankruptcy schedule: tax debts; alimony and support payments; liability for malicious injury or fraud; debts not on the bankruptcy schedule; and debts that haven’t been paid. If you file for bankruptcy, most credit bureaus keep it on your record for ten years.
Normally, a creditor of the bankrupt who has a mortgage on real property is entitled to the money that comes from that property before the bankrupt’s assets are given to other creditors. People who file for bankruptcy are usually able to get their debts paid off. But liens against their property aren’t erased. Fraudulent conveyances, on the other hand, are not valid, and the trustee in bankruptcy may cancel the transfer of the debtor’s property to a creditor within a certain amount of time after filing for bankruptcy. This allows a preferred creditor to get a bigger share of the debt than other creditors. One of the main goals of bankruptcy is to make sure that creditors get the same amount of money.
The bankruptcy of one of the parties to a real estate agency agreement (listing) ends the agency because the trustee in bankruptcy gets the title to the home. A real estate licensee usually isn’t free from the penalties that come with paying money out of the state licensing agency’s real estate recovery fund to people who were defrauded by them.
It’s important for a broker who works for the debtor in a bankruptcy case to keep these three things in mind: (1) The broker must be someone who is not interested in the deal. (2) A broker must get permission from the court before they can work for you. (3) Once the sale is done, the bankruptcy court must agree to the commission, which can’t be more than a reasonable amount.
Most leases and contracts for deeds say that bankruptcy of a lessee or buyer is a reason to break the terms of the deal, but this doesn’t always happen. Many leases and contracts for deeds have bankruptcy default clauses that give the owner-landlord the right to evict the buyer-tenant if he or she goes bankrupt. People who live in the United States live under the Federal Government.
Bankruptcy Act, on the other hand, may make forfeiture and termination clauses that depend on insolvency or bankruptcy unenforceable.
Before foreclosure proceedings have started, the bankruptcy of the person who owes money to a trust deed note or the person who owns the house will have an effect on them if the bankruptcy is filed before the foreclosure process has started. In these cases, the trustee in bankruptcy takes ownership of the property, and the judge of the bankruptcy court must give the go-ahead for the foreclosure process. In bankruptcy, when you file a petition, the foreclosure process in state court is put on hold for good.
Other types of bankruptcy are used to reorganize and save a debtor’s business. These actions have the debtor’s “rehabilitation” at the top of their list of goals. It doesn’t affect debts that are secured by liens, like mortgage loans or real estate taxes. It does, however, stop any foreclosure proceedings that are already in progress. A court-appointed referee is in charge of setting up the reorganization of the business. The debtor can keep the property while they work out a payment plan. Such proceedings only deal with property that isn’t owned by anyone else. The court can order a halt to all actions by a mortgagee, which would stop them from foreclosing.
Bar chart
A graphical representation of scheduling data (with or without a timeline).
Bargain and sale deed
It used to be a contract between the buyer and seller, but now deeds are used to transfer all of the grantor’s rights in a piece of land to the buyer. A bargain and sale deed usually doesn’t include promises about the title of the property that is being sold. However, the grantor implies that he owns, claims, or has an interest in the property that is being sold. The courts usually say that the grantor promises only that the grantor hasn’t done anything to cause a defect in title and isn’t liable for defects that aren’t known at the time of the grant. Trustees, fiduciaries, executors, and officers of the court often give real property they own to someone else by way of a bargain and sale deed, sometimes with a promise not to do something bad to the person who owns it.
A deed that transmits ownership interests rather than the property itself.
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Bargain sale
In this case, a sale of property for less than what it would be worth on the open market. Part of the time, the Internal Revenue Service might think of this sale as a part-gift and part-sale deal.
Barge
Shorter rafters are supported by a beam rafter, which is normally horizontal.
Bargeboard
A ornamental board that covers the gable end’s fly rafter.
Base line
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One of a set of imaginary lines that run east and west that surveyors use as a guide when describing land under the government survey method.
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This could be the topographic centre line of a survey, like the path of a freeway.
Surveyors use imaginary lines going east and west for guidance while finding and characterizing land using the government survey technique of property description.
The first and mutually agreed-upon plan for the project’s activity.
A reference point that runs east and west and is a component of government rectangle surveys.
It runs east and west on a governmental piece of territory, with townships marked by a specified base line.
Base period
A time period or starting point for calculating certain business and economic data, which is often used in escalation clauses to show how quickly things are going up. The determination of the base period is very important in commercial leases, where it is used to figure out the cutoff year before rent increases. The parties usually come up with a complicated formula for figuring out the base index, which is usually set at 100. From there, they can raise rents to keep up with rising operating costs, utilities, services, and property taxes.
Suppose that 2013 was used as the base year in a lease. If costs rose 8% in 2014 compared to 2013 prices, then the 2014 index would rise to 108 and lease rents would be raised if this was stated in the lease document.
Base rent
The bare minimum of rent payments below a lease with a participation clause.
Amount paid in percentage leases by retail tenants independent of the quantity of sales generated by the tenant’s business.
In a percentage lease, the minimum amount of rent that must be paid. This is called the “base year.” In English, the second and every year after that is called a comparison year.
Base shoe
In some places, molding is used to make a line where the floor meets the baseboard. This is also known as a carpet strip.
Molding is used to fill in the spaces between the floor and the baseboard.
Base top molding
Moldings have gaps between them, so they need to be filled in with a thin strip of wood. This is called a stile.
Base year
When applying the escalation clause, the year of the lease period is used as the standard. When compared to the base year, the production costs are either above or below the following year.
Baseboard
There is a piece of wood that goes around the bottom of the wall, running perpendicular to the floor. A baseboard covers the gap between the floor and the wall, protects the wall from scuffs, and adds a decorative touch. It’s also called wains.
A board that forms the inner wall’s foot.
Baseflow
Groundwater contributes a percentage of streamflow; it is a constant flow that is sluggish to alter even during rainless times.
Baseline
The first and mutually agreed-upon plan for the project’s activity.
A reference point that runs east and west and is a component of government rectangle surveys.
Basement
A room with a full-story height that is below the first floor, either completely or partially below the outside grade. It is usually not used for living space. Basement space can’t be part of a home’s finished gross living area at a certain level.
Basement window
The window frame and glass unit in the window buck are repaired.
Basic rate
The weighted average cost of capital plus the equity buildup factor used to calculate the appropriate overall capitalization rate.
Basis
It is from this value that profits, loss, and depreciation are estimated for calculating taxes.
This is the amount of money the Internal Revenue Service gives to an asset so that it can be depreciated over time and how much money it makes or loses when it is sold. All property has a value that is important when it comes to taxes when it is sold. Once that value is found, it is very important for tax reasons. If you bought a piece of property, your basis is the cost of the property, the value of any capital expenditures for improvements to the property, and any cost recovery depreciation that you took or were allowed to take. If the new property is a replacement for a home sold under the two-year rollover rules of Section 1034, or if the new home is bought through an exchange or an involuntary conversion, the new home’s basis is also reduced by any untaxed gains that are “carried over.” There is a new value for this property, which is called its adjusted basis.
If the donor gave the property to the donee over a long period of time, the donor’s basis at the time of the gift is used to figure out how much the donee owes in gift taxes and how much depreciation the donee is allowed to take. This figure is then reduced by any depreciation the donee is allowed to take. A gift and a sale can happen in some cases, but the maximum basis is the fair value of the property at the time it was given away, plus any capital expenditures by the new owner to improve the property, minus any depreciation that was allowed or was taken by the new owner. This is called the “maximum basis.”
A person who inherits something will use the “stepped-up” basis of that thing as the basis for figuring out how much money they made. This is usually what the property was worth when it was given to them, or if they chose, six months later, if they wanted to.
If the property was bought in a tax-deferred exchange, the basis of the new property is based on the basis of the old property that was traded. Often, though, tax-deferred exchanges become a little taxed because the recipient gets cash or other different property in addition to the property of the same kind. As long as cash or other goods are exchanged, the profit is taxed only if they are given as part of the deal. In this way, when a portion of a gain is recognized, the basis of what you get is based on the value of the property you traded for. This value is reduced by other property or cash you get, and the amount of taxable gain is added to the value of what you get.
Because a home is not “property used in a trade or business” or “property held for the production of income,” it is not depreciable for tax purposes. The taxpayer should keep good records and receipts of big home improvements so that the original value of the property can be raised by the amount of money that was spent on them. To figure out how much money someone made or lost when they sold something, they compare the amount of money they made or lost to how much money they made or lost on the sale.
An important thing to think about is how the base is set up. A taxpayer who buys real estate that can be depreciated has to divide the cost of the land and the improvements, which can be depreciated. Taxpayers often use the same allocation as the state tax assessor, but this is not required or binding on them. The taxpayer must also figure out how much depreciation, gain, or loss each part of the building will have. When a lot of work is done on a piece of property, the cost of that work must be added to the taxpayer’s depreciable basis.
Tax advisors, tax lawyers, and commercial-investment brokers can all help real estate investors get good advice on how to make a real estate investment, but they can’t help them if they don’t know what they’re talking about.
Basis point
A tiny fraction of a percentage.
1/100 of 1% This word is used to describe the amount of change in the market price of bonds and other debt instruments, such as mortgages, over time. To give an example, 50 basis points is the difference between a 13% rate and 13% rate.
Basis risk
The possibility that payments from an investment do not match the required payments to bondholders. This is due to a mismatch in the indexes that the investment and liabilities are connected to.
Basket provision
Insurance companies, savings and loan associations, and mutual savings banks must follow certain rules when they invest their money. A provision in these rules lets them invest a small percentage of their assets in things that aren’t allowed by the rules. It would be called a basket (bucket) money loan if it was made under this provision, like a high-yield second mortgage or a wrap-around mortgage. These kinds of transactions are put in a separate basket, so to speak.
Bat
A brick that has been split into two equal parts.
Batt
A slab-shaped insulating material used in the construction of buildings.
Batten
Decorative strips of wood or metal are used to cover joints on both the inside and outside of a home.
A little piece of wood used for a variety of purposes in construction, such as covering cracks between boards, reinforcing particular doors, or providing a base for lathing.
Bay
Between a row of columns and the bearing wall, there is an unfinished region or space. This is often the minimum area that a building level can be divided into.
People who work in factories and warehouses often have an unfinished area or space between a row of columns and the wall that holds them up. Usually, the smallest part of a building floor that can be divided up is called a “room.”
Bay depth
The measurement between the corridor wall and the actual window or wall.
Bay window
In a room, a window that is part of a bay, extends from the wall, and is held in place by its own foundation.
A room alcove that projects from an exterior wall and has its own window.
Continued at…
Real Estate Glossary B [Part 2]
