Continued from…
Real Estate Glossary F [Part 2]
Filled land
There is a higher grade in an area where dirt, gravel, and rock have been deposited or dumped. This land’s seller and broker have a duty to disclose to the buyer that the property is on filled land in most cases. Because of this, the seller and broker could be held accountable if an ignorant buyer experienced losses (for example, if the landslide or sank during construction) and sought to void the deal after learning that the property was built on filled land instead of undeveloped land. This criterion does not apply if it is apparent that the entire community is situated on property that has been used for a long period of time without any negative consequences.
Filtering down process
The reduction in the quality and value of housing units previously occupied by middle- and upper-income families, making them more affordable for lower-income families.
Filtration
A word that refers to the removal of contaminants, such as silt, by passing water through a soil, organic, and/or fabric medium.
Final adjusted sale price
In the sales comparison technique, the price paid for a comparable property that has been modified for all variables and features to resemble the subject property and the present date.
Finance charge
An amount determined by the federal Truth in Lending Act to include all fees imposed by the lender and payable either directly or indirectly by the borrower.
The amount charged by a mortgage lender.
Finance fee
A fee paid to a mortgage broker to cover the costs of establishing a mortgage with a lending institution; sometimes known as an origination fee or service fee. The finance charge is frequently expressed as a percentage of the loan amount, which is called a “point” (for example, 2 percent would become two points).
Financial assets
Promissory notes, bonds, and commercial paper are examples of assets that reflect financial claims rather than ownership of actual things.
Financial institution
An entity that acts as a go-between, obtaining money through deposits and then lending it out to make a profit. Savings and loan associations, commercial banks, credit unions, and cooperative savings banks are some of the most important financial institutions.
Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA)
In 1989, the U.S. Congress established a comprehensive financial institution regulating statute. The Financial Institution Reform and Recovery Act (FIRREA) introduced the SAIF and BIF, both of which are administered by the Federal Deposit Insurance Corporation (FDI), which was reformed (FDIC). FIRREA also established the now-defunct Resolution Trust Corporation (RTC) to oversee the assets of bankrupt savings and loan associations and credit unions. In one provision of the statute, the Appraisal Foundation was established to ensure the use of certified or licenced appraisers for federally insured or regulated properties.
Financial intermediaries
Institutions such as commercial banks, savings and loan organizations, credit unions, and others that serve as intermediaries between savers and user-borrowers.
Depositories and mortgage debtors are brought together by institutions.
Financial leverage
The influence of borrowed funds on investment returns. That is, the use of borrowed funds to magnify the effects on equities investors.
Because the funds were borrowed, the rate of return to the equity investor increased.
When borrowed money is used to buy an investment.
Financial management rate of return (FMRR)
A change to the internal rate of return that is intended to avoid difficulties that arise when negative cash flows are included in the projection.
Two after-tax reinvestment rates are utilized in this form of the internal rate of return assessment.
Financial risk
The risk that a project’s cash flow will be insufficient to cover the investor’s debt servicing obligations.
The danger is that the NOI will be smaller than the loan service.
The danger of borrowing money and the difficulties that will arise if the investor is unable to satisfy the debt service obligations.
The chance that an investment won’t be able to pay back its principal and income.
Financial statement
A statement of a person or company’s financial position and net worth as of a specific date, identifying and categorizing assets and liabilities. A certified public accounting firm’s seal of approval may be required by the person making the request for the financial statement. Mortgage bankers have recently started requiring a certified financial statement from all loan applicants as a current trend.
In order to register a proposed subdivision, a subdivider may be required to provide a current financial statement under the rules of various states. Under the Interstate Land Sales Full Disclosure Act, financial disclosures are required in interstate land sales. Any subdivision with more than a specific value or number of lots is required to have these declarations verified by a third party.
A statement that shows the revenue and costs for a certain accounting period, as well as the assets, liabilities, and equity as of a specific date.
Financing
Mortgages, deeds of trust, contracts for the deed, and the like are commonly used to secure this portion of the purchase price for a property. These include banks, savings and loan associations; insurance firms; credit unions; mortgage bankers; as well as individual investors. The greatest category of credit in the U.S. is mortgage financing, according to Federal Reserve data (that is, after the debt of the federal government).
When it comes to real estate financing, a variety of tools are typically employed. Both a note and a security instrument are used to prove that the borrower is obligated to pay back the loan. There is no note in the case of a contract for deed purchase. As the number of lenders looking to invest in real estate increases, so does the cost of borrowing for a borrower.
Throughout the 1980s, alternative financing techniques such as renegotiable rates, progressive payments and wraparounds have been used in place of traditional debt financing. Syndication has also become more commonplace. It is not uncommon for sellers to use the lottery system as a means of financing a buyer’s purchase.
The process of borrowing money in order to purchase real estate.
Financing a loan
A personal asset, such as real estate, or an unsecured loan, can be used.
Financing gap
The discrepancy between the asking price of a house and the amount of money the buyer has to spend on the acquisition.
Financing statement
Filed in order to “complete” a creditor’s security claim in an item of personal property, this short document is needed by the Uniform Commercial Code (UCC). This protects the creditor’s interest in personal property that is employed as security for a debt, but becomes a fixture when it is linked to real property. Suppose Sue Brown buys a sink at DS Count Department Store and subsequently install the sink in her home under a conditional sales contract. Afterwards, the sink becomes a fixture subject to all existing recorded liens. It is possible for the store to safeguard its security interest by recording a copy of Brown’s financing statement (Form UCC-1) immediately, giving it a prior secured right to the sink that would be superior to the rights of Brown’s home mortgagee should she default on her mortgage and the bank forecloses on the real estate.
The lien is created as a result of the security arrangement that exists between the debtor and the creditor. The filing of the financing statement, on the other hand, is what “completes” the lien (i.e., makes the lien effective against later creditors). Despite the fact that a financing statement is not applicable to real property mortgages, many mortgagees still file a financing statement in those circumstances where the security is ambiguous.
In the six months preceding the expiration date, a financing statement is valid for five years from the date of filing and expires if no continuation statement is filed to extend its validity.
A financial arrangement between a lender and a borrower.
Finder’s fee
A commission paid to a third party for introducing a buyer or a seller to a real estate agent, often known as a referral fee. No part in negotiating the terms of the contract is played by a finder; rather, a finder attracts, interests, introduces, or brings together the parties involved in a negotiation.
When it comes to commission splits, brokers in many jurisdictions are only allowed to do so if they work with another licensed real estate broker or a broker from another state who is not involved in the talks within their own state. It’s a common question as to whether an owner can compensate an unlicensed individual like a renter in the building for suggesting other potential tenants. Finding someone who accepts a commission could put the finder in breach of state licensing regulations for accepting income without the proper credentials.
As a result of federal legislation, real estate settlement practices act (i.e., paying a fee or other thing of value in exchange for receiving a referral when the transaction itself involves an original federally related mortgage loan). Payments made to a finder for services supplied or performed but not covered by this provision.
A charge paid to someone who performs a service but is not a broker.
Finger joint
Creating a longer piece of wood by joining two shorter ones.
Finish date
A moment in time related to the conclusion of an action.
Finish flooring
This includes anything from wood to carpet to tile to vinyl.
Fire block
Members of the wall that run horizontally from the floor to roughly halfway up the wall.
Nailed in between studs, these short horizontal elements are typically halfway up a wall’s height.
Brick built from a heat-resistant refractory ceramic substance.
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Fire insurance
Fire insurance is a type of property insurance that covers damages due to fire, but is not as comprehensive as a homeowners’ insurance policy that covers other risks, including liability.
Fire resistive or Fire rated
These are materials that are incombustible at typical fire temperatures and can resist the flames for up to an hour.
Fire retardant chemical
A chemical used to minimize a material’s flammability.
Fire sprinkler system
When the temperature in a certain building area exceeds a predetermined level, a fire protection system actuated by heat provides an automatic flow of pressurized water from overhead nozzles. To keep the water supply pipes from freezing, they are frequently pressurized with compressed air to keep the water behind the dry valve; this is referred to as a dry system.
Fire stop
To help prevent fires, short boards are inserted horizontally between studs or joists.
To prevent the spread of fire and smoke in an enclosed area, it is necessary to create a tight seal around the area.
Fire wall
In order to keep a fire contained within a building, a smoke and flame-retardant wall is used. The fire wall is assigned a standard rating based on how long it can keep a fire at bay.
A fire wall is made of fireproof materials and is put up to stop fire from spreading to other parts of a building or to properties next door.
Fire yard
According to several building rules, a section of a structure’s perimeter must be kept clear to allow for the passage of fire trucks.
Fireplace chase flashing pan
Large metal sheet used to keep fire and smoke contained to a small area.
Firm commitment
A firm commitment made by a lender to make a certain amount of money available to a specific borrower over a specific period of time at a specific interest rate, as well as a commitment made by the Federal Housing Administration to insure a specific mortgage held by a specific borrower (as opposed to a commitment conditioned on approval of a yet-to-be determined mortgagor).
When a real estate transaction is completed, it is the responsibility of the broker to ensure that all financial obligations and commitments are in writing, reflect the parties’ specific intentions, and are distributed to all parties involved.
First mortgage
A loan secured by real estate that has priority over all other liens on the property. Even if a mortgage is initially completed or referred to as a “first mortgage” by the parties, it must be recorded first in order to avoid subordination.
An initial lien on a piece of real estate.
Priority is given to this mortgage over all other liens on the property.
First papers
The initial paperwork in the transaction, such as a binder or an earnest money agreement.
First right of refusal
One party’s right to purchase or lease a property before another.
First-Loss Piece
The CMBS’s most junior class, which bears the brunt of a mortgage pool’s losses before the other classes.
First-year depreciation
Section 179 of the Internal Revenue Code permits a sole proprietorship, partnership, or corporation to deduct the full purchase price of a piece of tangible property in the year it is acquired. In 2011, a total of $500,000 was made available. Machinery and equipment, furniture and fittings, and most storage facilities are all eligible property. Buildings, income-producing assets, and other real estate holdings are all examples of ineligible property.
Fiscal policy
Controlling government expenditure and taxation allows you to exert economic power.
Fiscal year
One that is not a calendar year but rather one utilized for tax or accounting purposes. As an illustration, the 12-month period spanning July 1 and June 30 of the following year is usually given as an example of a fiscal year. The calendar year is commonly used by both individuals and businesses.
A financial reporting period of 12 months that may or may not correspond with the calendar year.
The difference between the calendar year and the business year. In Australia, 1 July to 30 June is the most common time frame.
Fish tape
The use of a long spring steel strip to fish cables and pull wires through conduit is commonplace.
Fishplate (gusset)
Tightening a butt joint using nails or bolts on a piece of wood or plywood.
Fit-up
Within the confines of the enclosing walls, the essential structure (leased space). Partitioning, doors, telephone and electrical outlets, completed wall surfaces, painting or wallcoverings, flooring, and lighting fixtures are all part of this package.
Five-year forecast
A long-term forecast of a property’s expected income and expenses based on anticipated changes.
Fixed expenses
Real estate taxes, hazard insurance, and debt service are examples of regular expenses that must be paid regardless of whether the property is occupied. These costs contrast with the costs of maintaining the functioning of a property in order to generate money.
The running expenses that are typically fixed in amount each earnings period. They don’t usually change according to the number of people in the house.
Costs that don’t change based on how full a building is. Taxes, insurance, and some kinds of building maintenance are part of them.
Fixed interest rate
Having a fixed interest rate that allows you to lock in the rate for a set amount of time.
A rate of interest that stays the same for a certain amount of time, like the whole loan term or the first year of a loan.
Fixed lease
An agreement in which the lessee agrees to pay a predetermined monthly fee for the use of the facility.
A lease in which the rent paid by the lessee stays the same for the whole length of the lease.
Fixed price contract
A contract with a fixed price.
Fixed rate
For a specific period of time, a mortgage where the monthly payments are linked to an interest rate. Regardless of changes in the lender’s normal rate, this interest rate cannot alter during this time period.
With an adjustable-rate loan, the initial payments are determined by the variable interest rate over a specified time period.
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Fixed rate loan
A loan with a fixed interest rate over its entire term. There was a time when fixed-rate mortgages dominated the real estate market, but that is no longer the case.
Fixed rate mortgage
A mortgage with a set interest rate for the life of the loan.
Fixer-upper
A property that is in desperate need of repair and is therefore being offered for sale at a discount.
Fixing-up expenses
It is no longer permissible to deduct expenses incurred in order to facilitate the sale of a principal property (such as painting and carpet cleaning).
Fixtures
Appliances and lighting fixtures that are permanently affixed to a home or business.
- When a piece of personal property is attached to real property in such a way that it becomes part of the property, it is referred to as “real property.” If the parties intend for an object to be a fixture, it can be determined by the way it is connected, its type and adaptation to the real estate, its function, and any relationships between the parties. It can also be determined by the intention of the parties. When determining whether or not something is a fixture, it is more important to look at how well it was installed than the potential damage it could create if it were to be removed. It doesn’t matter whether you leave behind a dirty or unpainted area when you remove anything. Under the constructive annexation idea, some items are so strongly linked to a structure that they are considered fixtures (as in the case of house keys, which pass to the buyer upon sale of the property). Real estate objects that are easily detachable.
Though an item is ruled to be a fixture, even if it is not specified in the deed, it passes with the property. Value of a property’s fixtures are often measured in terms of their value as part of the property, rather than the price they would attract if they were to be sold off on the open market.
Trade or tenant fixtures are exempt from the fixture rule. The courts believe that the parties did not intend for the tenant’s fixtures to become a permanent part of the building when they signed the lease agreement.
The landlord can acquire ownership of the abandoned property if the renter fails to remove trade fixtures.
It’s important to know whether a piece of furniture or other property is considered a fixture when determining the value of real estate for tax purposes, when trying to determine if a house sale included the item in question, when trying to figure out what a mortgagee owns when a lease expires, and when figuring out insurance coverage.
In current transactions, the distinction between fixtures and non-fixtures in the Uniform Commercial Code makes determining whether an item is a fixture all the more critical.
All fixtures must be included in the sale unless otherwise specified in the contract. This also applies to third-party fixtures. It is important for a broker to thoroughly check the property and establish whether any of the visible fixtures, such as air conditioners or carpeting, are leased or acquired under a UCC financing statement. Certain questionable objects, such as television antennas, solar devices, security systems, blinds, satellite dishes, and mirrors, should be specified in the contract of sale.
- Plumbing fixtures, such as toilets and baths, that are permanently installed in a home.
Personal property that becomes real property due to its permanent tie to realty
Personal property that is attached to the land and forms part of the real estate.
Parts of a property that are usually sold with it, like light fixtures, carpets, awnings, etc.
Fixturing period
A commercial lease agreement allows the lessee to enter the premises during this time to make necessary changes in order to establish their business.
Flag lot
Flag and pole-shaped land parcels are common in the United States. It is common for the location to be positioned in the back of a property that fronts a major thoroughfare. As illustrated in the illustration, a parcel can be divided into one or two flag lots.
Flagstone (flagging or flags)
A flat, irregular piece of stone used for paving. Usually made of sandstone or shale, which can be broken into slabs. Used for walkways, patios, terraces, and planter boxes.
This material is used for paving and as a veneer instead of bricks.
Flakeboard
Meant from 1"-2" wood chips and glue, this panel is made to look like wood. A common replacement for plywood on external walls and roofs.
Flame retention burner
An oil burner designed to keep the flame close to the nozzle’s surface.
Flashing
Protecting a building from water seepage by using sheet metal or other impermeable material on the roof and walls.
Protecting a structure from water by using a metal sheet or other material for the roofing and wall construction.
Sheets of copper, lead, or tin are used to keep water from getting into a building through the roof and walls.
Flat
A unit in a building that is normally owned under a strata (or company) title.
Apartment or complete floor of a building that is primarily utilized as a place to live.
A self-contained living space in a building with more than one unit.
Flat lease
Equal monthly rent payments are required for the duration of a lease. There is a clause in the contract that specifies how often payments should be paid.
Flat mold
Wood strips that are attached to the cabinet skins at the butt seam.
Flat paint
Intensely pigmented interior paint that dries with no sheen.
Flat rent
Describes a lease in which the rental rate is set for the duration of the term.
Flat work
There are many different types of concrete flooring that may be found in homes and businesses.
Flea market
A huge structure or open area where a portion is rented out to individuals who sell goods there. Drive-in theaters and vast parking lots are ideal locations for flea markets.
Flex space
Industrial space that is frequently designed without beautiful lobbies or furnishings and that may be utilized for storage or modest offices and that can be transferred from one use to another very cheaply.
Multipurpose areas that can be set up for a variety of purposes (for example, space that could be utilized for industrial or office activities).
Flexible payment mortgage
A loan in which the payments required by a pledged account mortgage are calculated using a computerized process. Often, interest rates are initially lower than on conventional mortgages, and initial payments are lower than on amortized mortgages, resulting in negative amortization.
The flexible loan insurance payment mortgage, or FLIP, allows potential buyers to cut their monthly payments by up to 20% during the first year of the mortgage and then gradually increase them over the next five years. As pledged cash collateral, the buyer places the down payment in an interest-bearing savings account. The lender is the only one who can draw on the pledged account, and the funds can be used to supplement the buyer’s monthly payment or applied against principal if the borrower defaults or the property is sold. Private mortgage insurance covers the first 20% of the loan, lowering the lender’s risk. A pledged account mortgage is another term for a pledged account mortgage.
Flip
When a buyer agrees to buy a property with the purpose of swiftly selling it to another buyer, this is known as a “flip.”
The mortgage loan insurance payment is adjustable.
Flip tax
The charge paid by a housing coop when an unit is sold to the coop is known as a transfer fee.
Flipping
Buying properties off the plan or for less than market value and then selling for a profit before settlement.
Property acquisition for the purpose of resale.
Float
The length of time that an activity can be delayed from its early start without causing the project’s completion date to be pushed back.
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The “pegged rate” is a mortgage finance phrase that refers to the spread between a loan’s variable interest rate and the local prime rate, for example. If there is no floor or ceiling, then it is a full float. If there is no limit, then it is a full float. At the time of loan completion, a common float clause reads as follows: “Three and three-quarters percent (334 percent) over and floating with Bank of Equity prime, but not less than three and three-quarters percent (334 percent) over Bank of Equity prime.”
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A banking word that refers to a check that hasn’t yet been cleared to be paid. The clearing of local checks can take up to three days. Another meaning for this phrase is "the bank’s usage of the money prior to clearing the check.
Floating
It’s the second-to-last stage of concrete work when you use a hand float for smoothing and watering the surface.
Floating lien
Property that is later purchased may have a debt attached to it, such as a mortgage or lien. There must be an additional condition included in the mortgage for it to be a floating lien; otherwise, the security is restricted to the assets that existed at time of the mortgage.
Floating rate
An adjustable-rate mortgage is one with an interest rate that changes over time (ARM).
Floating zone
Until a developer files for rezoning, a land area described in the zoning regulations but not on the zoning map.
Floating rate mortgage
A financial instrument whose interest rate fluctuates over the loan’s life depending on a stock index such as the prime rate or LIBOR.
Floating rate notes
A type of security with a variable (or floating) interest rate rather than a fixed rate, but generally a margin over the market index.
Floating slab
The footing is poured first, and then the slab is poured on top of it once the footing has set.
Floating wall
On a concrete floor, a non-bearing wall is built.
Flood insurance
Subsidized, government backed insurance offered by commercial insurance companies that are allowed to sell and service federal flood insurance policies by agreement with the Federal Insurance and Mitigation Administration. In the event of flooding, tidal waves, or any rising water, flood insurance will cover the damages. Flood insurance is never included in a homeowner’s policy; it is always a separate policy. Flood insurance is required for any property funded by a federally regulated lender if it is located in a flood-prone area as defined by the Federal Emergency Management Agency (FEMA).
For the HUD-1, all properties are required to have a flood certification. According to federal banking regulations, flood insurance must be purchased for properties located in zones A, V or AV of the Special Flood Hazard Area (SFHA). If a property is not located in an SFHA, lenders can choose whether or not to demand flood insurance.
Property damage caused by natural floods is covered by flood insurance.
Flood Insurance Rate Map (FIRM)
Official maps depicting locations designated Special Flood Hazard Areas and further separated into insurance risk zones within the 100-year flood boundary. Not every 100 years does a 100-year flood occur, but every year has the potential for a 100-year flood to be met or exceeded.
Flood prone area
A place with a 1% annual chance of flooding or a chance of a flood occurring once in a century.
Floodplain
Flat areas of land near waterways and streams that are at risk of flooding and overflow. Governmental restrictions on construction normally apply in certain areas.
A floodplain is a piece of land that is prone to flooding on a regular basis and is generally designated by the local authority.
Floodway Fringe
The region in a river valley that would be lightly flooded by a 100-year flood, as defined by federal flood regulation in the United States.
Floor area
The total area of a building or structure’s floors.
Total horizontal surface of a specific floor or the total area of all floors in a building with more than one floor, figured out by adding up the outside dimensions of each floor. The floor areas of balconies and mezzanines are added to the total floor area of the building.
Floor area ratio (FAR)
The floor area to land area ratio (often land on which the building sits). It is calculated by dividing the total floor area of the building by the lot area, and it can be expressed as a percentage or a decimal. This formula is commonly found in zoning rules to control the size of buildings. A limit on the number of buildings that can be built on a given piece of land; a density restriction.
The total square footage of the land divided by the total floor area of the building (gross or net).
The relationship between a building’s floor area and the square metre area of the land it stands on.
Floor duty
Assigning one sales person to handle all phone calls and office visitors for a set length of time is a common practice in real estate brokerage companies. “on the floor” is generally the first point of contact with new customers if they do not ask to talk to a specific salesperson (“up call”). Licensed real estate agents are required, not secretaries.
Floor joists
The major support for the floor is provided by horizontal planks arranged on their edges and resting on beams. In order to secure the subfloor, nails are driven into the joists. Ceilings also have joists.
Floor load
If the weight is evenly distributed, the floor of a building can hold pounds of weight per square foot.
Floor loan
A minimum level of loan that is issued in the financing of large-scale building construction until specified progress markers in construction and leasing are met. The loan is then raised.
To borrow less than the maximum amount allowed. Upon completion of the upgrades, the remaining balance of the loan is repaid in full. To give an example, a lender may agree to grant a $2,000,000 permanent loan in the following terms: $1,200,000 at closing and the remaining $800,000 at a later date, provided that 75 percent of the premises are leased by that date. Occupancy levels must be reached in the stipulated time period following floor loan funding before the $800,000 gap can be filled. If the developer does not get this occupancy, he or she will have to look for expensive gap financing due to the high risks involved.
The smallest loan amount that a lender will consider.
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