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[ Dictionary of Terms ]

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

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OBLIGATION BOND A bond signed by a mortgagor (borrower) for an amount greater than the loan amount. Such a bond creates a personal obligation on the part of the borrower and assures the lender of recourse in case of nonpayment of property taxes and insurance or past due interest on the mortgage.

OBLIGEE The person, such as a lender or creditor, to whom someone else is obligated under a contract.

OBLIGOR Someone, such as a borrower or mortgagor, who owes a duty to perform under a contract.

OBSOLESCENCE A loss in value due to a decrease in the usefulness of property caused by decay, changes in technology, people's behavior patterns and tastes, or environmental changes.

OCCUPANCY Physical possession and use of real estate.

OCCUPANCY PERMIT A permit required under the building codes of many local governments which indicates that the property passes a final inspection. The permit indicates that all applicable building codes have been met and that the structure is suitable for occupancy.

OCCUPANCY RATE The ratio of the space rented to the total amount of space available for rent. A 50-unit apartment complex in which 40 units are currently rented has an occupancy rate of 80 percent (40:50),

OFFER A promise conditioned upon some requested or asked for act or promise. An offer demonstrates intent by one party to form a contract with another party. In order to be effective, an offer must contain three essential elements: 1. An offer must be an expression of present contractual intent. This means that an advertisement or any other preliminary negotiation could not, as a general rule, be an offer. 2. An offer must be definite and certain in terms. Ordinarily an offer must include, either expressly or by implication, the following: A- Identification of the parties to the contract B. Description of the subject matter C. Time for performance D. Price It should be noted that the law will allow a reasonable time for performance unless the phrase time is of the essence is included which requires strict performance of all time obligations. The reader must also be aware of illusory offers. Illusory offers are those which do not really bind the offeror to any real commitment. 3. An offer must be communicated to the offeree. An offer ordinarily can only be effective when the offeror volitionally (voluntarily) communicates the offer.

OFFER AND ACCEPTANCE Two of the necessary components for forming a contract. Together, offer and acceptance are referred to as mutual assent and if supported by legally sufficient consideration, a contract is formed.

OFFEREE The person to whom an offer is made.

OfferingValueª, When a propertyÕs deeded interest are first placed on the exchange for sale, the selling price is called the Offering Value, equaling the propertyÕs purchase price, reserve fund amount, escrow and conversion costs, divided by the deeded interest.  OfferingValueª, is Copyrighted and Trademarked by World Deed Exchange.com, inc.

OFFEROR The person who makes an offer.

OFFER TO SELL Any attempt, either verbal or in writing, to induce or encourage someone to acquire an interest in property.

OFFICE BUILDING A structure used primarily for the carrying on of business.

OFFICE OF INTERSTATE LAND SALES REGISTRATION An agency within the Department of Housing and Urban Development (HUD) which has the responsibility for enforcing the Interstate Land Sales Full Disclosure Act.

OFFICE OF THRIFT SUPERVISION (OTS) An office created under the Treasury Department that replaced the Federal Home Loan Bank Board as the regulator of savings and loan associations. OTS was created in 1989 as part of the Financial Institutions Reform, Recovery, and Enforcement Act.

OFFICE PARK A parcel of land designed and developed to provide for a number of separate or attached office buildings. Normally located in suburban areas such as next to a beltway surrounding a metropolitan area, pffoce parks are intended to provide the users with the facilities necessary to carry on normal business

OFFER AND ACCEPTANCE Two of the necessary components for forming a contract. Together, offer and acceptance are referred to as mutual assent and if supported by legally sufficient consideration, a contract is formed.

OFFEREE The person to whom an offer is made.

OFFEROR The person who makes an offer.

OFFER TO SELL Any attempt, either verbal or in writing, to induce or encourage someone to acquire an interest in property.

OFFICE BUILDING A structure used primarily for the carrying on of business.

OFFICE OF INTERSTATE LAND SALES REGISTRATION An agency within the Department of Housing and Urban Development (HUD) which has the responsibility for enforcing the Interstate Land Sales Full Disclosure Act.

OFFICE OF THRIFT SUPERVISION (OTS) An office created under the Treasury Department that replaced the Federal Home Loan Bank Board as the regulator of savings and loan associations. OTS was created in 1989 as part of the Financial Institutions Re Recovery, and Enforcement Act.

OFFICE PARK A parcel of land designed and developed to provide for a number of separate or attached office buildings. Normally located in suburban areas such as next to a beltway surrounding a metropolitan area, office parks are intended to provide the users with the facilities necessary to carry on normal business. Such facilities include ample parking, a well-designed road system, landscaping, restaurants and hotel facilities, and an adequate supply of labor.

OFFICIAL MAP The land-use control used by local governments to designate and reserve private land for street widenings, new streets, parks, and other public improvements.

OFF-SITE COSTS The costs of improvements that service a particular lot or development, but that are not located directly on the lot. For a residential subdivision, examples would include the costs of sewage treatment facilities, streets, and streetlights.

OFF-SITE IMPROVEMENTS Physical improvements that affect the use and value of a parcel of land, but are not located directly on the lot. For a residential subdivision, examples would include streets, street lights, and curbs.

OFF-STREET PARKING Parking spaces which are located on private property rather than directly on a public street. A minimum number of off-street parking spaces per so many square feet of commercial or retail space is often part of a local zoning ordinance.

OIL AND GAS LEASE A right given by an owner (lessor) to another (lessee) for the purpose of extracting oil and or gas from the land. An oil and gas lease normally runs for a specific number of years and payment to the owner is in the form of a royalty based on a percentage of the oil or gas taken from the land.

ONCE A MORTGAGE, ALWAYS A MORTGAGE A legal rule which states an instrument originally intended as a mortgage cannot at some later date be converted into another instrument such as a deed by either a clause in the instrument or an agreement between the parties.

ONE-HUNDRED PERCENT FINANCING Action taken by a developer or investor which results in all of the cost or the purchase price being financed with borrowed money and thus the developer/investor does not have any equity in the property. Also known as mortgaging out, the ability to arrange such financing is generally more prevalent with new construction since the loan-to-value ratio will be based on the value of the property rather than on the cost of the project.

ONE-HUNDRED PERCENT LOCATION The particular area or spot in the business district of a city considered to be the best or prime location. The location might be an intersection, a square block or a portion of the business or shopping district. Normally such a location demands the highest rents in the area.

ONE-THIRD, TWO-THIRD RULE An appraisal rule of thumb stating that the first one-third of a standard lot nearest the street contains half of the total value while the rear two-thirds of the lot contains the other half of the value. While this is only a rule of thumb, it can be useful for appraisers in the valuation of land being condemned through eminent domain.

ON OR ABOUT The designation of an approximate date without a firm commitment to a precise date. Real estate sales contracts may include a sentence stating "closing to occur on or about June l' in which case June 1 would be the approximate closing date rather than the exact date.

ON-SITE IMPROVEMENTS Physical improvements such as buildings, sidewalks, and landscaping made inside the legal boundaries of the property.

ON-SITE MANAGEMENT Property management activities that need to be performed directly on the premises. Such activities would include the showing of available space, maintenance, and eviction of tenants.

OPEN AND NOTORIOUS Action by one party on the land belonging to someone else sufficient to notify the owner that such a use may result in transfer of title through adverse possession.

OPEN-END MORTGAGE A loan containing a clause which allows the mortgagor (borrower) to borrow additional money at some point in the future without rewriting the mortgage. The money which may subsequently be loaned will carry whatever the current rate of interest is at the time the money is loaned. By writing such a mortgage, the lender eliminates the time and paper work normally spent in processing and approving a loan.

OPEN HOUSE A marketing technique commonly used by real estate brokers to show residential property by having it available to the public during particular hours, such as from 1:00 to 5:00 Sunday afternoon. During the open house the broker or a representative is at the house and is available to show the property and answer any inquiries made by prospective buyers.

OPEN LISTING A type of listing agreement in which more than one broker may be employed to sell the property and the owner pays a commission only to the broker who is the efficient and procuring cause of the sale. This listing is also known as a simple listing or a general listing and the owner is not obligated to pay anyone a commission if the owner personally sells the property. Such a listing is often used by builders and developers who agree to pay a sales commission to any broker who sells a house or lot in their subdivision.

OPEN MORTGAGE A mortgage written without a prepayment clause and which thus can be repaid in part or in full at any time during the term of the loan without the borrower having to pay a prepayment penalty. Some mortgages are written so that the borrower can only prepay 20 percent of the outstanding balance per year for the first five years, otherwise a prepayment penalty is imposed.

OPEN SPACE Land which has not had improvements such as buildings and other structures added to it. Such land is often left in a subdivision by a developer for recreational use and enjoyment by those who buy lots in the development and as such the land is dedicated to and maintained by either the subdivision or the local government.

OPERATING EXPENSE RATIO (OER) The relationship of operating expenses to potential gross income or effective gross income. This ratio may vary with each type of property. However, it can be used by an appraiser/ investor to compare a particular property with similar-use properties. For apartment buildings the ratio generally falls between 35% and 45%; however, it may be as high as 50% if the landlord is responsible for paying all utilities. Office buildings which are expensive to maintain can have ratios exceeding 50%, while property leased under a net or net, net agreement will have a very low operating expense ratio.

OPERATING EXPENSES Periodic expenses of operating income-producing property other than debt service and income taxes. Operating expenses are those directly related to the level of occupancy and usage of the building. These can include management fees, maintenance, ground maintenance, utilities, supplies, legal fees, accounting fees, and other such costs. These expenses when subtracted from gross income equal net operating income.

OPERATING LEVERAGE The effect of increasing gross income while maintaining expenses at a fixed or semi-variable rate.

OPERATION OF LAW The application of established rules of law upon a particular fact situation.

OPPORTUNITY COST The economic principle that a prudent investor would pay no more for a particular piece of property than for equally attractive substitutes, whether those substitutes are real estate or other investments that promise to offer equal financial benefits and the same risk.

OPTION A right, given for consideration to a party (optionee) by a property owner (optionor), to purchase or lease property within a specified time at a specified price and terms. An option is an offer which, because it is secured by consideration, cannot be revoked. An option may be assigned to another person who may exercise the option. This is an exception to the rule that only the offeree may accept an offer. Assignment is not effective if the option itself prohibits the assignment or if the terms are dependent on the personal credit of the original option holder. An option is irrevocable by the optionor and will not be extinguished by death or insanity of either party.

OPTIONEE The holder or receiver of an option.

OPTIONOR One who gives an option to another.

OPTION TO PURCHASE LEASED PROPERTY A right given to a tenant in a lease to buy the property within a specified period of time either at a predetermined price or at a price to be mutually agreed upon at a later date. In some instances if the tenant exercises the option then the rent paid up to that time is applied toward the purchase price.

ORAL CONTRACT An agreement that is unwritten or only partially written and thus depends in whole or in part on spoken words of the parties to the contract. In order to be enforceable any contract involving an interest in land must be in writing.

ORDINANCE A rule or statute enacted by the legislative branch of a local government. Examples of ordinances directly affecting real estate include building codes, housing codes, and occupancy regulations.

ORDINARY ANNUITY A series of equal periodic receipts or payments, receivable or payable at the end of each period.

ORDINARY INCOME Income stemming from regular and recurring sources as contrasted with capital gains or tax-free cash flow. Ordinary income includes wages and other compensation, interest and dividends, rents and royalties, alimony, pensions, and proceeds from life insurance in excess of premiums paid (excluded if received because of death of the insured).

ORIGINAL EQUITY The cash down payment applied to purchase property.

ORIGINATION FEE The dollar amount charged by a lender to cover the time and expenses incurred in arranging a loan. The fee covers such expenses as credit check, employment verification, and appraisal of the property. Normally the origination fee is stated as a percentage of the loan amount, for example, one percent.

OSTENSIBLE AUTHORITY Authority which a third person can reasonably assume that an agent has on the basis of actions or inactions of the principal. This is so despite the fact that the agent may not have actual authority. A third person may justifiably rely on appearances and is not bound by secret instructions of the principal to the agent. Consider the case where John delivers a car to Honest Joe, a used car dealer. Honest Joe is instructed to sell the car for no less than $1,000. Honest Joe sells the car for $750 to Pam. Joe had apparent authority to sell the car at any price from the viewpoint of a innocent third party purchaser. John therefore cannot refuse to deliver title to Pam despite the fact that Honest Joe failed to obey his instructions.

OTHER PEOPLE'S MONEY (OPM) The use of someone else's money in the purchase of real estate. The higher loan-to-purchase ratio, the more other people's money is being used, and thus, the higher the leverage.

OUTBUILDING An accessory structure such as a tool shed or storage barn that serves the main building or structure on the land.

OUTLOT (OUTPARCEL) A small parcel of land in a shopping center development that is excluded from the mortgage in order to permit the developer to sell or lease the parcel and thus not be in violation of the mortgage.

OUTSTANDING BALANCE The remaining balance owed on a debt such as a mortgage loan.

OVERAGE RENT (INCOME) Percentage rent based on retail sales, in addition to a fixed base rent.

OVERALL RATE OF RETURN The mathematical rate obtained by dividing net operating income by the selling price or value of income- producing real estate.