FACE RATE OF INTEREST The stated interest rate in a promissory note. Also known as the contract rate or nominal rate, the face rate of interest will be less than the annual percentage rate (APR) if additional charges such as origination fees and discount points are charged by the lender.

FACE LIFT Changes other than structural that result in an improved appearance of a building. Such things as repairs, paint, new windows, and general cleaning all serve to improve the appearance of a building and, thus, give it a face lift.

FACE VALUE The value of a debt such as a mortgage as stated in the instrument itself If current interest rates are greater than the contract rate of interest, the market value of the debt instrument will be less than the face value since the instrument would have to be discounted to generate the market rate of interest. Conversely, if the contract rate of interest is greater than current market rates, the instrument, if sold, will sell for a premium and, thus, its market value will be greater than its face value.

FACTOR Any number or symbol that when multiplied by another forms a product; the reciprocal of a rate.

FACTORS OF PRODUCTION An economic principle which refers to the inputs necessary to create goods or services. There are four factors of production: (1) capital, (2) labor, (3) entrepreneurship or management, and (4) land. Each factor must be compensated in order for the owner(s) to be induced to part with the factor. Since land is the only immobile factor of production, it must attract the other three factors of production. As a result, land receives its payment only after the other factors have been compensated. This means that real estate is residual. Thus, the value of real estate is dependent upon how much compensation is left after the other three factors have been rewarded.

FAIR CREDIT REPORTING ACT A federal act which became effective April 1, 1971, and attempts to regulate the actions of credit bureaus that give out erroneous information regarding consumers. First, banks and credit companies must make a customer's credit file available to the person in question. Further, the consumer, upon examining the file, has the right to correct any errors that may appear in the credit reports. Secondly, if a creditor denies a loan to an applicant, the applicant must be given the name and address of the credit bureau that supplied the credit information to the creditor. Upon request the credit bureau must supply the consumer with the pertinent information contained in the applicant's credit file. Finally, the act limits the access of the consumer's credit records to people who: (1) evaluate an applicant for insurance, credit or employment, (2) secure the consumer's permission, or (3) secure court permission.

FAIR HOUSING AMENDMENT ACT OF 1988 A federal act which amended the Federal Fair Housing Act of 1968 to include two new protected classes, the handicapped and the "familial" status, or those with children under eighteen. The amendment became effective March 12, 1989.

FAIR MARKET VALUE An economic concept denoting the price, in terms of money, at which a willing seller and willing buyer will agree when both parties are acting prudently, knowledgeably, and under no compulsion.

FANNIE MAE Nickname commonly used in reference to the Federal National Mortgage Association (FNMA).

FARMER'S HOME ADMINISTRATION (FMHA) An agency of the U. S. Department of Agriculture that provides credit to farmers, rural residences, and certain communities. Currently, FMHA administers two loan programs for rural housing: (1) a direct loan program, and (2) a guaranteed loan program. Properties securing such loans may not be located in urban areas and, like FHA and VA, FMHA requires that the property meet certain minimum requirements. Although there is no statutory loan limit for such loans, the property must appraise for the contract sales price. Information on both loan programs is available from any office of the Farmer's Home Administration.

FARMLAND A classification of land which denotes land primarily used for the raising of crops and or livestock.

FARM MORTGAGE A loan secured by agricultural real estate. Such loans are normally used by farmers to raise capital for the purchase and operation of their farms.

FASA Fellow, American Society of Appraisers. A professional designation awarded by the American Society of Appraisers to individuals involved in the appraisal of both real and personal property.

FEASIBILITY The reasonable likelihood of satisfying certain investment objectives within the context of the market, finances, and other resources or constraints.

FEASIBILITY STUDY A detailed analysis of a real estate project to determine the most profitable use and the likelihood of the proposed use being a financial success. The study is often used by the promoter or developer to inure would-be investors to participate in the venture and to assist lenders in making their decision whether or not to loan the necessary funds.

FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) An independent agency functioning within the executive branch of the U. S. Government. FDIC was established following the run on banks that occurred prior to the Great Depression and its purpose was to insure the deposits of all banks who hold FDIC membership. As a result of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, FDIC currently insures both bank and thrift deposits. Thrift deposits are insured through the Savings Association Insurance Fund (SAIF), while commercial bank deposits are covered through the Bank Insurance Fund (BIF). The corporation insures deposits up to a statutory limit for both banks and thrifts.

FEDERAL FAIR HOUSING ACT OF 1968 A federal fair housing law which was passed as Title VIII of the Civil Rights Act of 1968. As originally passed, the act prohibited discrimination in the sale or rental of residential dwelling units or vacant land intended to be used as such on the basis of race, color, religion, or national origin. Discrimination on the basis of sex was prohibited by an amendment in the Housing and Community Development Act of 1974. The Fair Housing Amendment Act of l988, which became effective March l3, 1989, added two new protected classes, the handicapped and the "familial' status, or those with children under eighteen.

FEDERAL HOME LOAN BANK BOARD (FHLBB) A board established by the Federal Home Loan Bank Act of 1932 which chartered and regulated federal savings and loan associations. The purpose of the board in regard to savings and loans was much the same as that of the Federal Reserve System in regard to commercial banks. As part of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, the Office of Thrift Supervision (OTS) was established to replace the Federal Home Loan Bank Board for the purpose of chartering, regulating and supervising thrift institutions.

FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) In 1970 under the Emergency Home Finance Act, the Federal Home Loan Mortgage Corporation (FHLMC) or "Freddie Mac" was created as a wholly-owned subsidiary of the Federal Home Loan Bank System. Freddie Mac was established as a secondary mortgage market for savings and loan associations who are members of the FHLBS. The creation of FHLMC was of added importance since S & L's make such a high percentage of the total conventional residential mortgages and many these lenders would like to roll over their mortgages. While Fannie Mae deals heavily in FHA and VA mortgages, the majority of mortgages in Freddie Mac's portfolio are conventional. In recent years, this agency has referred to itself as The Mortgage Corporation.

FEDERAL HOUSING ADMINISTRATION (FHA) A federal agency established as part of the 1934 National Housing Act that insures mortgages made by FHA-approved lenders on real estate that meets FHA minimum standards. The establishment of the 1934 Housing Act immediately resulted in more construction jobs for the unemployed. This, in turn, helped to stimulate the depressed economy. In order to provide the means by which these new homes could be purchased, FHA established an insurance program to safeguard the lender against the risk of nonpayment of people purchasing these homes. The result was that the majority of homes financed were FHA insured. Even though the percentage of homes insured under FHA coverage has continued to decrease, the standards and requirements under FHA programs have been credited with influencing lending policies and techniques in financing residential real estate.

FEDERAL LAND BANKS Regional banks established as part of the Farm Credit Administration which are a source of long-term mortgages to farmers. The Federal Land Banks make first mortgages though local federal land bank associations to farmers, ranchers, rural residents, and farm-related businesses. A majority of the funds used to make these loans come from the selling of securities by the Federal Land Banks to investors. Each of the banks is known as 'the Federal Land Bank of " and is located in the following twelve cities: Baltimore, Maryland 21203; Berkeley, California 94701; Columbia, South Carolina 24202; Houston, Texas 77001; Louisville, Kentucky 40201; New Orleans, Louisiana 70150; Omaha, Nebraska 68101; Springfield, Massachusetts 01101; Spokane, Washington 99204; St. Louis, Missouri 63166; St. Paul, Minnesota 55101; and Wichita, Kansas 67202.

FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) Commonly known as "Fannie Mae", the FNMA is the largest and best known buyer of existing mortgages. The Federal National Mortgage Association was originally organized by the federal government in 1938 to purchase FHA-insured mortgages. The association was reorganized in 1968 as a quasi-private corporation whose entire ownership is private. Fannie Mae raises capital by issuing corporate stock which is actively traded on the New York Stock Exchange and by selling mortgages out of its portfolio to various investors. Over the past twenty years Fannie Mae has purchased many times more than it has sold. At the end of 1991 current mortgage holdings exceeded $100 billion, the majority being conventional mortgages.

FEDERAL RESERVE BANK One of twelve banks located in the twelve federal reserve districts throughout the United States.

FEDERAL RESERVE SYSTEM (FRS) The central bank of the United States which functions to control the money supply, availability of credit and interest rates. The FRS is comprised of twelve Federal Reserve Banks to which all nationally chartered commercial banks must belong and to which state chartered banks may choose to join. The system was created by Congress in 1913 and is governed by a seven-member Board of Governors each of whom are appointed for fourteen year terms by the President of the United States.

FEDERAL REVENUE STAMP A U. S. revenue stamp which until January 1, 1968, was required to be placed on deeds prior to recordation. The rate was $ .55 per $500 of consideration, and proof that the stamps had been purchased was evidenced by the actual placement of the stamps on the instrument being recorded. Since the end of this requirement in 1968, some states have passed their own requirements for revenue stamps.

FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION (FSLIC) A corporation established in 1934 as an agency of the federal government which insured the deposits of member savings and loan associations. Federally chartered S & L's had to maintain membership and state chartered associations could be members. As part of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, thrift deposits are now insured through the Savings Association Insurance Fund (SAIF) which is operated by the Federal Deposit Insurance Corporation (FDIC).

FEDERAL TAX LIEN A federal lien which attaches to the real property of a person when that taxpayer has violated either federal estate tax laws or federal income tax laws. When a person dies his or her estate is subject to a federal estate tax. This tax causes a lien to attach on all real and personal property in the estate for a statutory period of ten years or until the tax is paid. If a person fails to pay federal income taxes, government may issue a tax warrant which, when recorded in the federal tax do in the county records, attaches a federal tax lien.

FEDERAL TRADE COMMISSION (FTC) An agency of the federal government created in 1914 that has as its function the promotion of free and fair competition in interstate commerce the prevention of unfair and deceptive trade practices. In addition, FTC enforces the Fair Credit Reporting Act and those parts of the Truth-in-Lending Act r real estate brokers.

FEE APPRAISER A person who charges a fee for rendering his or her opinion as to the value a parcel of real estate. It is unethical for appraisers to charge a percentage of t derived value estimate as their compensation.

FEE SIMPLE The largest quantum of ownership recognized by law; also referred to as fee simple absolute or fee. The owner of the fee simple has unlimited power to dispose of the interests during his or her lifetime and upon death the property is automatically passed on to the owner's heirs and devisees either by will or by descent. Ownership in this country is ordinarily in the fee simple form. The only restrictions on use are those restrictions defined by the law of nuisance or those necessarily imposed by law in order to protect the interests of society. A fee simple owner may convey lesser estates, sell easements, mortgage the property or do whatever else he or she wishes with the property so long as others are not harmed by the improper use of the property. The fee simple absolute is created by using the words 'to (name) and his heirs and assigns forever.'

FEE SIMPLE DETERMINABLE A qualified fee simple estate created to exist only until the occurrence or nonoccurrence of a particular event. The words, "so long as" are ordinarily used to create the estate.

FEE SIMPLE SUBJECT TO A CONDITION SUBSEQUENT A qualified fee estate which is subject to a power in the original grantor or the grantor's heirs to terminate the estate upon the happening of an event. The termination is not automatic, since the party with the future interest called the right of reentry or power of termination must take steps to either enter upon the property or to bring a court action to recover the land.

FEE SIMPLE SUBJECT TO AN EXECUTORY LIMITATION A qualified fee simple estate which will automatically pass on to a third person upon the occurrence or nonoccurrence of a stated event.

FEE TAIL An estate in land which was designed to restrict the conveyance of title to the descendants of the grantee. This estate is established by a grant in N following words of conveyance are used, 'to X and the heirs of his body." Effectively the fee tail created a long series of successive life estates. This estate was to promote the landlord aristocracy in England by keeping property in family.

FELONY A crime more serious than a misdemeanor.

FEUDAL SYSTEM A system of land ownership established in England after the Norman of 1066, in which all property theoretically resided in the king. In return for service or other duties the king would give a feud or fief to a lord.

FHA A common reference to the Federal Housing Administration.

FHA INSURANCE An insurance fee charged the borrower on all FHA mortgages. The insurance payment is retained by FHA for use in buying any mortgage in default that is held by a lender.

FIDUCIARY A person who essentially holds the character of a trustee. Real estate brokers and salespersons are considered by law to be fiduciaries, thus they have a duty to act primarily for the principal's (the person who employed them) benefit and not their own. A fiduciary must act with the highest degree of care and good faith in relations with the principal and on the principal's business. 'Me penalties for failing in fiduciary duties may be quite severe.

FIEF An interest in land given under a feudal system. The term "fee,' as used to denote the extent of one's interest in land, is derived from the term fief.

FIFTEEN-YEAR MORTGAGE A loan with a less than traditional payback period, specifically one of fifteen years. During the past thirty years, the vast majority of long-term residential loans have been made with twenty, twenty-five, and thirty year payouts. However, in recent years more and more homebuyers have opted for loans with shorter maturity periods, such as fifteen-year mortgages. The primary advantage of a early-payout mortgage is the fact that considerably less interest is paid over the life of the mortgage since the principal is borrowed for a shorter period of time. However, offsetting this advantage is the fact that since the principal is borrowed for a less than normal period of time, the principal repayment each period is greater than with twenty- five and thirty-year mortgages. Thus, higher monthly payments eliminate many people from qualifying for fifteen-year mortgages.

FILTERING DOWN PROCESS The means by which housing once occupied by middle- and upper-income groups becomes available to lower- income families. Normally the property has physically deteriorated and thus is less expensive than when originally occupied.

FINAL VALUE ESTIMATE 'Me estimate of value reached after the appraiser has analyzed the data, reconciled the value indications provided by the application of the various approaches to value, and made a final judgment.

FINANCE CHARGES The total of all costs paid to the lender by the borrower directly or indirectly as an incident to the extension of credit. 'Me Truth-in-Lending Act requires that consumers be told of the following charges: interest, finder and origination fees, discount points, service charges, credit report fees, and other such charges.

FINANCIAL FEASIBILITY The likelihood that a proposed project will attain a cash flow of s quantity, quality, and duration to allow investors to recover the capital invested and achieve the necessary and expected rate of return. Factors to be considered timing of inflows and outflows of cash, revenues, costs, debt service, and the of a sale or re-financing.

FINANCIAL INSTITUTION An organization that attracts funds through some type of deposit mechanism lends those funds to individuals or corporations in order to make an acceptable return. The major financial institutions involved in financing real estate are savings and loan associations, commercial banks, mutual savings banks, life insurance companies, credit unions, finance companies, and pension funds.

FINANCIAL INSTITUTIONS REFORM, RECOVERY, AND ENFORCEM ACT (FIRREA) Federal legislation enacted in 1989 that changed the regulatory framework of financial institutions in the United States. Commonly referred to as the "savings and loan bailout bill,' FIRREA was a direct result of the insolvency problems : many savings and loan associations during the middle and late 1980s. Included act was the creation of the Savings Association Insurance Fund (SAIF), which insures thrift deposits, and the Bank Insurance Fund (BIF) which insures commercial bank deposits. Both funds are administered by the Federal Deposit Insurance (FDIC). FIRREA also established the Resolution Trust Corporation agency created to manage the assets and liabilities of savings and loan. that became insolvent both before and after the enactment of the act.

FINANCIAL INTERMEDIARY A financial institution that serves as a middleman between depositors and borrowers. Savings and loan associations, for example, attract many deposits from individuals. In turn, these deposits are made available to borrowers through a loan. The difference between what the financial intermediary pays to attract deposits and what it charges on its loan is its gross profit.

FINANCIAL LEVERAGE The use of borrowed money to complete an investment transaction. If the asset purchased with borrowed money offers annual financial benefits at a rate in excess of the loan's interest rate, leverage is said to be positive or favorable. 'Me investor makes money by borrowing. Conversely, if an asset purchased with borrowed money fails to increase in value or if it fails to provide benefits in excess of the interest rate paid on the borrowed money, then leverage is negative. Leverage is neutral when the property earns at the same rate as the interest rate on borrowed money.

FINANCIALLY FEASIBLE A real estate project in which the economic objectives of the investor(s) are satisfied.

FINANCIAL MANAGEMENT RATE OF RETURN (FMRR) A modified internal rate of return model designed to remedy some of the deficiencies of the internal rate of return (IRR) technique. Two rates are considered by the FMRR: (1) a safe, liquid after-tax rate, and (2) a run-of- the mill reinvestment rate.

FINANCIAL RATIO ANALYSIS A means by which an investor/lender detects facets of a business or investment that are within norms as well as those that become unhealthy. An astute investor uses financial ratio analysis to compare potential acquisitions and select the ones offering the greatest potential. By monitoring constantly changing ratios, it is possible to detect areas of weakness for both management and capital employment in order to take steps necessary to bring ratios back to the desired balance level of safety and risk.

FINANCIAL RISK The uncertainty resulting from the financing of an investment.

FINANCIAL SOLVENCY The expected normal condition of a business present when current assets exceed current liabilities.

FINANCIAL STATEMENT A written statement of the financial position of a person or company, showing total assets and liabilities as of a certain date. Many lenders require a financial statement as part of a loan application.

FINANCIAL STRUCTURE The mix of equity and debt used in the purchase price of an asset.

FINANCIER A person or financial institution engaged in the lending and management of money.

FINANCING The difference between the purchase price and the down payment, commonly referred to as debt or the mortgage. One of the features distinguishing real estate from some investments is the ability to finance all or a significant part of the purchase price with borrowed dollars.

FINANCING PACKAGE The total of all loans used to develop and/or purchase a real estate project.

FINANCING STATEMENT A written notice filed in the public records by a creditor who has extended credit for the purchase of personal property. The purpose of filing the statement is to establish the creditor's interest in the personal property which is the security for the debt but which may become a fixture when it is attached to real property.

FINDER'S FEE A payment made by one party to another for locating a prospect. This payment is often used in the financing of real estate when a mortgage banker locates a lender willing to loan money to a borrower. In addition, in most states real estate brokers may legally split a real estate sales commission with another broker who was partly responsible for bringing about the sale. However, an unlicensed person may not legally accept a finder's fee from a real estate broker since by doing so the unlicensed person is brokering real estate without a license and is thus in violation of licensing law. The term is also known as a referral fee.

FIRE AND EXTENDED COVERAGE INSURANCE A basic fire insurance policy protecting the insured against losses suffered from fire or lightning. In addition, the owner can receive extended coverage which insures against losses suffered due to windstorm, hail, explosion, riot or civil commotion, aircraft, vehicles, smoke, theft, and vandalism and malicious mischief Coverage of these extra perils normally adds very little to the premium.

FIRM COMMITMENT An agreement by a financial institution to loan a specified sum of money for a specific time period and at a certain interest rate, provided all conditions set by the lender are met by the borrower.

FIRM OFFER An offer made by a potential buyer that will not be further negotiated.

FIRM PRICE A stated sales price that is fixed and, thus, nonnegotiable. While uncommon in real estate transactions, occasionally an owner will put his or her property on the market at a firm price and will instruct the listing sales broker not to accept any offer below the listed price.

FIRST LIEN A legal claim with the highest priority against a certain property; also known as a senior lien.

FIRST MORTGAGE A lien on property in which the lenderÕs claims are superior to the rights of subsequent lenders. Such a lien position means less risk to the lender and thus normally results in a lower interest rate charged to the borrower than that charged on second or junior mortgages. Certain lenders only make first mortgages due to regulatory requirements; others limit mortgages to these senior instruments due to company policy.

FISCAL YEAR A business year used for accounting or tax purposes as compared to a cal, year. The fiscal year of many governmental units, including the federal govern] runs from July 1 through June 30 of the following year. Whether or not a government operates on a fiscal or calendar year is particularly important in prorating property taxes between buyer and seller.

FIXED EXPENSES Expenditures such as property taxes, license fees, and property insurance not vary directly given changes in the occupancy rate. Fixed expenses are on items subtracted from effective gross income to determine the net operating of property.

FIXED RATE MORTGAGE A loan carrying a constant interest rate over the full life of the m Historically, fixed rate mortgages have been the norm in permanent financing, particularly residential real estate. Thus, when a borrower secures a fixed rate mortgage he or she knows that the lender cannot raise the interest rate re of what the market rate of interest is doing. However, in recent years lenders have in some instances been reluctant to loan money for a long period of time including in the loan provision a clause allowing them to vary the rate of in and when market conditions change.

FIXING-UP EXPENSES The money spent to repair and/or refurbish real estate so as to imp marketability.

FIXITY OF LOCATION A physical characteristic of land which makes it subject to the influence of surrounding land uses. Since real estate space is fixed in location it cannot be moved. While it is true that the various elements within the space may be moved, such as the topsoil or the minerals, the space itself remains in the same geographic location. This immobility leads to several legal and economic results. From a legal standpoint only the legal rights and not the asset itself can be physically transferred to a purchaser.

FIXTURE Personal property which for some reason, such as the manner of attachment, has become realty. Such property is also referred to as chattel real. Examples of fixtures include built-in cabinets in a kitchen, bathtubs, permanent bookcases, and other such objects.

FLAG LOT A parcel of land that is shaped like a flagpole and flag with the land being the "flag" and the only access being the "pole."

FLAT A floor or part of a floor in a building designed for occupancy by a single family for residential purposes.

FLAT LEASE A type of lease requiring the tenant to pay equal rent payment each period, be the period monthly or annually. Rental payments under this type of lease change during the term of the lease and thus because of expected inflation generally used by a landlord when the lease is for a significant period of time.

FLEA BAG An inexpensive, run-down rental property such as an apartment or hotel.

FLEA MARKET A large area either outdoors or under a roof in which individuals lease space for the purpose of selling merchandise. The merchandise sold is normally consumer oriented.

FLEXIBLE LOAN INSURANCE PROGRAM (FLIP) An innovative financing technique developed to overcome the negative amortization aspects of the graduated payment mortgage. The key to the flip mortgage is the use of the buyer's down payment. Instead of being used payment, the cash is deposited in a pledged, interest-bearing savings account where it serves as both a cash collateral for the lender and as a source of supplemental payments for the borrower during the first few years of the loan.

FLIP The near simultaneous buying and selling of a parcel of real estate at an price for the purpose of leveraging the transaction.

FLOAT The time period in which a person has free use of someone else’s money.

FLOATING RATE A finance term used to explain the spread on a variable interest rate loan. Developers and builders often borrow money at an interest rate tied to the prime rate, for example, 'prime plus two.' This means that if the prime rate is 10% the builder pays 12% on the money borrowed. However, if the prime increases to 11%, then the interest rate charged by the lender floats upward to, in this case, 13%.

FLOODINSURANCE Insurance that protects a property owner from damages resulting from flooding. Due to the high cost of flood insurance when written through a private insurance company, Congress enacted the National Flood Insurance Program in 1968. 'Me intent of this legislation was to provide insurance coverage for those people suffering both real and personal property losses as a result of floods. Due to the lack of public interest in the program, Congress enacted the Flood Disaster Protection Act in 1975. Under this law, no real estate located in a floodplain area can be financed through a federally regulated lender unless flood insurance is purchased.

FLOODPLAIN The land bordering or surrounding a river or stream that can be under water when the river or stream are at their high-water mark.

FLOOR AREA The total of all the horizontal areas of all the floors in a building.

FLOOR AREA RATIO (FAR) The relationship between the floor area of a building and the total area of the land under the building. Minimum and maximum floor area ratios are often established as part of a zoning ordinance.

FLOOR DUTY A procedure used in many real estate brokerage offices in which one or more sales associates are responsible for answering all telephone inquiries and office visits during a specific period of time. The benefit to the company is the assurance that all inquiries will be handled, while the benefit to the person(s) on floor duty is the opportunity to acquire new clients that would otherwise not be known.

FLOOR PLAN The layout of a building showing the exact specifications as to size and shape o each room.

FLOOR-TO-CEILING LOAN A financing technique in which the total amount of the loan is a function of the projected net operating income of the project. The total amount of the loan is funded by the lender in two separate payments. The "floor loan" is made upon satisfactory completion of the project and may be as high as 50 to 75 percent of the total loan. The remainder of the loan, the 'ceiling,' is funded only if certain predetermined occupancy and or net income requirements are met.

FLOW OF INCOME The total amount of income projected from a real estate investment as stated ii either annual figures or the total flow over the economic life of the investment.

FOLIO Latin word for "page." When deeds, promissory notes, subdivision regulations and other legal instruments dealing with real estate are recorded in the public land records, they are assigned a liber (book) volume and a folio (page) number.

FORBEARANCE Refraining from action by a creditor against the debt owed by a borrower after the debt has become due.

FORECASTING An estimate of future events based on present knowledge, facts, theory, and judgment. Numerous real estate associations and organizations are constantly forecasting what lies ahead for their particular membership.

FORCED SALE The selling of an asset under less than favorable conditions in order to liquidate the asset, such as the selling of mortgaged property through foreclosure by the lender.

FORECLOSURE A legal procedure by which mortgaged property in which there has been default on the part of the mortgager (borrower) is sold to satisfy the mortgage debt. The most common type of foreclosure in most states is foreclosure by sale. Foreclosure by sale takes two general forms: (1) foreclosure by judicial sale, and (2) foreclosure by power of sale (also known as foreclosure by advertisement). While procedures differ from state to state, under a foreclosure by judicial sale, a petition is usually filed with the court against the defaulting mortgager and all persons having junior lien interests in the property. The petition states the nature of the default, the amount due, and the property involved.

FOREIGN CORPORATION A corporation not incorporated or chartered in a particular state yet business in that state. Even though it is not chartered in states where business, a foreign corporation must consent to certain requirements and before it may legally operate in the state.

FORESHORE The part of a parcel of land lying between the high water mark and the water mark.

FORFEITURE Loss of property for some specified reason such as nonperformance condition or legal obligation.

FORGERY Altering a written document with the intent to injure or defraud someone.

FORMAL CONTRACT A written contract under seal that is enforceable because of the way it is written and does not depend upon sufficiency of the consideration.

FORM REPORT A specific format established for use in presenting the results of an appraisal. Lenders, government agencies, and certain investors often require the use of a form report by appraisers in rendering an opinion as to the value of certain types of property such as single-family residential or condominiums.

FOR RENT BY OWNER (FRBO) Effort on the part of an owner of real estate to lease his or her space without employing the services of a property management firm. Owners of both residential rental property as well as income-producing property often manage the property themselves and thus they do not see the need for a professional management company.

FOR SALE BY OWNER (FSBO) An attempt by the owner of real estate to sell his or her property without using the services of a real estate broker. Quite often the owner believes that by selling the property without employing a real estate broker the commission will be saved and therefore the owner will end up with more money.

FORWARD COMMITMENT An agreement by a lender or investor to either make or purchase a loan within a certain period of time into the future.

4-3-2-1 RULE A rule of thumb used by appraisers in estimating the value of land. The rule states that in a standard sized lot, 40 percent of the total value is allocated to the front (street frontage) quarter of the lot, 30 percent to the second quarter, 20 percent to the third quarter and 10 percent to the back quarter. Such an approach is nothing more than an approximation and should not be used if a more definitive estimate is desired.

FRACTIONAL APPRAISAL An appraisal of one component or legal interest of the whole property.

FRACTIONAL INTEREST A partial interest in real estate, such as an easement.

FRANCHISE A business arrangement undertaken for the purpose of marketing a product or service. One party (the franchiser) provides marketing and selling expertise for a fee to another party (the franchisee) who in turn sells the product or service in the marketplace.

FRAUD A misrepresentation of a material fact which is made with knowledge of its falsity and with intent to deceive a party who in fact relies on the misrepresentation to his or her detriment and injury. Fraud can result from words spoken or written, acts, or nondisclosure where there is a duty to inform. Fraud is a defense against the enforcement of a contract.

FREDDIE MAC A common name used to refer to the Federal Home Loan Mortgage Corporation.

FREE AND CLEAR Title to property which is unencumbered by any mortgages or other liens.

FREEHOLD An estate in real property which continues for an indefinite period of time. Freehold estates may be inheritable or non-inheritable. Inheritable estates include the fee simple absolute, the qualified fee, and the fee tail. Noninheritable estates include various life estates which are created by acts of parties, such as an ordinary life estate, or by operation of law, such as dower and curtesy.

FREEHOLDER One who owns a freehold interest in real property.

FREE MARKET SYSTEM AUCTION An auction process used by the Federal National Mortgage Association in which the association accepts bids from approved lenders as to the amount, price, and terms of existing mortgages that these lenders wish to sell to Fannie Mae. Upon deciding how much money it will spend during a given time period, Fannie Mae notifies the successful bidders (determined by those mortgages offered for sale will generate the highest yield to FN@), and these bidders have a certain period in which they can choose to deliver the mortgages. Once the mortgages been delivered to Fannie Mae, the originator of the mortgage continues to service the loan (collect monthly payments, escrow property taxes, etc.) and for this se: the originator receives a servicing fee.

FREE-STANDING BUILDING A building which contains only one business. Fast-food franchises and retail stores are often free-standing buildings.

FRONTAGE The linear distance of a parcel of land abutting a road or river.

FRONTAGE ASSESSMENT An assessment made by local governments to pay for improvements s roads. Improvements such as roads or sidewalks can be paid for by assessing property facing or abutting the road based on the proportion of a par property's frontage to the total distance being improved.

FRONT-END FEE Charges made by a lender to a borrower for expenses incurred in determining whether or not a loan will be made. Such expenses would include credit report appraisal, survey, structural inspection, and various legal fees. The fee may be stated as a set amount or as a percentage of the requested loan. Such fees are not payment. for the use of money and thus are not considered to be interest.

FRONT FOOT A property measurement for purposes of valuation that is measured by the footage on the street line. When the dimensions of a lot are given, such as 600, the first measurement, 200, normally refers to the front footage.

FRONT MONEY Money that must be raised by a builder/developer before obtain financing in order to start a project. Front money is needed to pay for such options on the land, legal fees, feasibility, and engineering studies, drawings. The money, also known as seed money, is normally provided by the equity investor(s) since at this stage in the development of a project financing has not been finalized.

FULL DISCLOSURE The obligation to reveal all material facts. Under agency law a real estate broker or salesperson acting as an agent is required to fully disclose all material facts to a third party. Failing to do so may result in legal action against the agent. In addition, federal and state acts such as the Truth-in-Lending Act and the Interstate Land Sales Full Disclosure Act require that certain information be made available to the consumer.

FULL-PRICE OFFER An offer to purchase real estate at the exact price and with the exact conditions stated by the owner. Most real estate offers are not full-price offers, although in some isolated markets offers are made above the listing price due to the high demand and short supply of available property.

FULLY AMORTIZED MORTGAGE A loan that is fully repaid at maturity by periodic reduction of the principal. The first part of each payment covers interest on the outstanding debt as of the payment due date and the remainder of the payment reduces the outstanding debt.

FUNCTIONAL OBSOLESCENCE A loss in value within a structure due to changes in tastes, preferences, technical innovations, or market standards. The item in question may be curable, such as lack of air conditioning in Florida, or incurable, such as exceptionally low ceilings in a warehouse, depending on the costs of correcting the item as compared to the benefits expected if the correction is made.

FUTURE ADVANCES Money loaned by a mortgagee (lender) to a mortgager (borrower) after the mortgage has been placed on the property and secured by the original security agreement. A construction loan often calls for future advances in which dollars are dispersed to the developer as various stages of construction are completed.

FUTURE BENEFITS The positive cash flows and/or increases in the value of property anticipated by an investor. Such anticipation is the foundation on which the income approach to value is based.

FUTURE INTEREST A present ownership interest or possibility of ownership in land with the right of possession postponed into the future. Essentially a future interest is a present non-possessory right which will or may become a possessory right at some future date. Future interest may be classified as follows: (1) possibility of reverter, (2) right of reentry or power of termination, (3) reversions, and (4) remainders.

FUTURE WORTH OF ONE A factor used to calculate how much a present sum will be worth in the future if it is held for a certain period of time and earns an interest rate that is compounded periodically.

FUTURE WORTH OF ONE PER PERIOD A factor used to calculate how much a series of equal sums deposited at the end of periodic compounding time intervals will be worth at the end of the total term.