terms and definitions

Question 1

Amortization

Answer 1

Amortization is when payments divide into equal amounts for the duration of the loan

Question 2

Ad valorem

Answer 2

The Latin phrase ad valorem means “according to value.”

Question 3

Appraisal

Answer 3

An appraisal is an estimate of approximate worth of something.

Question 4

Appreciation

Answer 4

Appreciation is any gain in the value of a property over time from any cause.

Question 5

Capitalization

Answer 5

Capitalization is the conversion of assets or income into capital.

Question 6

Capitalization rate

Answer 6

Cap rate is used to indicate the rate of return that is expected to be generated on a property.

Question 7

Cetris Paribus

Answer 7

A Latin phrase meaning “other things equal” or in plain terms all things remaining constant.

Question 8

Commission

Answer 8

A commission is a fee paid to an agent for performing a transaction.

Question 9

Debt

Answer 9

Something owed or promised.

Question 10

Depreciation

Answer 10

Depreciation is any loss in the value of a property over time from any cause.

Question 11

Discount points

Answer 11

Discount points also known as mortgage points are prepaid interest.

Question 12

Double net lease

Answer 12

“Double” means two additional costs will be added to your base rent. Usually, taxes and insurance costs are added to the monthly lease payment.

Question 13

Equity

Answer 13

Equity is the difference between the market value of your home and the amount you owe the lender who holds the mortgage.

Question 14

Escrow

Answer 14

Escrow is a way for money and property to be transferred from one party to another through the use of a neutral, third-party agent also known as an escrow agent. Escrow makes it a lot safer for both buyers and sellers to close the sale without worrying about getting snubbed or cheated.

Question 15

Gross rent multiplier

Answer 15

The ratio of the price of a real estate investment to its annual rental income before accounting for expenses such as property taxes, insurance, and utilities. More specifically its a measure of the value of an investment property that is obtained by dividing the property’s sale price by its gross annual rental income.

Question 16

Interest

Answer 16

money paid or owed regularly at a particular rate.

Question 17

Investment

Answer 17

An investment is the legal purchase of something that is not consumed today but will be in the future to create profit.

Question 18

Market value or market price

Answer 18

The actual selling price of the property. So if your home sells for $200,000. Its market value is $200,000.

Question 19

Mill rate

Answer 19

The mill rate is the amount of tax payable per dollar of the assessed value of a property. Mill rate is also known as the millage rate.

Question 20

Net listing

Answer 20

A net listing is when an agent agrees to sell an owner’s property for a set minimum price. Anything over the minimum price belongs to the agent as commission.

Question 21

Net operating income

Answer 21

The total income of a property minus all operating expenses.

Question 22

Property tax

Answer 22

Property tax is a real estate ad-valorem tax, calculated by the local government, which is paid by the owner of the property. The tax is usually based on the value of the owned property.

Question 23

Principal

Answer 23

The amount borrowed (such as the face value of a debt security).

Question 24

Tax rate

Answer 24

The tax rate is the designated rate the government taxes a person, business, or entity.

Question 25

Triple net lease

Answer 25

“Triple” means three additional costs will be added to your base rent. Usually, taxes, insurance, and maintenance are all added to the monthly lease payment.