Real Estate Glossary Terms Beginning With – O

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Terms Beginning With - O

Property Development & Investment Glossary, Terms & Definitions

Oath

Pledge before a notary or other official who takes it very seriously. A person who swears an oath is known as an "affiant." Oaths frequently take the form of an appeal to God or another deity, such as: "You solemnly swear that the contents of this declaration, to which you subscribe, are true." If the affiant does not raise his hand or place it on a Bible, the notary must take the oath. An affirmation may be used instead of swearing if the affiant objects to the term "swear" for religious or personal reasons.

Obligation bond

In the event of nonpayment of taxes, insurance premiums, or overdue interest, a bond signed by a mortgagor in excess of the loan amount serves as a safeguard for the lender.

Obligee

Individual who promises to pay a certain amount under the provisions of a promissory note. Usually a borrower.

A person who is obligated to someone else.

Obligor

Individual to whom a promissory note is issued with a commitment to pay a specific sum. Usually a lender.

An oath-breaker; a person who promises to fulfill another's legal obligation (the obligee). An obligor is a person who owes money to the recipient of a promissory note. The obligor is the contractor in a performance bond. Securing the performance of an obligation is the role of the surety; they are sometimes referred to as guarantors.

A person who owes money to someone else.

Observed condition

Depreciation is calculated using this method. Depreciation is calculated by subtracting the reproduction (or replacement) cost of new improvements to a property from each of three factors: physical deterioration, functional obsolescence (curable or incurable), and external obsolescence to arrive at a total depreciation figure.

Obsolescence

Changes in design, technology, taste, or demand cause a decrease in property value.

A thing that makes a property lose value. Functional obsolescence is when something loses value because of a structural flaw, like old plumbing or fixtures that were not made well. One bathroom in a house with five or six bedrooms is an example of functional obsolescence. External obsolescence is when a property's use or value goes down because of things that happen in the neighborhood but not on the property itself, such as a change in zoning, the loss of jobs, or other bad things that happen outside of the property.

Occupancy agreement

A deal in which the seller agrees to let the buyer live in the property before the closing of the escrow in exchange for the buyer paying the seller a daily prorated rent. When a buyer, seller, and broker all agree on the terms of a rental agreement in writing, there is less room for misunderstandings. Before the escrow closes, the buyer should not be allowed to move in without a written occupancy agreement; in most cases, the buyer should first waive any purchase contingencies. A homeowner's insurance policy or an endorsement on the seller's policy should be obtained by the buyer in this situation. There has been a lot of litigation over whether or not the premises are habitable in disputes between sellers and buyers who move in early.

Occupancy level

The proportion of available space that is currently rented.

Occupancy permit

In order to prove that a property is safe and habitable, the appropriate governing body issues a permit.

Occupancy rate

1. The amount of rented space compared to the amount of space that can be rented.

2. The rent paid divided by the income that could be made if all the rooms were rented.

OER

The operational expenditure ratio, which is calculated by dividing operating expenses by gross effective income.

Off The Plan

Purchase of a property before it has been finished or, in some situations, before construction has begun.

Off-price shopping center

A shopping complex made up of retail establishments that sell name-brand products often available in specialized shops and department stores for 20 percent to 70 percent less than the manufacturer's suggested retail price.

Off-record title defect

The absence of an obvious flaw in the ownership of real estate as evidenced by public records. If a recorded document was forged, never delivered to the grantee, or signed by an incompetent party, it cannot effectively transfer title to property. Even if a forged deed is recorded, the owner of the property who signed it retains legal title and can enforce that title against a good-faith buyer for value. Off-the-record risks are not covered by a certificate of title. Off-record risks should be covered by title insurance for the buyer's peace of mind.

Off-site costs

Expenses incurred by the developer for the construction of sewers, streets, and other infrastructure, but not for the construction of the building itself or its on-site costs.

Off-site management

There are some property management tasks that can be done away from the property. Some of these tasks are keeping track of the rents collected and paying the bills.

Off-street parking

The parking spaces are on private property, usually in an area set aside for that purpose. There are enough spaces for vehicles to move around and get in and out of the property.

Off-the-plan

Buy an apartment off the plan means agreeing to buy an apartment that hasn't been built. You can look at the design and building plans, but there is no real property that you can see or check out there.

Offer

A promise by one party to act or do something in a certain way if the other party acts or does something in the same way. When you make an offer, you show that you want to sign a contract. This is different from a listing contract, which just asks for other offers. When you make someone an offer, you give them the power to say yes. A potential buyer's offer to buy the seller's property is sent to the seller through the sales contract (also called a proposition).

Every offer should include a date. This is especially important if a deal doesn't have a clear end date. Most of the time, the courts say that an offer should be open for a reasonable amount of time, unless it is withdrawn. This needs proof that an offer was made at a certain time and date.

If the parties think that the acceptance will be sent electronically, it's best to include a clause that says the acceptance will be considered to have happened when the message is sent.

Offer and acceptance

In order for a contract to be enforceable, both parties must agree to the terms of it. An offer is a declaration of one's desire to reach a deal. Real estate contracts require that the offer be communicated to the prospective buyer and must be a clear and specific one, with all terms written down. The person to whom the offer is communicated gains the ability to accept it. A legally binding contract is formed when the offeree accepts and is made aware of all of the terms of the offer. Offerors have the option of rescinding their offers at any time before the offeree has accepted them, but unless the offer is an option, a revocation usually does not take effect until it has been accepted. The offeree loses the ability to accept the contract as soon as the revocation takes effect. If the offeree or the offeror fail to respond within a reasonable amount of time, or if the offeree or the offeror die or become insane, the offer is void.

There should be no wiggle room in accepting an offer. As long as the acceptance is unqualified, it constitutes a counteroffer, and a contract can only be formed when the original offeror accepts this counteroffer. A written acceptance signed by the party to be bound is required in all real estate transactions. Adding the date of acceptance is also a good idea. If you're doing business, it's almost universally assumed that a written offer must also be accepted in writing.

The sales contract is where most offers to buy real estate are made. An earnest money deposit is not required by law, but this is the most common practice. To ensure that the offeree has enough time to consider the offer before making a decision, the offeror gives the offeree a deadline. Even if you accept the offer, you have the option of withdrawing it at any time during this time period. There is an exception to this rule, which is when the offeror's agreement to keep the offer open is backed up by separate consideration like the exercise of an option. Acceptance after the deadline would constitute a counteroffer.

When an offeree accepts a written offer and mails it back to the offeror, the contract is formed. Since the acceptance has been mailed, the offeror has no way of retracting the offer before it has been received by the offeree. The rationale behind this is that the offeror has designated the mail as his agent, and the offeree is deemed to have effectively communicated his acceptance to the offeror when he delivers it to the agent (i.e., mails it).

Offer to lease

Lessee and lessor sign a contract to lease commercial space on agreed-upon terms and conditions in this document. A formal lease agreement is signed by the lessor and the lessee at the time of the closing.

Offer to purchase

A buyer's purchase offer, which becomes a legally binding document if accepted.

Offer to sell

Most condominium and subdivision laws use a broad definition of "inducement" that includes any attempt to get someone to buy property or get an interest in property.

Under the various licensing laws, you need a valid real estate license to offer to sell, buy, rent, or buy options on real estate for other people in exchange for money.

Under federal and state securities laws, a "offer to sell" is any specific talk about an investment that can be bought. In non-registered securities transactions, the law may limit how many of these offers can be made or how they can be made.

Offering memorandum

A document designed to thoroughly reveal the nature of a security's private offering.

Offering sheet

One-page summation of the loan's most important aspects. Analyzing why a mortgage loan was requested by a lending correspondent is made easier with this executive summary provided to the investor.

Offeror

An offeror is the person who makes an offer to another person.

Office building

A building that is typically divided into individual offices, used primarily by businesses for their operations.

When it comes to valuing a business, an office building is no different than any other type of rental property. For an office building to be valued, there are many issues to consider. An appraiser must take into account the local economy when valuing a property. There are a number of specific factors to consider, such as population growth, monthly industrial payrolls, total bank clearances, building permits over a period of years, school enrollment, public utilities, transportation facilities, rentals of comparable properties, vacancy percentages, and the type of tenancies..

Office exclusive

A listing that the seller refuses to submit to a multiple listing service; a listing that is held by one real estate office to the exclusion of other brokers. The seller, in essence, wants only the listing broker to show the property to interested parties.

Sometimes, the MLS will write to sellers inquiring about listing their property with them, outlining the benefits and asking them if they'd like to reconsider doing so. The listing broker must receive a copy of any such letter. While the listing broker is still required to work closely with other members in selling the property, he or she does not have to share any compensation for doing so. Following the rules of the REALTOR® Board of Directors as well as the NAR Code of Ethics, we've taken this action.

Office of Equal Employment Opportunity Commission (EEOC)

To enforce federal laws prohibiting discrimination against job applicants and employees on the basis of their race, colour, religion, national origin, gender (including pregnancy), age (40 years and older), disability or genetic information is the Equal Employment Opportunity Commission.

Office of Interstate Land Sales Registration (OILSR)

Agency in charge of overseeing cross-border land transactions. The agency was established in 1969 as a part of HUD in order to prevent public abuse, such as fraud and misrepresentation, in the promotion and sale of recreational property across state lines. It was established.

Office of the Comptroller of the Currency (OCC)

Financial institutions that are regulated by the Federal Deposit Insurance Corporation (FDIC).

Office of Thrift Supervision (OTS)

Previously, a division of the Treasury Department that took over regulation of the thrift sector from the Federal Home Loan Bank Board. Because of a requirement in Section 312 of DODFrank, which took effect in July of this year, OTS was required to merge with OCC, FDIC, FedBoG, and CFPB in order to better protect consumers' financial interests. The OTS has been abolished.

Offset loan

Reduces loan interest expenses by tying the loan to a deposit account. The transaction account balance 'offsets' the loan principle. The interest is then computed on the loan principal less the account balance. For example, if the loan amount is $180,000 and there is $5000 in the transaction account, interest is calculated solely on $175,000.

Offset statement

1. This is a written statement from a lienholder or property owner notifying the buyer of any outstanding liens that exist on the property.

2. An agreement between a landlord and a renter, outlining the rent and security deposit, as well as any other terms and conditions.

Oil and gas lease

The exclusive right to extract oil and gas from beneath the surface of land. In the event of production, the payment of royalties, the initiation of drilling operations on or before a specified date, and the completion of a certain amount of development work within a specified time frame are all conditions that must be met in order for the lease to be valid. Typically, a written or implied easement is granted to enter the property in order to conduct drilling operations.

Old System Title

Torrens Title's forerunner. Old system title, which consists of a description of the property and its roots from the initial grant or purchase, is still found in some older suburbs.

Oligopoly

A market structure defined by a small number of producers, into which new producers find it particularly difficult to enter.

Ombudsman

An ombudsman in Australia helps people who have problems with their banks to get them taken care of by someone else.

On line auction

The use of the Internet to buy, sell, and bid on real estate. This includes both distressed properties and voluntary sales.

On or before

A clause in a contract that specifies a deadline for completing a specific act, such as making a payment or completing a transaction. Prepayment of a promissory note may be permitted if the provision is written in such a way that there is no penalty. This means that the closing date should not be set for "on or before January 1, 2014" if, for example, a seller wants to close a transaction in 2013 for tax purposes.

On The Market

properties that are available for purchase.

On-frame modular

A hybrid of modular construction and non-removable steel frames. In general, these are not built in accordance with HUD Code (red label).

On-site improvement

It's an increase in the value of your home by building a house or other improvement within the boundaries of your property.

On-site management

There are a number of property management tasks that must be completed on the property. Rental unit showings, repairs, and evictions are all examples of on-site management functions.

One hundred percent commission

A commission arrangement between a real estate broker and a salesperson who is treated as an independent contractor in which the salesperson receives the full net commission on certain real estate sales if the salesperson meets specified sales quotas and/or pays the broker for specified administrative overhead costs. The state real estate commission closely examines such arrangements to ensure continued compliance with the licensing law requirement of adequate supervision of all salespeople by the managing broker.

When compared to other locations in a market area, this is the place where a retail store would generate the largest sales volume.

Open and notorious possession

Accurately conveying one's claim to a piece of property so that a reasonable person looking at it would recognize it as theirs. Adverse possession does not result in the loss of property unless the owner is aware of the occupant's claim to the property. Open and notorious possession can only be established by the construction of buildings or the fencing and cultivation of land, not by the posting of a No Trespassing sign.

Open house

The standard real estate practice of making a listed property available to the public at predetermined times.

Open housing

Existing housing that does not discriminate on the basis of gender or sexual orientation or physical or mental disability or any of the aforementioned factors. In order to ensure that housing is available to everyone who can afford it, both federal and state antidiscrimination laws are in place

Open listing

A contract between a property seller and a broker in which the broker receives a commission if the property is sold. The broker receives no exclusive protection.

A listing that is made available to any number of brokers for the purpose of selling the owner's property at the same time. In order to earn a commission, a broker must secure a buyer who is prepared to buy at the listed price and terms. Any brokers who were interested in the property before it was sold are not obligated to find out.

An open listing, in contrast to an exclusive listing, does not require a specific end date. After a predetermined amount of time, the ad is removed from the site. The agency can be terminated at any time by either party in good faith. However, it's worth noting that some states require all listings to include expiration dates as a matter of policy.

Contractors and builders frequently use this type of ad. As long as nothing specifies otherwise, a listing is taken to be a unilateral contract.

A listing agreement in which the broker's compensation is contingent on the broker finding a buyer before the owner or another broker sells the property.

Open mortgage

At any time, a borrower may pay off their mortgage in full without incurring a penalty from their bank.

A mortgage that has reached the end of its term or is past due, putting it in risk of foreclosure at any time.

Open space

1. A piece of land that hasn't been built on and is kept in its natural state or used for farming or recreation, like parks, squares, and the like.

2. Land in a subdivision that is set aside as a park. This is usually a requirement for a developer to get a building permit from the city or county. HUD gives money to communities to cover up to 50 percent of the cost of buying, developing, and keeping land for parks, recreation, conservation, science, and historic uses.

Open space act

A tax law that uses a "current-use assessment" to encourage the protection of qualified lands. Some types of agricultural land, timberland, open space, or unused land are eligible for a lower assessment. This means that the assessed value goes down a lot, which means that taxes go down.

Once the land has been classified, it can't be used for anything else. If it is used for something else without permission, it will be taken out of its classification and an extra tax will be added. This extra tax is the difference between what the land was taxed as open space and what it would have been taxed as if it hadn't been classified.

Open wall systems

Components for walls made in a factory. Local officials can inspect the insulation, wiring, and plumbing after the exterior sheathing has been installed at the factory. On-site drywall installation has begun.

Open-end construction loan

A situation in which a promise to pay back the construction loan has not been made ahead of time.

Open-end mortgage

A loan that can be increased. The borrower is given a cap on how much they can borrow, and each increase is backed by the same mortgage. The advances can be up to, but not more than, the original limit on how much you could borrow. This reduces the costs of closing on future loans under the same mortgage, as well as the costs of refinancing and appraising. Most of the time, the terms of an open-end mortgage are better than those of a home improvement loan, which has a much higher interest rate and must be paid back in a shorter amount of time. Note that the interest rate on new money borrowed through an open-ended mortgage may be the market rate at the time the money is given out. Before each small advance on an open-end mortgage, the lender should require a lien search or title update to make sure that no other recorded liens have taken priority over the mortgage. This type of loan is sometimes used by farmers to cover their seasonal operating costs, just like a line of credit. It is also called a mortgage for future advances.

Open-ended Fund

A real estate fund that allows investors to demand that their money be redeemed or returned. New investors can frequently subscribe for new units for cash at these events.

Open-ended mortgage

A mortgage established to ensure the advance of additional cash beyond the amount originally disbursed.

Operating budget

A budget that is typically produced a year in advance and lists the estimated costs of building upkeep and repair.

Income, expenses, net operating income prior to debt service, and cash flow, all broken down by line item. Costs are divided into two categories: those that cannot be changed, like salaries, taxes, and insurance premiums, and those that can: things like emergency repairs, supplies, and equipment replacements.

A property manager for an investment property is typically responsible for developing an operating budget to give the owner an idea of the cash yield to expect from the property over a predetermined period of time. / (typically a year). For the manager, the budget serves as a guide and a measure of the property's past performance. The manager of a property should be cautious when predicting future income. The owner's long-term plans for the property should be reflected in the budget.

Operating expense escalation clause

A clause in a commercial lease that says the tenant has to pay for any increases in one or more operating costs compared to a base year.

Operating expense ratio

Operating expenditures as a proportion of effective gross income

Annual operating costs are calculated by dividing operating expenses by effective gross income.

Operations expenditures divided by potential revenue.

Total operating expenditures divided by effective gross income is known as the ratio of total operating expenses to effective gross income.

Operating expenses

Cash outlays necessary to keep a property in good enough condition to generate effective gross income.

The expenses incurred in operating and maintaining an income-producing property.

The costs of owning and operating a property.

Those regular costs that are needed to keep a property running and in good shape. Operating costs are usually split into three groups: fixed costs, like real estate taxes and building insurance; variable costs, like utilities, payroll, administration, and property management fees; and replacement reserves. Things like mortgage payments, capital expenses, and depreciation are not part of operating costs.

Operating lease

A sublease is a contract between a lessee and a person who actually occupies and utilizes the property.

Operating leverage

A financial strategy in which a little increase in gross income leads to a significant rise in net operating income.

Operating statement

The financial statement for an income property that shows the revenue and costs.

Operation of law

A term for how a person gets rights and (sometimes) duties just because the rules of the law are applied to a certain situation, even though the person didn't do anything. For example, a buyer of land next to a stream that can't be crossed has certain "riparian rights." These rights are not given by contract. Instead, state law makes them belong to the buyer automatically.

Operative words of conveyance

Words used to signify a desire to transfer title to real estate.

Opinion letter

An attorney's written opinion on the tax and legal implications of particular aspects of syndication.

Opinion of title

A professional's assessment of a property's record title status, such as that of a title attorney. A title opinion does not imply ownership. In examining the abstract of title, examiners only claim that they are competent in doing so and that they have done so with due care and diligence.

A certificate, generally signed by an attorney, stating that the title to the property being sold is legal.

Opportunistic Real Estate Investments

The riskiest investments are those in non-traditional property types, such as speculative development, that seek high internal rates of return and have debt levels above 70% of the property value. They have property assets with low economic occupancy, significant tenant turnover, are located in secondary or tertiary markets, and have investment arrangements with little control. Opportunistic real estate investments include foreclosed assets, debt on distressed properties, and debt on development projects.

Opportunity cost

The return on an alternative investment of equal risk that the investor foregoes in order to invest in the asset under consideration. In other words, it is the return an investor could earn on his next best alternative of comparable risk.

Opportunity cost of capital

Opportunity to earn income on funds committed to other assets is foregone.

Option

The right, but not the responsibility, to do something within a particular amount of time, such as purchasing a house.

The right to buy a property at an agreed price on or before a specified date (backed by a payment). It is the right to renew a lease at a mutually agreed-upon rent.

A person who owns property can give another person (the optionee) the right to buy or rent the property at a certain price and for a certain amount of time.

The right to buy or lease property at a certain price and for a predetermined length of time.

An agreement to keep an offer to sell or lease real estate open for a specified period of time. An option, for example, can be used to give the buyer time to resolve financing, title, zoning, and feasibility issues before committing the buyer to purchase. In the land acquisition process, options are frequently used. The option must be supported by its actual consideration, which must be separate and independent of the property's purchase price. Except in the case of a lease-option, where the provisions of the lease are sufficient consideration to support the option, a mere recital of consideration is insufficient.

An option merely creates a contractual right; it does not confer any estate in the property on the optionee. At the time the option is signed, neither the owner nor the buyer sells the property. Although the owner is required to sell if the buyer gives notice, the buyer is not required to purchase. A buy option is also known as a call, and a sell option is known as a put.

All of the essential terms of the underlying contract of sale must be included in an option. When the optionee decides to exercise the option, a binding contract is formed. Names and addresses of the parties, the date of the option, consideration, the words granting the option, the date the option expires, a statement of purchase price, and the principal terms are all required information. The purchase agreement is frequently attached and incorporated by reference. An option agreement usually includes a statement about how the option will be exercised, provisions for forfeiture of option money if the option is not exercised, and the optionor's and optionee's acknowledged signatures (only the optionor must sign). Unless expressly prohibited by its terms, the option is usually assignable; however, if the option fails to cover all of the material terms and leaves room for future agreement, it will be unenforceable. A court would not enforce a contract if the option agreement detailed the parties, the property, the price, and the method of payment but omitted the mortgage interest rate. As a result, before entering into an option agreement, the parties should consult with an experienced real estate attorney.

Because a broker rarely earns a commission on an option until it is exercised, the distinction between an option and a contract to buy and sell is important in practice. If both parties are required to perform (i.e., mutuality of obligation), the agreement is a contract for sale. It is an option if only one party is required to perform. An option is thus a unilateral contract in which the optionor/offeror promises to make the offer irrevocable for a set period of time in exchange for the optionee/offeree making option money payments. When the optionees provide the required notice of intent to exercise the option, they effectively accept the offer, and a bilateral contract for sale is formed with both parties bound to perform. The option money is typically applied to the purchase price, but the parties must address this in the option contract.

If the optionee does not exercise the option, most options require the optionor to keep the option money and neither party to perform. In an option agreement, time is of the essence; thus, if the option is not exercised before the termination date, it automatically expires. The option is usually unaffected by the death of the optionor or optionee. The optionee or heirs retain the right to purchase. The optionee's heirs and assigns are also bound by the contract.

An option should be recorded because the optionee's rights will be retroactive to the date of the option and will take precedence over all intervening rights of third parties with notice of the option. In the event that a recorded option is not exercised, good title practice requires that a release of option be recorded. Otherwise, the expired option is a cloud on the title. Because of this risk, many options include a defeasance clause that states that the recorded option will automatically cease to be a lien on the property when the option exercise date expires.

The standard fixed option; the step-up option, in which the purchase price increases at predetermined stages of the option period; and the declining-credit option, in which the percentage of the option price that may be credited toward the purchase price decreases over time (opposite of the full-credit option).

Because an option is not a real estate interest, most lenders will not accept it as mortgage security. Similarly, if the underlying property is taken in a condemnation proceeding, the optionee does not receive just compensation. Furthermore, an optionee typically lacks the legal standing to seek zoning changes.

Except in rare cases and when buying and selling to avoid licensing requirements, anyone who buys and sells options without exercising them must usually obtain a real estate license. Of course, if the option is exercised, no license is required to sell the property because the optionee becomes the owner, and owners are not required to be licensed to sell their own property. The real estate broker should ensure that the listing includes the right to and payment of a commission if the broker negotiates an option instead of an outright sale during the option period. The listing should also specify whether the commission is based on the option consideration (regardless of option exercise) or the full purchase price only if the option is exercised.

If a tenant pays rent with the understanding that a purchase option is available, and that tenant eventually exercises that option, the option may provide that a portion of all rents paid may be applied to the purchase price. However, failure to exercise the option does not entitle the tenant to a refund of the portion of the purchase price that would have been applied to the property had it been purchased.

On the other hand, if the rent or a portion of it is applied to the purchase price and the tenant has the right to purchase the property for a nominal amount at the end of the lease, the Internal Revenue Service may interpret this arrangement as a disguised real estate contract and sale rather than a lease with option to buy. The lease rent payments would not be deductible in this case; they would be treated as installment payments, which the "tenant" would have to capitalize and deduct through depreciation deductions. Unless the transaction qualifies for installment reporting, the "landlord" risks being taxed on the entire gain.

Option agreement

An agreement that grants one party the right to acquire or sell an asset at a predetermined or determinable price within a specific time period.

Option ARM

An adjustable-rate mortgage loan that provided the borrower with a number of payment options. The options typically included a payment that would fully amortize (pay off) the loan in 15 years, a payment that would fully amortized the loan in 30 years, an interest-only payment, and a payment that was artificially low so that unpaid interest was added to the outstanding balance each month. For a few months, the loan was frequently offered at a lower-than-market interest rate.

Option contract

Sets a time limit for developers to purchase property at a specified price.

Option fee

The amount paid by the optionee in order to get an option.

Option listing

A listing in which the broker keeps the right to buy the property for himself or herself. A lot of lawsuits have been filed against brokers who hide offers from buyers until after the broker has used the option. Because of this, the seller must be given full and fair information.

Option price

The agreed-upon price at which the optionee is willing to purchase the option.

Option to renew

A clause in a lease that gives the tenant the right to extend the lease for a set amount of time.

Or more clause

It is a clause in a mortgage agreement that allows a borrower to increase their monthly payment without incurring a prepayment penalty. An "or more" clause may have a limit on how much can be paid.

Oral contract

A contract made verbally. Except for short-term leases, most real estate agreements must be in writing. Because of the potential for disputes between landlord and tenant, even short-term leases should be documented in writing.

The agreement was made verbally.

Ordinances

Rules, regulations, and codes that are adopted by local governing bodies, such as building standards, motor vehicle standards, and subdivision requirements, are generally referred to as ordinances. As an example, in many jurisdictions, the posting of Sold signs on recently sold real estate is prohibited by law.

Ordinary and necessary business expense

Costs incurred in the normal course of business, as opposed to costs associated with a specific project or venture, such as rent or supply expenditures. Ordinary and necessary business expenses, unlike capital expenditures, can be written off in the year they are incurred under federal tax laws.

Ordinary annuity

A fixed sum of money received on a regular basis for a set period of time.

Ordinary gain

A profit or gain that must be taxed at the normal rate of income tax. Even though other types of income are subject to a higher maximum tax rate, long-term capital gains are taxed at a lower rate.

Ordinary income

Any income that is taxed at standard tax rates, such as fees, commissions, and interest, as defined by the Internal Revenue Service.

Ordinary life estate

A life estate is one in which the property owner retains all rights to exclusive possession, use, and enjoyment for the rest of his or her life, while a subsequent owner holds a remainder interest that follows the life estate.

Ordinary loss

Loss that can be deducted from ordinary income for tax purposes.

Ordinary tax rate

The tax rate applicable to taxable income that is not considered capital gain income or depreciation recapture income.

Organizational expenses, partnership

Partnerships and their partners can't take deductions for expenses paid or incurred to promote the sale of (or to sell) partnership interests (these are called "syndication expenditures") or for expenses paid or incurred to set up a partnership (except as noted below).

Syndication costs are the costs that come with selling and giving away shares in a partnership. Commissions, professional fees, and printing costs are all examples of this.

A partnership, on the other hand, can choose to capitalize its start-up costs and deduct them over a period of at least 60 months, starting with the month the partnership starts doing business.

Organizational fee

A fee paid to a general partner for his assistance in forming a syndicate.

Orientation

An important consideration is where to put the house on the property so that it is well-protected from external noises, as well as from direct sunlight and prevailing winds.

Oriented strand board (OSB)

An alternative to plywood made from waterproof heat-cured adhesives and right-angle-layered rectangular wood strands. To the same extent as plywood, all U.S. and Canadian model building codes permit the use of OSB panels in construction. Similar to plywood, the engineered wood panel has many of the same properties. OSB is used in both residential and commercial construction, as well as in the upholstery of furniture.

Original cost basis

The total amount paid to buy the property, which includes the land, the building, any personal property, and other costs like lawyer fees, commissions for the broker, and so on.

Origination

The procedure for obtaining a loan.

Origination fee

A lender's fee for approving a mortgage loan. Documents and credit, inspection, and appraisal fees are all included in a loan's origination fee. Most lenders charge an origination fee based on a percentage of the loan amount. For a $100,000 loan, for example, the lender's fee might be 2%, or $2,000. The origination fee and interest on borrowed money can both be deducted from your taxable income if they are expressed as points. Such a fee cannot exceed one percent of the total mortgage amount in VA and FHA transactions involving existing structures. A lender can charge an origination fee in excess of 1% for inspections and partial payments during the construction of a structure under both the VA and FHA.

A fee imposed by a mortgage lender for services performed in the processing of a loan application.

Ostensible agency

A real agency relationship that comes about because of what the parties do, not because they say so. For example, a property owner knows that a broker is showing potential buyers his or her empty lot without permission to do so. The law says that third parties have a good reason to think that the broker is the owner's agent unless the owner does something to stop the showings. So, the owner could be held responsible for what the "owner's broker" does. This is an ostensible agency because it looks like there is an agency on the surface. Once this kind of agency is set up, the owner can't deny that it exists. This is called estoppel.

Other income

The revenue from an income property that is not earned through the leasing of a tenant space.

Other people's money (OPM)

Borrowed money is used for investing reasons.

Outgoings

all costs associated with a property

Outlet center

A type of specialty shopping facility that sells name-brand items at discounted costs.

Outparcel

A piece of land next to a bigger piece of land that was once a part of the bigger piece. At least one of the out parcel's edges is not shared with the larger tract. One example is land that used to be part of a shopping centre and is next to it. This land can be used as a separate site by a tenant, a bank, or a fast-food restaurant, or it can be improved so that it can be used as a separate site.

Outside of closing

Some closing costs were paid to a third party without going through the closing process, as evidenced by the settlement statement notation POC.

Outstanding balance

The remaining balance on a loan. A note that hasn't been paid in full is known as an outstanding note.

Outstanding loan balance

The amount of money owed on a debt right now.

Over Collateralization

A credit enhancement capital structure in which the value of assets exceeds the value of liabilities (used most regularly in certain asset-backed transactions). For example, a $100 million issuance of senior securities might be backed by a $150 million pool of assets, resulting in a 33 percent over-collateralization of the senior securities.

Overage

"Additional rent" is a term used in retail store leases to describe the percentage of sales volume above a certain threshold that counts as additional rent. The lessee should consider this excess income.

Overage lease

In certain retail leases, an additional rental is levied depending on a percentage of sales above a set sales base.

Overall capitalization rate

Divided by the market value of a property, net operational income. The free and clear rate of return is another name for it.

The capitalization rate derived by dividing comparable properties' net operational incomes by their selling prices in direct capitalization.

The net operational income divided by the total costs or sales price is a good investing rule of thumb.

Overall caps

Affordability caps on adjustable rate mortgages limit interest rate adjustments over the loan's term.

Overall rate (OAR)

The direct proportion of net annual operating income to sales price. Divide the net income by the price to get the overall rate.

Overall rate of direct capitalization

An overall capitalization rate calculated from actual comparable property transactions.

Overall rate of return (ORR)

The entire capitalization rate is also known by this term.

The capitalization rate is the proportion of net operating income divided by the property's acquisition price.

Overflow right

The right to put water on someone else's land. It could be a short-term or long-term right.

Overhang

Extending beyond the exterior wall of a house, the roof's eaves.

Overimprovement

A land or building usage that is seen to be excessive.

An improvement that, due to its high cost, is not the highest and best use of the site on which it is located. A $500,000 home in a neighborhood of mostly $100,000 homes is an example of over-improvement. Over-improving an existing property is another meaning of the term.

Override

1. A clause in a listing agreement that protects a broker's right to a commission for a reasonable time after the agreement ends if the owner sells the property to a prospect with whom the broker negotiated during the time the listing was in effect.

2. A payment made to managers, like principal brokers, based on the sales made by their subordinates. Most of the time, this override is figured out as a percentage of the gross sales commissions made by the salespeople who work for the manager.

3. The amount of rent a tenant pays based on how much money his or her business makes over a certain amount. For example, a gas station tenant pays $0.01 per gallon of gas sold over 50,000 gallons per month.

Overriding royalty

A fee that a lessee of an oil and gas lease keeps when the property is rented out to someone else.

Owelty

Payouts to the other tenants of a tenancy that is physically divided into unequal shares. Court-ordered payments are common.

Own-your-own flats

the growing trend of people purchasing flats and units rather than renting them Typically, the owner receives a separate title and agrees to pay a fair share of the building's operating costs.

Owner occupant

Absentee landlords and owners are those who do not live on the property they own. Mortgage rates for owner-occupants tend to be lower than those for investors/owners.

Owner of record

Person who appears on the public record as the owner of a specific property or mortgage.

Owner's policy

A policy of title insurance that pays the owner of the property the money from the policy. Most of the time, the coverage isn't as good as the lender's policy. If there is a lender's policy, the owner can get a policy that covers both the owner and the lender for a small fee.

Ownership structure risk

The impact that the chosen form of ownership can have on the risk and return that investors ultimately earn.

Ownership, form of

People who want to buy real estate often ask a broker for advice on the best way to own the property. It's important to know the type of ownership because

  • The type of ownership at the time of the sale determines who must sign the different documents, such as the listing, contract of sale, or deed; and
  • The way someone owns something affects many of their rights in the future. How a person gets the title to a piece of property can affect things like income taxes, real property taxes, gift taxes, estate and inheritance taxes, the ability to give the property to someone else, the risk of being sued by creditors, and the probate process.

A broker should be able to talk about different ways to own property, such as joint tenancy, tenancy in common, tenancy by the entirety, tenancy in severalty, community property, partnership trust, and corporate forms of ownership. However, a broker should not recommend a specific form of ownership because doing so would be the illegal practice of law. The broker should suggest that the client talk to a tax or legal expert, especially if there will be more than one owner, to figure out the best way for the client to own the property. For example, if a husband and wife want to own property together, they may be able to do so as "tenants by the entirety," if that is allowed in that state. But in some cases, especially if the husband and wife are in a high income tax bracket, this form could be bad from a tax point of view because the estate tax on jointly held property could be much higher than if it were held in another way. So, a broker who doesn't suggest a good lawyer or tax expert may be doing a client a disservice.

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