Real Estate Glossary

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L

Loan origination fee

The processing of a mortgage application is known as loan origination. When a mortgage loan is originated, a loan origination fee, or transfer fee, is charged by most lenders to cover the expenses involved in generating the loan.

loan-to-value ratio

the ratio which expresses the relationship betweeen the amount of money borrowed and the value of the subject property.

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Local Improvement District (LID)

An assessment (i.e., tax) on a local improvement district for a public improvement project the district has approved.

locational factors

is one of the four basic categories of adjustments; which are: terms and conditions of sale; date of sale; locational factors; and physical factors.

Locational factors permit adjustments for differences associated with advantages or disadvantages in location between the subject and comparables. Locational factors include physical, social, economic, and political differences that influence the prices paid for real estate.

Example: A subject is located at the entrance to the subdivision off a busy street. Comparables are all located within the same subdivision. The appraiser analyzes any affect from the subject property location against the comparable locations and makes appropriate adjustments for any difference in value.

lot-and-block (recorded plat) system

A method of describing real property that identifies a parcel of land by reference to lot and block numbers within a subdivision, as specified on a recorded subdivision plat.

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M

management agreement

An agreement between the owner and a management firm or individual that shows what the owner expects of the property manager and how the property manager will satisfy those expectations.

management plan

This plan includes the owner's goals of the property. This document is detailed and states what the manager wants to accomplish, how and when. They analyze three different factors while putting this plant together: owner goals, regional and neighborhood market, and the specific property. It also has a section on revenue and anticipated expenses.

market

is where buyers and sellers discover information about products and services offered, and voluntarily engage in transactions to buy and sell those products and services. Just about everything that is bought and sold has a market and most markets are defined by the product or service being exchanged such as the petroleum market, automobile market, housing market, etc.

market abstraction

An appraisal technique that allows appraisers to 'break down' real estate transactions into their component parts to identify the values associated with the individual components. Note that market abstraction can be used as a tool in a variety of ways in addition to finding depreciation. For example, it can also be used to find site values from analysis of improved property sales.

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market rent

or economic rent, is described as the rent paid by the typical tenant to an owner where:

the parties are dealing at arms-length, and
the parties are well-informed or well-advised as to the usefulness of the property, and
the parties are typically motivated, and
where the rent paid is unaffected by special concessions.

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