Find below commonly used real estate terms and Collaperty terminology unique to the website.
Adjustable-Rate Mortgage (ARM): A mortgage in which the interest changes periodically, according to corresponding fluctuations in an index. All ARMs are tied to indexes.
Adjustment Date: The date the interest rate changes on an adjustable-rate mortgage.
Amortization: The loan payment consists of a portion which will be applied to pay the accruing interest on a loan, with the remainder being applied to the principal. Over time, the interest portion decreases as the loan balance decreases, and the amount applied to principal increases so that the loan is paid off (amortized) in the specified time.
Annual Percentage Rate (APR): Describes the interest rate for a whole year (annualized), rather than just a monthly fee/rate, as applied on a loan, mortgage loan, credit card, etc. It is a finance charge expressed as an annual rate. Those terms have formal, legal definitions in some countries or legal jurisdictions, but in general
Appraisal: A written justification of the price paid for a property, primarily based on an analysis of comparable sales of similar homes nearby.
Appraised Value: An opinion of a property’s fair market value, based on an appraiser’s knowledge, experience, and analysis of the property. Since an appraisal is based primarily on comparable sales, and the most recent sale is the one on the property in question, the appraisal usually comes out at the purchase price.
Appreciation: The increase in the value of a property due to changes in market conditions, inflation, improvements or other causes.
Asking Price: The initial selling price of a property, determined by the seller.
Assessed Value: The valuation placed on property by a public tax assessor for purposes of taxation.
Asset: Items of value owned by an individual. Assets that can be quickly converted into cash are considered “liquid assets.” These include bank accounts, stocks, bonds, mutual funds, and so on. Other assets include real estate, personal property, and debts owed to an individual by others.
Assumable Loan/ Mortgage: A loan/mortgage in which the lender is willing to “transfer” from the previous owner of the home to the new owner, sometimes at the same interest rate, sometimes at a new rate. An assumable loan/mortgage can make your home more attractive to buyers when you want to sell.
Balloon Mortgage: A mortgage loan that requires the remaining principal balance be paid at a specific point in time. For example, a loan may be amortized as if it would be paid over a thirty year period, but requires that at the end of the tenth year the entire remaining balance must be paid.
Bankruptcy: By filing in federal bankruptcy court, an individual or individuals can restructure or relieve themselves of debts and liabilities. Bankruptcies are of various types, but the most common for an individual seem to be a “Chapter 7 No Asset” bankruptcy which relieves the borrower of most types of debts. A borrower cannot usually qualify for an “A” paper loan for a period of two years after the bankruptcy has been discharged and requires the re-establishment of an ability to repay debt.
Bi-weekly Mortgage: A mortgage in which you make payments every two weeks instead of once a month. The basic result is that instead of making twelve monthly payments during the year, you make thirteen. The extra payment reduces the principal, substantially reducing the time it takes to pay off a thirty year mortgage.
Bridge Loan: Not used much anymore, bridge loans are obtained by those who have not yet sold their previous property, but must close on a purchase property. The bridge loan becomes the source of their funds for the down payment.
Buydown: Usually refers to a fixed rate mortgage where the interest rate is “bought down” for a temporary period, usually one to three years. After that time and for the remainder of the term, the borrower’s payment is calculated at the note rate.
Capitalization Rate (Cap Rate): Is the ratio between the annual net operating income produced by an asset and its capital cost (the original price paid to buy the asset) or alternatively its current market value.
Net operating income (NOI): Net income + depreciation + interest expenses; whereas Cash Flow = Net Income + depreciation (interest being a cash outlay).
Cash Flow: Is the movement of money into or out of a business, project, or financial product. It is usually measured during a specified, finite period of time. Measurement of cash flow can be used for calculating other parameters that give information on a company’s value and situation.
Chain of Title: An analysis of the transfers of title to a piece of property over the years.
Closing Costs: Costs the buyer must pay at the time of closing in addition to the down payment: including points, mortgage insurance premium, homeowners insurance, prepayments for property taxes, etc.
Closing: This has different meanings in different states. In some states a real estate transaction is not consider “closed” until the documents record at the local recorder’s office. In others, the “closing” is a meeting where all of the documents are signed and money changes hands.
Co-borrower: An additional individual who is both obligated on the loan and is on title to the property.
Collection: When a borrower falls behind, the lender contacts them in an effort to bring the loan current. The loan goes to “collection.” As part of the collection effort, the lender must mail and record certain documents in case they are eventually required to foreclose on the property.
Commercial Real Estate: The term commercial property (also called investment or income property) refers to buildings or land intended to generate a profit, either from capital gain or rental income.
Commit: To pledge a monetary value towards a deal. A commitment is not an actual investment (This is subject to change in the future).
Commitment Round Length: The time the commitment round will last. This is set by the Sponsor. The commitment round begins when the Sponsor activates the round. Before a commitment round begins the Sponsor can invite investors to view the deal.
Common Area Assessments: In some areas they are called Homeowners Association Fees. They are charges paid to the Homeowners Association by the owners of the individual units in a condominium or planned unit development (PUD) and are generally used to maintain the property and common areas.
Comparable Sales: Recent sales of similar properties in nearby areas and used to help determine the market value of a property. Also referred to as “comps.”
Condominium Conversion: Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.
Construction Loan: A short-term, interim loan for financing the cost of construction. The lender makes payments to the builder at periodic intervals as the work progresses.
Contingency: A condition put on an offer to buy a home; such as the prospective buyer making an offer contingent on his or her sale of a present home.
Contract: A contract is an agreement entered into voluntarily by two or more parties, each of whom intends to create one or more legal obligations between or among them. The elements of a contract are offer and acceptance by competent persons having legal capacity who exchange consideration to create mutuality of obligation, and, in some circumstances, do so in writing.
Conventional Mortgage: A type of mortgage not insured by either the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA), and thus usually requiring a minimum 10% down payment.
Convertible ARM: An adjustable-rate mortgage that allows the borrower to change the ARM to a fixed-rate mortgage within a specific time.
Credit History: A record of an individual’s repayment of debt and credit worthiness. Credit histories are reviewed by mortgage lenders as one of the underwriting criteria in determining credit risk. This can often be found in a credit report. These are prepared by the credit bureau agencies.
Crowdfunding: A method of collectively raising capital for investing. I.e. group of individual’s collaborate and invest in a building.
Crowdsourcing: A method of collectively raising resources. I.e. raising funds to help a charity.
Days to Go: The time remaining for a commitment round until completion.
Deal Status: The status of a deal. Statuses include: Inviting Investors, Raising Funds, Reached Goal, Did Not Reach Goal, and Deal Terminated by Sponsor.
Deal: Deal is an investment property that is pitched to Investors by a Sponsor.
Sponsor: Sponsors see real estate opportunities where others may not. They bring real estate deals onto Collaperty to recruit Investors. They have a stake in the deal, and are responsible for executing the strategy, managing the property, and providing returns to Investors. Sponsors work closely with Investors and Sellers to complete a real estate investment transaction. This group consists of property builders and developers, real estate syndicators, and tenured investors.
Deal Terminated by Sponsor: Status at which the Sponsor stopped the investment round before it ends. At that time the Sponsor must give a reason as to ‘why’ and a notification email to the Investors will be sent.
Debt: Is an obligation owed by one party (the debtor) to a second party, the creditor; usually this refers to assets granted by the creditor to the debtor, but the term can also be used metaphorically to cover moral obligations and other interactions not based on economic value.
Default: Failure to make the mortgage payment within a specified period of time. For first mortgages or first trust deeds, if a payment has still not been made within 30 days of the due date, the loan is considered to be in default.
Delinquency: Failure to make mortgage payments when mortgage payments are due. For most mortgages, payments are due on the first day of the month. Even though they may not charge a “late fee” for a number of days, the payment is still considered to be late and the loan delinquent. When a loan payment is more than 30 days late, most lenders report the late payment to one or more credit bureaus.
Deposit: A sum of money given in advance of a larger amount being expected in the future. Often called in real estate as an “earnest money deposit.”
Depreciation: A decline in the value of property; the opposite of appreciation. Depreciation is also an accounting term which shows the declining monetary value of an asset and is used as an expense to reduce taxable income. Since this is not a true expense where money is actually paid, lenders will add back depreciation expense for self-employed borrowers and count it as income.
Did Not Reach Goal: Status at which the Investment Amount was not met.
Discount Points: A type of prepaid interest mortgage borrowers can purchase that lowers the amount of interest they will have to pay on subsequent payments. Each discount point generally costs 1% of the total loan amount and depending on the borrower; each point lowers your interest rate by one-eighth to one one-quarter of your interest rate. Discount points are tax deductible only for the year in which they were paid.
Distressed Property: A property that is under foreclosure order or is advertised for sale by its lender. Distressed property usually fetches a price that is much below its market value.
Down Payment: The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage.
Due-on-sale Provision: A provision in a mortgage that allows the lender to demand repayment in full if the borrower sells the property that serves as security for the mortgage.
Earnest Money Deposit: A deposit made by the potential home buyer to show that he or she is serious about buying the house.
Earnest Money: Funds submitted with an offer to show “good faith” to follow through with the purchase. Earnest money is placed by the broker in an escrow/trust account until closing, when it becomes part of the down payment or closing costs. (HUD generally requires an earnest money deposit of $500.
Easement: A right of way giving persons other than the owner access to or over a property.
Effective Age: An appraiser’s estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.
Eminent Domain: The right of a government to take private property for public use upon payment of its fair market value. Eminent domain is the basis for condemnation proceedings.
Equity: A homeowner’s financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage and other liens.
Escrow Account: Once you close your purchase transaction, you may have an escrow account or impound account with your lender. This means the amount you pay each month includes an amount above what would be required if you were only paying your principal and interest.
Escrow Analysis: Once each year your lender will perform an “escrow analysis” to make sure they are collecting the correct amount of money for the anticipated expenditures.
Escrow Disbursements: The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.
Escrow: An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the earnest money deposit is put into escrow until delivered to the seller when the transaction is closed.
Estate: The ownership interest of an individual in real property. The sum total of all the real property and personal property owned by an individual at time of death.
Eviction: The lawful expulsion of an occupant from real estate property.
Examination of Title: The report on the title of a property from the public records or an abstract of the title.
Exclusive Listing: A written contract that gives a licensed real estate agent the exclusive right to sell a property for a specified time.
Expected ROI: The estimated return on investment on a deal proposed by a Sponsor.
Fair Market Value: The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.
Federal Housing Administration (FHA): An agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money or plan or construct housing.
Fee Simple: The greatest possible interest a person can have in real estate.
FHA Financing: Financing for a loan which will be insured against loss by the Federal Housing Administration—a part of the U.S. Department of Housing and Urban Development (HUD). Such financing allows for a lower down payment than required by most lenders.
Firm Commitment: A lender’s agreement to make a loan to a specific borrower on a specific property.
First Mortgage: The mortgage that is in first place among any loans recorded against a property. Usually refers to the date in which loans are recorded, but there are exceptions.
Fixed-rate Mortgage: A mortgage in which the interest rate does not change during the entire term of the loan.
Flood Insurance: Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.
Follow deal: Allows you to get activity and status updates on a deal.
Foreclosure: The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.
Government Loan (Mortgage): A mortgage that is insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) or the Rural Housing Service (RHS). Mortgages that are not government loans are classified as conventional loans.
Grantee: The person to whom an interest in real property is conveyed.
Grantor: The person conveying an interest in real property.
Homeowners Insurance: Insurance that protects the homeowner from “casualty” (losses or damage to the home or personal property) and from “liability” (damages to other people or property). Required by the lender and usually included in the monthly mortgage payment.
Inspection Report: Written record of a property’s condition, including the foundation, interior, roof, kitchen & baths, foundation, heating & A/C. This is usually completed by an inspector.
Investment Amount: The monetary amount required to be raised for a deal through Collaperty’s portal.
Investor: Collaperty has built a better and secure way to find commercial real estate deals. We provide access to real estate opportunities tailored to qualified investors who are looking for opportunities specific to their investment goals. Investors work closely with Collaperty Sponsors to execute on deals.
Inviting Investors: Status at which the investment round has not yet begun and the Sponsor is inviting Investors to view the deal.
Last Purchase Price: The price at which the property was purchased last.
Loan Origination Fee: A fee charged by the lender for evaluating, preparing, and submitting a proposed mortgage loan.
Minimum Investment: The minimum investment that can be committed or invested on a deal. This is set by the Sponsor.
Mortgage Insurance Premium (MIP): A charge paid by the borrower (usually as part of the closing costs) to obtain financing, especially when making a down payment of less than 20 percent of the purchase price, for example on an FHA.
Point: An amount equal to one percent of the principal amount being borrowed. The lender may charge the borrower several “points” in order to provide the loan.
Posted Deals: Deals that have been posted by the Sponsor on the Collaperty portal.
Property Taxes: Taxes (based on the assessed value of the home) paid by the homeowner for community services such as schools, public works, and other costs of local government. Paid as a part of the monthly mortgage payment.
Raising Funds: Status at which the Sponsor is actively raising funds for their deal and the commitment round is open.
Reached Goal: Status at which the Investment Amount is met.
Rental Property Management: Rental property management refers to managing residential or commercial real estate. Property managers work for property management companies to manage and rent out real estate owners’ properties. Residential properties range from furnished to unfurnished, urban to rural and apartments to houses. Commercial rental property management may involve managing either office space or industrial warehouses.
Rental Property: Referring to lands and/or buildings and/or units and/or rooms available for or being rented.
Return on Investment (ROI): A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment; the result is expressed as a percentage or a ratio.
Reviews: Comments and opinions by members on the site on a deal or on another member shown on a deal profile or a member profile.
Seller: Collaperty is also a property listing platform for those who are looking to sell commercial real estate. Collaperty provides Sellers the ability to broadcast their property to qualified Sponsors who then can re-package the opportunity into an investment deal. This allows Sellers to get the exposure they need to sell the property faster. Sellers consist of property owners, brokers, and agents representing the property.
Short Sales: Property that sells for less than the balance owing on its mortgage. A short sale can be an underwater home, an apartment building or even vacant land. If there is a mortgage balance that is greater than the market value of the home, that property is a short sale.
Title Insurance: Protects lenders and homeowners against loss of their interest in property due to legal defects in the title.
Total Investment Length: The time the deal will be featured and searchable on Collaperty’s portal. This is set by the Sponsor.
Trust: To trust someone on Collaperty’s portal is to publicly recognize a member as a credible person. Collaperty however does not backup or endorse any trusts on the site.
Unfollow: Activity that will remove user as a follower. User will no longer receive activity updates.
Upcoming Events: Shows any upcoming events setup by a Dealer. Events may include important dates that inform members of upcoming commitment rounds or investment rounds, conference calls, etc.
Verified Investor: A verified investor is an Investor or Dealer who has identified themselves as an accredited investor on the site. To be a verified investor, the member must fill out the accredited investor form and be accepted by Collaperty.