Real Estate Glossary

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N

net lease

a tenant has to pay rent as well as cost incurred in maintaining the property, including taxes, insurance, utilities, and repairs.

net listing

the seller will receive a net amount of money from the sale and any excess money goes to the broker as commission. Net listings are illegal in Georgia.

net operating income

is the annual "income" in the income approach formula.

The calculation of the net operating income (NOI) begins with the calculation of the potential gross income (PGI) – which is the maximum income the property is capable of generating. Next, effective gross income (EGI) is calculated which is equal to the PGI minus the appropriate vacancy and collection losses for the type of property. The NOI is the result of reducing the EGI by the operating expenses as shown in the following:

PGI – Vacancy and Collection Losses = EGI
EGI – Operating Expenses = NOI

Keyword(s):

net-net lease

is a contract between landlord and tenant that shifts part of the cost of ownership to the tenant. In a net-net lease, the tenant will pay rent plus the tenant’s share of property taxes and insurance on the building.

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non-conforming use

land presently used in such a manner that is inconsistent with a newly enacted zoning ordinance. Depending on the zoning ordinance, the right to a non-conforming use may terminate if the improvements are partially or totally destroyed.

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nonhomogeneity

a lack uniformity. Real estate is considered to be nonhomogeneous because no two parcels of land are exactly alike.

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note

A financing instrument that states the terms of the underlying obligation, is signed by its maker, and is negotiable (transferable to a third party).

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novation

is a change in a contract that involves a replacement agreement or a replacement of a party.

Example: A homeowner refinances a mortgage with the same mortgage company. The parties remain the same, but the old agreement (mortgage) is substituted with a new agreement. That is called a novation of the contract.

O

observed condition method

is the most detailed method of quantifying accrued depreciation. This method separately accounts for physical depreciation (curable, incurable short-lived, and incurable long-lived), functional obsolescence (both curable and incurable), and economic obsolescence.

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offer and acceptance

is an essential element to create a contract valid. Requires that one party (the offeror) makes an offer to a second party (the offeree) who accepts unconditionally and communicates that acceptance to the offeror. A "meeting of the minds"

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