Real estate glossary: the ABCs of real estate.

Lien: A legal hold or claim of one person on the property of another as security for a debt or charge. The right given by low to satisfy debt.

Loan coverage: The ratio of net income before depreciation divided by debt service.

Loan-to-value ratio: The relationship of a mortgage to the appraised value of a security. This ratio is expressed to a potential purchaser of property in terms of the percentage a lending institution is willing to finance.

Maturity: The date on which on agreement expires; termination of the period a note or obligation has to run.

Mechanic's lien: A claim created by low for the purpose of securing priority of payment for work performed and material furnished by o mechanic or other person for the construction or repair of a building; such claim attaches to the land as well as buildings end improvements erected thereon.

Minimum lot zoning: A type of zoning that regulates the smallest lot size permitted per building.

Mortgage-backed securities: Bond-type investment securities representing on undivided interest in a pool of mortgages or trust deeds. Income from the underlying mortgages is used to pay off the securities.

Mortgage commitment: A legal contract between a borrower and a lender to advance a mortgage Loan when the borrower meets certain conditions, e.g., completing the project, acceptance by the lender's agent, etc.

Nonossumption clause: A prohibition of the assumption of a mortgage by a third party without the prior approval of the lender.

Nondisturbance agreement: An agreement that permits a tenant under a lease to remain in possession despite any foreclosure.

Nonrecourse loan: A type of mortgage Loan in which the lender's remedies in the event of the borrower's default ore limited to foreclosing the mortgage; the borrower is not personally liable.

Participation loan: (1) A mortgage mode by one lender, known as the lead lender, in which one or more other lenders, known as participants, own a pert interest; (2) A mortgage originated by two or more lenders.

Passive investor: An investor who has no active role in operation or construction; participates only to earn a return on and of his investment.

Perfecting title: The elimination of any claims against a title.

Permanent financing: A mortgage Loan, usually covering development costs, interim Loans, construction Loans, financing expenses, marketing, administrative, legal, and other costs. This Loan differs from the construction Loan in that the financing goes into piece after the project is constructed and open for occupancy. It is a long-term obligation, generally for a period of ten years or more.

Personal liability: Personal liability arises when the borrower's assets ore pledged or subject to claim in addition to a primary security.

Preferred return: A return from a real property investment that is distributed entirely to preferred investors until these investors hove received a specified return on their investment.

Prepayment penalty: A consideration paid to the mortgagee for the prepayment privilege. Also known as prepayment penalty or reinvestment fee.

Prepayment privilege: The right given a borrower to pay oil or port of o debt prior to its maturity. The mortgagee cannot be compelled to accept any payment other then those originally agreed to.

Present value: Today's worth of monies to be received in future.

Quitclaim deed: A deed relinquishing oil interest, title, or claim in o property by a grantor, but not representing that such title is valid, nor containing any warranty or covenants for title.

Security interest: The interest of a creditor in the property of a debtor.

Settlement costs: Money paid by borrowers and sellers to effect the closing of a mortgage Loan. This normally includes on origination fee, discount points, title insurance, survey, attorney's fee, end such prepaid items as taxes end insurance escrow payments.

Sinking fund: A fund that, with interest, will serve as payment for future replacements required for on income property.

Subdivision: Improved or unimproved land divided into a number of parcels for the purpose of sole, lease, or financing.

Subordination: The act of a party acknowledging, by written recorded instrument, that a debt is inferior to the interest of another in the some property. Subordination may apply not only to mortgages, but to leases, real estate rights, end any other types of debt instruments.

Vested interest: A fixed right to the enjoyment of real estate by a specified person, subject to the termination of a previous estate.

Without recourse: In real estate finance, the term refers to the lender looking solely to the mortgaged real estate as a source of repayment in the event of default. The lender agrees not to seek a personal judgment against the borrower for any deficiency.

Working capital: Liquid assets available for the conduct of doily business.

Working capitol retie: Ratio of current assets to current liabilities, it is one of the most commonly used ratios to indicate a company's financial position.

Marc Wieder, CPA, Partner

Anchin, Block& Anchin LLP