Real Estate Glossary
- Balloon Mortgage
- A Balloon Mortgage is one which matures with a balance still owed at the end of the term.
- Board Approval
- Board Approval is a condition in the bylaws of a co-operative requiring that the seller obtain approval from the Board of Directors as a prerequisite to transferring the shares or, in the case of a condominium, obtaining a waiver of the right of first refusal.
- Building Codes
- Building Codes are regulations established by the state or city government stating fully the structural requirements for a building.
- By-Laws are the rules by which the co-operative corporation and condominium association operates.
- Cancellation Clause
- A Cancellation Clause is a provision in a lease or other contract which confers upon one or more of the parties to the lease the right to terminate the party's or parties' obligations thereunder upon the occurrence of the condition or contingency set forth in the said clause.
- Capital Improvement
- A Capital Improvement is a permanent improvement to real estate, usually extending the useful life and value of a property.
- Certificate of Occupancy
- A Certificate of Occupancy ("C of O") is a document issued by a government authority certifying that a building is ready and fit for occupancy. (Likewise, "TCO" or Temporary Certificate of Occupancy.)
- Co-brokerage is an agreement between two brokerage firms to share listings and commissions. This is usually used when one of the brokers is the seller's exclusive listing agent and the other broker represents the buyer.
- Collateral is the security put up in exchange for a loan. It can be taken by the lender if the loan goes unpaid.
- Commitment Letter
- A Commitment Letter is the letter issued by a lending bank which legally binds it to provide funds as specified subject to written terms and conditions.
- A Condominium is an apartment building in which each apartment owner owns his or her own apartment plus a percentage of the ownership of the common areas of the entire property. Each owner receives a unit deed, proof of that ownership.
- Condominium Apartments
- Unlike cooperatives, condominiums are owned outright as actual property. At closing, the buyer receives a deed to the apartment. Each owner is billed directly and is responsible for making individual real estate tax and mortgage payments, if any. The common charges for maintenance and upkeep are billed to owners on a monthly basis.
As part of the board package procedure, the real estate agent will present the buyer with the building's condo board requirements and application papers, which may include:
- Signed financial statements
- Tax returns
- Bank statements
- Brokerage statements
- Personal and financial letters of interest
- Professional reference letters
- The contract of sale
- Bank financing documents (if financing)
- Usually, a condop refers to a residential co-op that is operated pursuant to "condo style" rules. (Alternatively, this term refers to a hybrid form of co-op/condo ownership designed to shelter income, from commercial space owned by the building, for example.)
- A Contract, also known as a Purchase of Sales Agreement, is a written agreement between seller and purchaser in which the purchaser agrees to buy certain real estate and the seller agrees to sell upon conditions and terms set forth therein.
- Conversion is a change in ownership type or status. Example: A rental housing building may be converted to co-operative or condominium ownership. A commercial loft building may be converted into residential apartments.
- A Co-operative is a corporation that owns a building. Purchasers receive shares of stock in the corporation, and a Proprietary Lease for their apartment.
- Cooperative Apartments
- Cooperative apartments represent approximately 70% of all resident-owned real estate in Manhattan. Instead of purchasing the residence outright, the co-op buyer purchases a certain number of shares in a corporation. These shares entitle the buyer to a proprietary lease, affirming the buyer's right to occupy a specific apartment. Tenants/shareholders of a co-op pay a monthly maintenance, based on the number of shares, to cover real estate taxes, the building's mortgage, employee salaries, and overall building maintenance.
Facts about Cooperative Apartments:
- A co-op's board of directors has the right to accept or reject a potential shareholder without providing a reason why.
- Most co-ops limit the amount of the purchase price that may be financed by the buyer. Some buildings require all cash.
- Interest on an underlying mortgage, if any, and real estate taxes typically comprise a portion of a co-op's maintenance charges. Hence, a corresponding percentage of those mainteneance charges will be tax deductible.
- Shareholders must obtain permission from the board before subleasing a unit; some buildings forbid subleasing entirely.
- Prospective buyers must provide detailed personal financial data, tax returns, and professional reference letters to the board in order to be approved. The building's board will also personally interview the buyer.
- A flip tax (generally 1 to 2% of the selling price) is a common feature in cooperative sales. This "tax" or fee helps build the co-op's capital reserve fund and pay for building improvements. Flip taxes are payable by buyer or seller, depending on building policy.
- A Covenant is an agreement(s) written into deeds promising performance or nonperformance of certain acts or stipulating certain uses or non-uses of the property.
- Deed Restriction
- A Deed Restriction is an imposed restriction in a deed for the purupose of limiting the use of the land.
- Default is the act performed by either the buyer or seller that breaches the contract of t sale and permits a claim for damages.
- An Easement is an interest in land/property owned by another that entitles its holder to a specific use or enjoyment.
- Earnest Money
- Earnest Money, also known as a Deposit or Down Payment, is made by a purchaser of real estate as evidence of good faith.
- Escrow is the means by which money (a deposit or down payment) is held by one person in trust for another, for the purpose of assuring performance under an agreement. Normally, in a residential real estate sale, the attorney for the seller is the "escrow agent" for the deposit money securing the deal until closing.
- Exclusive Right to Sell Agreement
- Exclusive Right to Sell Agreement is an agreement between a broker and a seller which designates the broker as the seller's sole representative. Under this agreement, a commission is due to the broker even if the apartment is sold directly by the owner.
- Financing Loan
- A Financing Loan is secured by personal property. The stock and lease of a co-operative corporation constitute such personal property. Real estate brokers often refer to these financing loans as mortgages, though technically they are not.
- Fixtures are personal property attached to the land or improvements so as to become part of the real property.
- Flip Tax
- A Flip Tax is a levy issued on the transfer of ownership by a co-operative corporation or condominium association against either the buyer or seller.
- The Grantee is the party to whom the title to real property is conveyed.
- A Landmark is a designation given to a building which places it under protection for the purpose of preservation.
- A Lien is a legal right or claim upon a specific property which attaches to the property until a debt is satisfied.
- A Listing is the term used by brokers for an apartment for sale after it has been "listed" by the broker in its system.
- Listing Agent
- A Listing Agent, also known as the Exclusive Broker, is the broker who represents the interests of the seller.
- Loft Buildings
- With large open spaces and high ceilings, loft buildings are typically found in former commercial manufacturing and office districts. As a result, they are more numerous in downtown Manhattan and parts of Brooklyn, although many new "Loft-style" apartments are being developed city-wide.
- Low-Rise/Tenement Buildings
- Among the most affordable housing options in New York, low-rises are five or six-story buildings, usually without elevators or doormen, and with few, if any, amenities.
- Luxury High-Rise Buildings
- More recent in vintage, today's modern towers offer expansive views from very high floors, with floor-to-ceiling glass and state-of-the-art systems and amenities.
- Maintenance is the monthly charge paid by the co-operative tenant/shareholders to cover the building's operative costs, real estate taxes and debt service on the building's underlying mortgage.
- Market Value
- The Market Value is the most probable price that a property should bring if exposed for sale in the open market for a reasonable period of time, with both the buyer and seller aware of current market conditions, neither being under duress.
- Mortgage Broker
- A Mortgage Broker is the real estate professional who represents an array of banks seeking to issue mortgages. This person meets with a customer, assists with the mortgage application and effectuates the mortgage process on behalf of the borrower and the bank. Generally, the mortgage broker is paid a fee by the bank for this service.
- Net Worth
- Net Worth is one's assets, less one's liabilities. Liquid net worth (that which is cash or can be immediately converted to cash) is what cooperatives focus on.
- Offering Plan
- An Offering Plan, also known as a Prospectus, is a document issued by a sponsor in the process of converting a building to cooperative or condominium ownership (or developing a new building). Its purpose is to provide full disclosure of all relevant data associated with evaluating an investment in the property.
- Points are a payment made to a bank as consideration for issuing a mortgage. These are usually based upon a percentage of the loan amount.
- Postwar Buildings
- Built after World War II, postwar buildings offer spacious, well-planned apartments with L-shaped living areas, wide picture windows, good closets, and air-conditioning. They rarely exceed 20 stories in height.
- Power of Attorney
- Power of Attorney is a written instrument duly signed and executed by a person who authorizes an agent to act on his/her behalf to the extent indicated in the instrument.
- Pre-payment Clause
- A Pre-payment Clause is a clause in the mortgage which gives a mortgagor the privilege of playing the mortgage indebtedness before it becomes due.
- Prewar Buildings
- Built prior to World War II, prewar buildings often have larger and wider rooms and commonly feature fireplaces, hardwood floors, high ceilings, and moldings.
- Proprietary Lease
- A Proprietary Lease is the lease issued by a co-operative corporation to each tenant/shareholder prescribing the right to occupy a specific apartment pursuant to guidelines mandated by the building.
- Real Property
- Real Property is land and generally whatever is erected upon or affixed thereto.
- Recognition Agreement
- A Recognition Agreement, also known as an Aztech Form, is generally provided by the lender to be signed by the cooperative. It recognizes the secured rights of a lender to the shares of stock and the proprietary lease on an apartment.
- Right of First Refusal
- A Right of First Refusal is a condition found in many condominium by-laws which permits the board to review any party seeking to purchase or rent an apartment. It gives the board permission to refuse the applicant. If the applicant is refused, the condominium must purchase or rent the apartment under the terms and conditions stipulated in the contract or lease.
- Real Estate agents generally refer to the size of an apartment based on the following specifications. According to the New York City Rent Guidelines Board, a "room" in Manhattan, except for a kitchen, must be at least 65 square feet and include a window. Baths are not counted as "rooms."
- Classic Twelve - A prewar apartment comprised of a living room, formal dining room, library, kitchen, four bedrooms, and four maids' rooms.
- Classic 9 to 11 Rooms – A prewar apartment offering a living room, formal dining room, library, three bedrooms, and two to four maids' rooms.
- Classic Seven or Eight – A prewar apartment with a living room, dining room, kitchen, three bedrooms, and one or two maids' rooms.
- Classic Six – A prewar apartment that consists of a living room, dining room, kitchen, two bedrooms, and one maid's room.
- Classic Five – A prewar apartment that includes a living room, formal dining room, kitchen, and two bedrooms.
- Five Rooms – A living room, kitchen, and three bedrooms.
- Four Rooms – A living room, kitchen, and two bedrooms.
- Three Rooms – A living room, kitchen, and one bedroom.
- Two Rooms – A living room and a kitchen, a.k.a. a "Studio".
- ½ Room – Added to any of the above, typically either a foyer that is large enough to dine in, or a separate alcove intended for dining or, often in the case of a Studio ("2 ½ Room") apartment, for sleeping in.
- Duplex – Although in many markets, a duplex refers to a house with two units, in New York City, it is a single apartment with two floors or levels.
- Loft – Open living space, usually with separate bedrooms.
- Loft Area – Additional space created in apartments with very high ceilings, usually accessed by stairs or a ladder and often used for sleeping.
- Schedule A
- Schedule A is the list in the Offering Plan of all the apartments being sold in a newly-constructed building or one that is in conversion. It presents allocated shares or unit percentage interest, room count, prices, and other material cost elements including the projected maintenance charges and the tax-deducible portion of the maintenance.
- Schedule B
- Schedule B is the projected estimated cost of operative a co-operative or condominium during its first year.
- Subject to Financing
- Subject to Financing, also known as Financing Contingency, is a term stipulating that the agreement is conditioned upon the buyer obtaining financing from a financial institution in an agreed-upon amount.
- Tax Abatement
- A Tax Abatement is the reduction in the amount of real estate tax due over a period of time.
- Title Insurance
- Title Insurance is an insurance polity which indemnifies the holder for any loss sustained by reason of defects in the title.
- Title Search
- A Title Search is an examination of the public records to determine the ownership and encumbrances affecting real property.
- Townhouses and Brownstones
- These are single-family houses that in many cases have been converted into multi-unit apartment buildings. Most townhouses and brownstones were built in the late 19th or early 20th centuries and offer gardens, fireplaces, beautiful floors, and ornamental interior details.
Facts about Condominiums & Townhouses:
- The purchaser receives a deed to the premises that is recorded in the office of the county clerk.
- Owners are responsible for real estate taxes.
- Financing is readily available.
- Owners need to maintain insurance coverage on the dwelling.
- The title may be held in the name of a corporation or trust.
- A Waiver is the renunciation, abandonment or surrender of some claim, right or privilege.