Disclaimer: The below glossary has been prepared for reference purposes only and should not be relied upon or construed as investment advice. Always consult an appropriate expert, including (but not limited to) tax advisors, architects/engineers, loan officers, an attorney, etc, for guidance on outcomes specific to you. Buyers and investors should always perform their own due diligence, make their own purchase / investment and market assumptions, and perform their own calculations and research.
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| Term | Definition | Category |
| Broker vs. Salesperson vs. Associate Broker | A Broker holds the license for a specific brokerage company. An Associate Broker works as an agent under a Broker’s License and has no role in the operations of the organization. A salesperson is a licensed junior agent working under a Broker’s license. | Agency |
| Dual Agency | An agent acting on behalf of both the buyer and seller, as long as both parties have agreed to the arrangement. Fiduciary duties remain limited to each side. | Agency |
| Buyer’s Agent | An agent with a fiduciary duty / relationship to the buyer only. | Agency |
| Seller’s / Listing Agent | An agent with a fiduciary duty / relationship to the seller only. | Agency |
| Open House | Preview time slot set up by the listing agent for buyers to view / casually inspect the property. Usually a few hours long on evenings or weekends. | Agency |
| Reserve Fund | A “Rainy Day” Savings Fund for unexpected costs that arise such as maintenance and long-term capital expenditure. | Building |
| Condominium | A building / property comprised of multiple tax lots that can be owned individually. Condominium units are owned fee simple and are conveyed with a title/deed. | Building |
| Self-Managed Building | A building without a property manager in place which manages its own operations and finances. | Building |
| Building Architect/Engineer | A design professional retained by Condos and Co-ops to review renovation applications for the building. These professionals are more familiar with the specifics of the overall building and can shed light on issues that a designer of a specific unit renovation may not be aware of. | Building |
| Maintenance / Common Charges | A monthly charge paid to manage the building’s expenses. Each building’s budget will vary as to what type of expenses are included in the payment. For example, all Co-ops include property taxes in their maintenance, while Condos do not as they have their own individual tax lots to pay taxes on. | Building |
| Guarantor / Co-signer | A person with the financial ability to cover a purchaser’s liabilities should said purchaser not be able to cover the total cost of owning a property (i.e. mortgage and maintenance payments). Such a person must prove that they can not only cover the costs of the property in question but also their current liabilities elsewhere. Come Co-ops restrict Guarantor’s. Each property should be confirmed on a case by case basis. | Building |
| Pied-a-terre | A second home used on a part time basis. Some buildings restrict the use of apartments in this manner. | Building |
| Management Company | A service company which provides property management and oversight to Condos and Co-ops including facilities management and financial/accounting management. | Building |
| By Laws | A set of Laws that govern how a Co-op or Condo run, usually to do with procedural requirements for decision making and the election of new board members. | Building |
| Wet over dry | Concept referring to adding a bathroom or other plumbing equipment above non-wet, i.e. dry, spaces. This design idea is usually looked down upon by Condos and Co-ops unless the renovation includes extensive waterproofing techniques to guard against leaks to the unit below. | Building |
| Sublet Policy | Co-op or Condo policy put in place to limit the rental of the property by the unit owner. Each building has specific rules put forth in their By Laws which stipulate the policy’s details. This can vary greatly by building. | Building |
| Alteration Agreement | Mandatory agreement between Co-ops / Condos and their unit owners setting out the process for renovations including approvals and rules for what can and cannot be done in the building. | Building |
| Voting Percentage | Wait of a specific unit owners vote should non majority decisions be questioned. In Co-op’s measured by number of shares. In a Condo usually stipulated in the offering plan and tends to be measured by SF of the apartment. | Building |
| Gifted Deposit Money (buying for a child or parent) | An amount of money gifted by a friend or relative towards a purchase. Both the bank and in the case of a Co-op the board will seek verification for where this money originated. Banks are typically concerned with money laundering, while the Co-op board is concerned with a purchaser’s ability to afford the property. Some Co-ops restrict gifted funds entirely. | Building |
| Financial Statement | A list of assets and liabilities filled out by the buyer or sometimes presented and confirmed by a buyer’s financial representative (i.e. CPA or Financial Planner). This document may be requested by the sellers to get a full picture of a potential purchaser’s financials. | Building |
| House Rules | A set of rules at a Co-op or Condo that governs how the building is maintained and used by the owners. Some rules may include policies regulating pets, smoking, pied-a-terre use, co-purchasers, subletting, etc. | Building |
| Mansion Tax | A city tax paid by the purchaser for properties over and above one million dollars with various higher tranches depending on the specific price. | Closing |
| Lien / Lien Search | A search conducted by a title company to investigate if any debts or owed by the current property holder. The search also verifies the chain of ownership over the years to confirm to the best of their knowledge that the seller does in fact have the right to convey the property to the purchaser. | Closing |
| Title Search | A search to review the previous chain of ownership to ensure the seller of the property actually holds the right to sell said property. | Closing |
| Walk through | A simple inspection of a property taken within a few days or hours prior to a real estate closing. | Closing |
| Transfer Tax | A tax paid at the city and state levels associated with the sale and purchase of property, typically paid by the seller. | Closing |
| Recording Fees | Fees charged for the recording of documents at the city and state level. | Closing |
| Title Insurance | Insurance policy protecting the value of property in the event a previous owner makes a claim that the property was illegally sold and therefore the chain of property ownership is invalid. | Closing |
| Coop Board | A board of directors which oversees the decision making of the Co-op. | Coop |
| Coop (Cooperative) | A corporation controlling a single or group of properties which sells shares to owner occupiers accompanied by proprietary leases to allow the shareholders to reside in specific units. | Coop |
| Proprietary Lease | A long lease of real property corresponding with a specific unit of a Co-op backed by shares. | Coop |
| Flip Tax | A tax charged by Co-ops for the sale of shares. Either calculated as a percentage of the gross sale price or percentage of profit. | Coop |
| Board Interview | An in-person interview of potential shareholder/s, accompanied by a Co-op Application, held by a Co-op Board allowing both parties to opportunity to meet and learn about the other. The board will make the final decision on whether the new shareholder will be approved for a purchase of the shares. | Coop |
| Shares | Original Physical Certificates with raised seals certifying a percentage ownership of a Co-op. | Coop |
| Lot Line Window | A window bordering a shared lot line (i.e. not a street facing lot line or a corner lot line). These windows have added fireproofing and safety requirements. They may not be considered in the calculation of legal light and air. Thus, any bedroom solely lite by a lot line window is not a legal bedroom. | DOB |
| Allowable / Permitted Uses | An allowable use per the zoning resolution for a particular location. A location maybe permitted for an office space but not a chemical plant. It is important to establish this during due diligence if one is planning to change how the property is currently being used. | DOB |
| Permit | An approval and permit by the city DOB to undertake construction projects. | DOB |
| DOB | Department of Buildings, City agency regulating the issuance of construction permits. | DOB |
| FAR | Floor Area Ratio is a method for calculating the maximum allowable floor area that can be built on a specific tax lot. The FAR is multiplied by the lot size to arrive at the buildable square footage. Always consult an architect or expert during due diligence to make sure this area is achievable as certain zoning requirements may prohibit you from building to the full potential. | DOB |
| LPC | Landmark Preservation Commission, controls building approvals in Historic Districts. | DOB |
| Zoning | Laws describing what and how much can be built on a given tax lot. | DOB |
| Light and Air | Legal light and air as it is referred to is required to deem a sleeping or living space legally “inhabitable.” This refers to light from a non-lot line window which can be opened to let in fresh air. Basement spaces for example without windows are not legally inhabitable sleeping or living areas and as such can only be referred to as “storage” or “recreation” areas. Consult your architect for specific advice. | DOB |
| TCO / CO | Temporary Certificate of Occupancy (TCO) requires subsequent renewals until a final Certificate of Occupancy (CO) is issued to a building. | DOB |
| Variance | An application to receive a special acceptance for a non-conforming building either by size or bulk usually regarding a specific zoning requirement that cannot be met on a particular lot due to an oddity. Most cases require the proof of a hardship to be granted. Consult your architect and zoning / land use attorney for more detailed information specific to your property. | DOB |
| Financing Contingency | A clause written into a purchase agreement, or rider to a purchase agreement, protecting the buyer in the event they are unable to gain financing to complete the purchase. | Financing |
| Pre-approval | A letter from a bank confirming that a buyer has been pre-approved for a loan of a particular size. A pre-approval holds more weight than a pre-qualification as it goes into greater due diligence on the buyer and includes a credit check and review of the buyer’s documents such as pay stubs, W-2’s, and most recent tax return. | Financing |
| Pre-qualification | A letter from the bank providing an estimate of what a buyer could be pre-approved for should what the buyer stated for the income prove to be true and they have a good credit score. Typically, sellers and seller’s agents will not rely on the pre-qualification as it has yet to be verified by the bank. | Financing |
| Jumbo Loan | A loan larger than the conforming loan limit. As of 2020 any loan larger than $510,400. | Financing |
| Mortgage Recording Tax | A state recording tax charged on the amount of the loan. Only applies to fee simple properties. | Financing |
| Interest Only | A type of loan in which borrowers only pay interest and the outstanding loan balance does not decrease thus the original principal balance is due in full at the end of the loan. Consult with a loan officer / mortgage broker to learn more. | Financing |
| Appraisal Inspection | An onsite visit of the property by the appraiser to confirm size and characteristics to guide their appraisal of the value. | Financing |
| Appraisal | An opinion of value ordered by the lender and produced by a third-party licensed appraiser taking into account recent comparable sales in the area to arrive at a value. | Financing |
| LTV | Loan to Value Ratio. The amount of the loan compared to the appraised value of said property. | Financing |
| PMI | Private Mortgage Insurance, sometimes required by the lender to be purchased by the borrower in the event the borrower puts down a limited amount of equity towards the purchase. | Financing |
| Debt to Income Ratio | The proportion of monthly debt costs including principle and interest compared to the monthly income of the borrower. | Financing |
| Amortization | The repayment of principal in small installments over the life of the loan until the loan is fully paid. | Financing |
| P and I (Principal and Interest) | The two portions of a mortgage payment, one corresponding to the repaying of the principal balance of a loan and the other corresponding to the paying of monthly interest due on the loan. | Financing |
| Down payment | Total amount of money put down by the buyer towards the purchase of the property. The remaining is typically financed by a bank. This amount includes the deposit money that was paid at the contract signing. | Financing |
| Monthly Carrying Costs (totally P and I, Taxes, CC’s and Utilities) | Total out of pocket costs per month including mortgage (both principal and interest payments), property tax payments, common charge / maintenance payments, Insurance, and Utilities. This is the best metric to compare to what your rent plus utilities might be. | Financing |
| Adjustable Rate Mortgage (ARM) | When a borrower’s interest rate can adjust to the current market level, usually after a fixed rate period. Consult with a loan officer / mortgage broker to learn more. | Financing |
| Fixed Rate | When a borrower’s interest rate is fixed for a certain amount of time. Usually 15 to 30 years. | Financing |
| Commitment Letter | Once a property is under contract and the buyer completes their loan application, submits their documents, and the bank receives a completed appraisal a letter will be released by the bank if loan approval has been granted. There may be a few remaining caveats that make it a 100% commitment, but they are usually formalities at that point. | Financing |
| Recognition Agreements / Aztechs | Specific to Co-op’s, which are owned via shares and not a deed, a Recognition Agreement is a three-way agreement between the lender, the Co-op, and the purchaser detailing future communication and up keep of common charge payments to protect the shares and avoid any default claims. | Financing |
| Tax Lot | A definitive boundary filed with the city illustrating the meets and bounds of fee simple real property. | Land |
| Ground / Land Lease | A long lease of real property on which a building in constructed. Some Co-ops do not own their land in a fee simple manner putting in question what might happen at the end of the lease’s term. | Land |
| Easement | An agreement allowing access to property by crossing through another property. Easements usually run with the land and can not be altered. Consultant your attorney and title company to review how an easement may impact a property of interest or if it can be modified. | Land |
| DOF | Department of Finance, controls the collection of property taxes. | Land |
| Utilities | Each property will have various utilities that the unit owner will be responsible for paying on a monthly basis. This list may include but is not limited to, electricity, gas, water/sewer. TV and internet are usually not thought of as utilities. | Land |
| Title / Deed | Official document conveying the ownership of fee a simple property / tax lot. | Land |
| Property Insurance (Condo HO6 “Walls in”) | Property Insurance can cover general liability and replacement of property due to damage, consult your insurance provider and mortgage loan office for details regarding minimum requirements. Co-ops and Condos usually purchase an HO6 or Walls in policy. Townhouses / detached homes will require a different, more comprehensive policy. Again, consult your insurance provider for the appropriate policy for your specific property or group of properties. | Land |
| Star Program (owner occupied tax savings) | School Tax Relief Program is a Property Tax savings incentive for homeowners making below $500,000. See tax.ny.gov/star/ for more detailed information. | Land |
| Property Taxes | Taxes paid to the city for the upkeep of the municipality. Property taxes are charged on a given tax lot and are charged for detached homes, townhouses, and condos. (Note: Coops pay property tax, but these funds are collected via the monthly maintenance). Usually based on an assessed or market value and multiplied by the local tax rate. Consult your local government’s tax department for details on how your taxes are specifically calculated. For New York City, the Department of Finance oversees these matters. | Land |
| Tax Exemption (, 421a or J51) | Commonly referred to as Tax Abatement, exemptions are long term discounts placed on the assessed value of a property thereby lowering the annual tax burden. The most typical forms of exemptions are the 421a and the J51. Buyers should beware when considering a property with a tax exemption when the exemption period ends as the taxes will most likely increase substantially adding to total monthly costs. Consult the NYC Department of Finance for a more detailed explanation. | Land |
| Comparable or “Comp” | A comparable is a property that is meant to be as similar as possible to the property in question which has sold recently. Using the complete sales prices of several comparables or “comps” we can arrive at a target market value of the property in question. Appraisers use comps as evidence to back up their valuation. Real estate agents / brokers use comps to produce a Comparative Market Analysis which is simply an opinion as Brokers are not licensed appraisers but will help guide sellers towards a reasonable asking price or in the case of buyers a bid offer. | Negotiations / Contract |
| Letter of Intent | A letter to a potential seller expressing one’s interest in submitting a future non-binding offer should the property become available for sale. This can sometimes occur when a building is under construction, but the offering plan has not yet been completed and/or approved. Thus, the seller cannot officially market the units so a buyer can present a letter of intent with the goal of securing a sort of first come first serve reservation on a specific unit. | Negotiations / Contract |
| Offer | A non-binding bid for a property put forward by a potential purchaser. An offer should include detailed terms including purchase price, funding method (i.e. cash or financing), and any other contingencies to make the seller aware of. | Negotiations / Contract |
| Inspection | A physical inspection of a property by purchasers with or without the aid of a licensed inspector. | Negotiations / Contract |
| Purchase Agreement | Also known as a “contract” is an agreement made between a buyer and seller agreeing terms for the sale of a specific property. | Negotiations / Contract |
| Counter Offer | An offer made by the seller in response to a buyer’s offer. Or an offer made by a buyer in response to a seller’s counter offer. Again, detailed terms of the offer are important to convey. | Negotiations / Contract |
| Deposit / Earnest Money / Escrow | Initial amount of money paid at the Contract Signing as earnest money towards the purchase. These funds are places in an interest-bearing escrow account usually set up by the seller’s attorney. | Negotiations / Contract |
| Due Diligence | Performing an in-depth review / analysis of a property to discover as much information as possible to aid in making a well informed decision. | Negotiations / Contract |
| Accepted Offer | When the buyer and seller have agreed on initial terms for the purchase of the property. This acceptance should be thought of as a “handshake deal” and is in general non-binding and subject to the successful signing of a fully negotiated contract. | Negotiations / Contract |
| Signed Contract | When the buyers sign a negotiated contract and puts down a deposit, usually 10%. The buyer always signs first. Just because the buyers have signed does not make it a fully signed contract. The buyer must wait for the seller to counter sign and once the counter signed contract is returned it is considered fully signed and in contract. | Negotiations / Contract |
| Seller’s Concession | An agreed percentage of the purchase price provided by the seller to the buyer as a credit at the closing to help pay closing costs. Usually maxed out at 3%. | Negotiations / Contract |
| Offering Plan (approved and effective) | A prospectus laying out what is being sold to the general public and how it will be run in the future including house rules and budgets. Offering plans are approved by the State Attorney General and are deemed effective once a certain percentage of units are under contract. | Sponsor |
| Sponsor | A sponsor is the entity, usually a developer or real estate investor, which “sponsors” a building’s conversion or sale of new units to the general public to be owned by shares (for Co-ops) or individual tax lots (for Condos). | Sponsor |
| Sponsor Unit | A unit still owned by the sponsor which has not yet been sold to an owner occupier. | Sponsor |
| Working Capital Contribution | For Sponsor Units, the buyer is obligated to pay a set number of month’s common charges to establish the building’s bank account. | Sponsor |
| Tax Deductible Percentage | The percentage of annual maintenance or common charges that are considered tax deductible. In the case of a Co-op property tax and any interest payments towards underlying Co-op loans may be applicable. Consult your tax advisor to see if these potential deductions are applicable to how you file your taxes each year. | Tax |
| 1031 Exchange | A method of selling and then reinvesting funds into a property of “like kind” in order to delay one’s tax burden. Like kind refers, for example, selling commercial real estate and buying commercial real estate. You cannot sell commercial and then use the proceeds to buy a new home which you will occupy. Consultant your tax advisor for the specifics of this method of selling to make sure you are within in the law. | Tax |