face interest rate

The percentage interest that is shown on the loan document. Compare with "annual percentage rate" and "effective rate". Example: A mortgage has an 8% "face interest rate", $10,000 "face value", and 30-year "amortization term." If market interest rates are 12%, the "market value" of the loan is $7,200.

face rent

The identified rental rate in a lease (also known as contract rate), as shown in the lease itself.

face value

The dollar amount, shown by words and/or numbers, on a document. Compare with "market value"; see "amortization." Example: A mortgage has a "face value" of $10,000, "amortization term" of 30 years, and 8% "face interest rate". It will be amortized in 13 years to $8,000 by annual payments.

Facility Management

Facility management is the practice of coordinating the physical workplace with the people and work of the organization. It integrates the principles of business administration, architecture and the behavioral and engineering sciences. From the International Facility Management Association

facility space

In hospitality properties, the floor area dedicated to operating departments such as restaurants, health clubs, and gift shops that service guests or the public on an interactive basis not directly related to room occupancy.

Fair Credit Reporting Act

The Fair Credit Reporting Act gave consumers the right of access to, and correction of, credit reports. (See credit report)

Fair Employment and Housing Act

California's Fair Employment and Housing Act (FEHA) (Sections 13100-13196 of the Government Code) prohibits housing discrimination based on marital status as well as race, color, religion, sex, national origin or ancestry. The Department of Fair Employment and Housing enforces the law, which is based on the former Rumford Fair Housing Act. Fair Employment and Housing Act-Full Text

Fair Housing Act

Pursuant to the federal Fair Housing Act, no offer to sell, rent, buy, or exchange property shall contain any preference, limitation, or discrimination based on race, color, religion, sex, national origin, handicap, or familial status, or an intention to make such preference, limitation or discrimination. (See Civil Rights Act of 1968, federal fair housing law)

Fair Housing Amendment Act of 1988

Extends the Civil Rights Act of 1968 to cover handicapped persons and families with children. (See Fair Housing Act, federal fair housing law, Civil Rights Act of 1968) HUD-Fair Housing Reading Room

fair market rent

The amount that a property would command if it were now available for lease. Contrast with "contract rent." See "economic rent", "rent control."

fair market value

A term, generally used in "property tax" and "condemnation" legislation, meaning the "market value" of a property. Example: (1) Property taxes generally are assessed at some ratio of "fair market value." (2) When property is condemned for public use, the owner is entitled to be compensated at "fair market value."

fair value of an asset (or liability)

The amount at which the asset (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation sale.

familial status

Familial status is defined as one or more individuals who have not obtained the age of eighteen (18) years, being domiciled with a parent or other person having custody, or anyone who is pregnant. It is therefore unlawful to refuse housing to anyone with children under the age of 18 or anyone who is pregnant, except when such housing meets the definition of housing for older persons.

farm credit system

A national banking system for financing the activities of farmers and ranchers.

Farm Service Agency (FSA)

Formerly the Federal Agricultural Mortgage Corporation (FAMC or Farmer MAC) is a federal agency of the Department of Agriculture. FSA offers programs to help families purchase or operate family farms. It also provides loans to help families purchase and improve single-family homes in rural areas. The FSA provides assistance to rural and agricultural businesses and industry through the Rural Business and Cooperative Development Service. Loan programs fall into two categories guaranteed loans, made and serviced by private lenders and guaranteed for a specific percentage by FSA, and loans made directly by the FSA.


Prospecting an area for buyers or sellers. (See geographic farming, nongeographic farming, prospecting)

fashion/specialty center

A center composed mainly of upscale apparel shops, boutiques and craft shops carrying selected fashion or unique merchandise of high quality and price. These centers need not be anchored, although sometimes restaurants or entertainment can provide the draw of anchors. The physical design of the center is very sophisticated, emphasizing a rich decor and high-quality landscaping. These centers usually are found in trade areas having high-income levels.

feasibility study

A determination of the likelihood that a proposed development will fulfill the objectives of a particular investor. Example: A "feasibility study" of a proposed "subdivision" should: (a) estimate the demand for housing units in the area, (b) estimate the absorption rate for the project, (c) discuss legal and other considerations, (d) forecast "cash flows", (e) approximate investment returns likely to be produced.

Federal Deposit Insurance Corporation (FDIC)

An independent federal agency that insures the deposits in commercial banks.

federal fair housing law

In 1968, Congress enacted Title VIII of the Civil Rights Act, called the Federal Fair Housing Act, which declared a national policy of providing fair housing throughout the United States (reference Sections 3601-3631 of Title 42, United States Code). This law makes discrimination based on race, color, sex, familial status, handicap, religion or national origin illegal in connection with the sale or rental of most dwellings and any vacant land offered for residential construction or use. The law does not prohibit discrimination in other types of real estate transactions, such as those involving commercial or industrial properties. The law is administered by the Office of Equal Opportunity (OEO) under the direction of the Secretary of the Department of Housing and Urban Development (HUD). (See Civil Rights Act of 1968, Fair Housing Act, HUD) As amended in 1972, the law instituted the use of equal opportunity posters (11" x 14") for display at brokerage houses, model home sites, mortgage lenders' offices and other related locations. Failure to display the poster constitutes prima facie evidence of discrimination if a broker who does not display the sign is investigated by HUD on charges of discrimination. The poster must show the equal housing opportunity slogan Equal Housing Opportunity. It must also carry the equal housing opportunity statement.

federal funds rate

The interest rate the Federal Reserve charges its member banks on uncollateralized loans.

Federal Home Loan Bank System (FHLB)

Regulates the nation's savings and loan associations, much like the Federal Reserve governs the commercial banking industry.

Federal Home Loan Mortgage Corporation (FHLMC)

Commonly known as "Freddie Mac," a federally chartered corporation established in 1970 for the purpose of purchasing mortgages in the secondary market. Freddie Mac was created as a part of the savings association system and, while it is not so limited, its loan purchase policies are designed to accommodate savings association needs. It functions with an independent board of directors but is subject to oversight by HUD.

Federal Housing Administration (FHA)

A federal agency established in 1934 under the National Housing Act to encourage improvement in housing standards and conditions, to provide an adequate home-financing system through the insurance of housing mortgages and credit and to exert a stabilizing influence on the mortgage market. FHA was the government's response to a lack of quality housing, excessive foreclosures and a building industry that collapsed during the depression.

Federal National Mortgage Association (FNMA)

Popularly known as "Fannie Mae," an active participant in the secondary mortgage market. Fannie Mae was established as a federal agency in 1938 for the purpose of purchasing FHA loans from loan originators to provide some liquidity for government-insured loans in a depression-wracked economy when few lending institutions would undertake this type of loan.

Federal Reserve System ("the Fed")

The nation's central bank created by the Federal Reserve Act of 1913. Its purpose is to help stabilize the economy through the judicious handling of the money supply and credit available in this country. The system functions through a seven-member Board of Governors (appointed by the President) and 12 Federal Reserve District Banks, each with its own president. The system sets policies and works with the privately owned commercial banks.

fee appraiser

A non-salaried appraiser who is paid a fee for the appraisal assignments he or she performs.

fee simple

The highest possible degree of ownership in real property, continuing without time limitation. Commonly used as a synonym for ownership.

fee simple (or fee absolute or fee simple absolute)

Absolute ownership of "real property"; owner is entitled to the entire property with unconditional power of disposition during the owner's life, and upon his death, the property descends to the owner's designated heirs. Example: the only power that can require Abel to sell his land is "eminent domain"; he owns the property in "fee simple", so there is no other interest.

fee simple defeasible

An estate in land in which the holder has a fee simple title subject to being divested upon the happening of a specified condition; also called a qualified fee or a defeasible fee. There are two categories of fee defeasible estates—fee simple determinable and fee simple subject to a condition subsequent. The term fee simple determinable implies that the duration of the estate can be determined from the deed itself. This is not true of a fee simple subject to a condition subsequent, in which case the estate's duration depends on the grantor's independent choice of whether to terminate the estate. (See fee simple determinable, fee simple subject to a condition subsequent)

fee simple determinable

A fee simple determinable is an estate in real property that exists "so long as," "while" or "during the period" that a certain prescribed use continues. Such use is described in the grant of conveyance. For example, a conveyance to the University of Know-it-all "so long as" the real estate is used for educational purposes would give the university title provided the granted land is used as prescribed. If, at some future time, the university were to stop using the property for educational purposes, title would revert to the original grantor if living or to his or her heirs if the grantor is deceased. A fee simple determinable automatically ends when the purpose for which it has been prescribed terminates. Upon the grant of a fee simple determinable, there remains in the grantor a possibility of reverter.

fee simple subject to a condition subsequent

A fee simple subject to a condition subsequent is an estate conveyed "provided that," "on the condition that" or "if" it is used for a specific purpose. If it is no longer used for that purpose, it reverts to the original grantor or his heirs. This type of estate is much the same as a fee determinable, except that in a fee determinable conveyance the words are of duration while a fee condition subsequent refers strictly to a specific condition. In addition, unlike a fee determinable, when fee condition subsequent property is no longer used for its prescribed purpose, the original grantor (or heirs) must physically retake possession of the property within a reasonable period of time after the breach (i.e., the grantor must exercise his or her right of reentry). Any transaction involving a fee simple defeasible estate should be referred to an attorney for a professional opinion.

fee title

The maximum possible estate one can possess in real property. A fee title estate is the least limited interest and the most complete and absolute ownership in land; it is of indefinite duration, freely transferable and inheritable. A "fee title" is sometimes referred to as "the fee." (See fee simple)

feudal system

A system of ownership usually associated with pre-colonial England, in which the king or other sovereign is the source of all rights. The right to possess real property was granted by the sovereign to an individual as a life estate only. Upon the death of the individual title passed back to the sovereign, not to the decedent's heirs.


Acronym for "Fair, Isaac & Company." FICO is the most commonly used scoring system used by lenders to derive credit scores for borrowers. (See credit score)

fictitious business (company) name

A business name other than that of the person under whom the business is registered. Most state license laws require such brokerage offices operating under an assumed name be jointly registered under the supervising broker's name and the fictitious business name.

fictitious business name statement (California)

A fictitious business name statement must be filed with the county clerk in the county of the broker's principal business address and a copy sent to the Real Estate Commissioner. The commissioner may refuse to allow the use of a name that may be inappropriate or misleading. (See fictitious business (company) name)

fictitious deed of trust

Comprehensive master deeds of trust are established by lenders to cover all areas of trust deed finance. (See deed of trust)


The relationship where a person (e.g., an agent) is authorized to act for the benefit of another (e.g., a property owner or user). The term is also used to describe the person who is acting on the behalf of another and to describe the fiduciary's obligation to act in the best interest of their client.

filled land

An area of a property where the grade has been raised by depositing dirt, gravel or rock. Under most circumstances a seller (broker) has a duty to disclose to a buyer the fact that a property is on filled land.

final payment

The last installment that is made on a fully amortized loan. It is usually smaller than the preceding periodic payments.

Financial Institutions Reform, Recovery and Enforcement Act (FIRREA)

Legislation that abolished the FSLIC and established a new deposit insurance fund, SAIF, for savings institutions, appropriated funds and created the Resolution Trust Corporation to dispose of failed thrifts, imposed wide-ranging changes in savings institution investment activities and operations, and created the Office of Thrift Supervision as part of a restructuring of the federal thrift regulatory and supervisory systems. (See Office of Thrift Supervision, Resolution Trust Corporation)

financial intermediaries

A financial institution that accepts deposits and makes loans.

financial management rate of return (FMRR)

A multi-year analysis of rate of return. Used by investors in medium and large properties (occasionally on small properties). Multi-year cash flows and net sale proceeds are analyzed using discounted cash flow techniques to solve for the Financial Management Rate of Return (FMRR). FMRRs are the best rate of return indicator, because they require an analysis of the investor's entire holding period, not just a single year. The discounting process takes into consideration the time value of money and thereby produces a more realistic rate of return.

financial statement

A brief summary of a person's assets, liabilities and earnings records.


Borrowing money to buy property. See "creative financing." Examples: (a) obtaining a "mortgage" loan on a purchase, (b) "assumptions of a mortgage" from a seller, (c) arranging for the seller to take a loan as part of the purchase price, (d) arranging an "installment sale."

financing statement

Security interests in chattels (personal property) are created by an instrument known as a security agreement. To give notice of a security interest, a financing statement must be recorded. (See personal property, Uniform Commercial Code)

finder's fee

A fee paid to someone for "finding" either the buyer to purchase or the seller to list a property.

finish-out allowance

A provision in a lease for an office or retail space that provides a certain sum or amount per square foot to the tenant to customize the space provided. Example: A retail tenant leases space for 5 years at a $10 per square foot annual rental rate. The "lessor" provides four concrete walls and a concrete floor, and will pay the tenant a "finish-out allowance" of up to $4 per square foot for costs to customize the space.

fire and casualty insurance

Coverage against property damage from fire, theft, and water damage. Additional casualty coverage, depending on location, may cover flood, earthquake, and wind damage.

fire corridors

Special corridors whose size, length, and height of partitioning are designed to create escape routes to stairwells or exits during a fire.


Special building materials, such as partitioning and doors, which have greater fire resistance than other building standard materials.


The Foreign Investment in Real Property Tax Act.

first-generation space

Generally refers to new space that is currently available for lease and has never before been occupied by a tenant.

first loan

See primary financing.

first right of refusal

See right of first refusal.

fiscal policy

The government's policy in regard to taxation and spending programs. The balance between these two areas determines the amount of money the government will withdraw from or feed into the economy, which can counter economic peaks and slumps.

fiscal year

A continuous 12-month time interval used for financial reporting; the period starts on any date after January 1 and ends one year later. Example: For agencies of the federal (U.S.) government, "fiscal year" 1994 refers to the time between October 1, 1993 and September 30, 1994.

fixed expenses

Property operating expenses that do not vary with a building’s occupancy level. (See variable expenses)

fixed increase to rent

A rental rate which increases by fixed amounts during the period of the lease term.

fixed payment mortgage

A loan secured by real property which features a periodic payment of interest and principal which is constant over the term of the loan. All "fixed payment mortgages" are "fixed rate mortgages", but some "fixed rate mortgages" may have variable payments, such as a "graduated payment mortgage." Example: A "fixed payment mortgage" calls for 360 monthly payments of interest and principal of $1,000. Added to that amount is a payment to an escrow account for taxes and insurance which may change from year to year.

fixed-rate loan

A loan with the same rate of interest for the life of the loan.

fixed-rate mortgage

A loan secured by real property featuring an interest rate that is constant for the term of the loan. Contrast with "adjustable rate mortgage." Example: A fixed-rate mortgage is originated with an interest rate of 10% for a term of 30 years. The rate will remain at 10% until the loan is retired or the "due-on-sale clause" is exercised at resale of the property.


Personal property that is sufficiently permanently attached to real property so as to become part of the real property. Since removal of fixtures involves damage to the real property, they must typically be left by the tenant when moving out. Contrast trade fixtures.


Sheet metal or another impervious material used in roof and wall construction as a barrier to water seepage.

flex space

Flex Facility – as it names suggests, an industrial building designed to be used in a variety of ways. It is usually located in an industrial park setting. Specialized flex buildings can include service centers, showrooms, offices, warehouses, and more.

floating rate

An interest rate that is not fixed over the term of a loan, bond, or other fixed-income security, but is allowed to vary according to the change in a specified "index." See "adjustable-rate mortgage." Example: Financial Securities Company created a "floating-rate" mutual fund based on a portfolio of adjustable-rate mortgages. The yield on the fund varies from year to year, depending on the interest rates charged on the ARMs in portfolio.

flood hazard areas

Locations specified on Federal Emergency Management Agency (FEMA) maps indicating areas that are subject to flooding. The seller's agent is required to inform potential buyers if the agent has knowledge that a property is located in such an area.

floor plan

The arrangement of rooms in a building, or a one-plane diagram of that arrangement.


The widened section, usually concrete, at the base or bottom of a foundation wall, pier, or column.


The surface area that is occupied by a structure.

foot traffic

The volume of pedestrian traffic for sidewalk and mall oriented locations. One of the criteria used by retail tenants to qualify potential locations, which will be of importance to most retailers.


The act of refraining from taking legal action despite the fact that payment of a promissory note in a mortgage or deed of trust is in arrears. It is usually granted only when a borrower makes a satisfactory arrangement by which the arrears will be paid at a future date.

force majeure

A force that cannot be controlled or resisted. Something beyond the control of the parties to a contract preventing said parties from complying with a contract provision. Includes acts of God (e.g., floods, hurricanes, tornadoes, etc.) and acts of man (e.g., riots, strikes, arson, etc.).


The process of a property lender taking ownership of a property when a borrower defaults on the terms of the loan.

foreclosure sale

The public sale of a mortgaged property following foreclosure of the loan secured by that property. Depending on the type of foreclosure proceeding, the sale may be administered by the courts (judicial foreclosure) or by an appointed trustee (statutory foreclosure). Proceeds of the sale are used to satisfy the claims of the mortgagee primarily, with any excess going to the mortgagor. Example: Anyone may bid on properties sold at "foreclosure sale." As a practical matter, however, most properties are acquired by the lender, often for the amount owed on the foreclosed loan.

Foreign Investment in Real Property Tax Act (FIRPTA)

Enacted by the United States Congress in 1985, the act requires buyers to withhold estimated taxes equal to 10% of the sale price of a property sold or exchanged by a foreign person. The withholdings must be reported and paid to the Internal Revenue Service within 10 days of closing. The act applies to sales of personal residences with prices of $300,000 or more.

forward commitments

Contractual obligations to perform certain financing activities upon the satisfaction of any stated conditions. Usually used to describe a lender's obligation to fund a mortgage.

four unities

Four "unities" are required to create a joint tenancy:

  1. Unity of possession - all joint tenants holding an undivided right to possession
  2. Unity of interest - all joint tenants holding equal ownership interests
  3. Unity of time - all joint tenants acquiring their interests at the same time
  4. Unity of title - all joint tenants acquiring their interests by the same document

The four unities are present when the following requirements are met. Title is acquired by one deed. The deed is executed and delivered at one time. The deed conveys equal interests to all of the parties. The parties hold undivided possession of the property as joint tenants. Because the unities must be satisfied, many states require the use of an intermediary when a sole owner wishes to create a joint tenancy between himself or herself and others. The owner conveys the property to a nominee, or straw man. Then the nominee conveys it back, naming all the parties as joint tenants in the deed. As a result, all the joint tenants acquire title at the same time by one deed.

fractional basis

Each property in the improvement district is charged a prorated share of the total amount of the special tax assessment. The share is determined either on a fractional basis (four houses may equally share the cost of one streetlight) or on a cost-per-front-foot basis (wider lots incur a greater cost than narrower lots for street paving and curb and sidewalk installation).

fractional section

A parcel of land less than 160 acres, usually found at the edge of a rectangular survey. Undersized or oversized sections are classified as fractional sections. Fractional sections may occur for a number of reasons. In some areas, for instance, the rectangular survey may have been made by separate crews, and gaps less than a section wide remained when the surveys met. Other errors may have resulted from the physical difficulties encountered in the actual survey. For example, part of a section may be submerged in water.


  1. A privilege granted to conduct certain service businesses, such as a franchise real estate brokerage.
  2. The private contractual right to operate a business using a designated trade name and the operating procedures of the parent company (the franchisor).

Franchise Investment Law

Administered by the California corporations' commissioner, the law requires disclosure from the franchisor to the franchisee and is intended to protect prospective purchasers of franchises. (See franchise)

franchise tax

An income tax California corporations pay.


Any form of deceit, trickery, breach of confidence or misrepresentation by which one party attempts to gain some unfair or dishonest advantage over another. Unlike negligence, fraud is a deceitful practice or material misstatement of a material fact, known to be false, and done with intent to deceive, or with reckless indifference as to its truth, and relied on by the injured party to his or her damage.

free and clear

Free of any debt financing.

freehold estate

An estate in land in which ownership is for an indeterminate length of time, in contrast to a leasehold estate.


The breaking down of a substance into tiny filaments and particles. Asbestos is harmful only if it is disturbed or exposed, as often occurs during renovation or remodeling. Asbestos is highly friable. This means that as it ages, asbestos fibers break down easily into tiny filaments and particles. When these particles become airborne, they pose a risk to humans.


Void of significance or reason; Of little or no worth, or importance; not worthy of serious notice; trivial; unimportant.

front feet (frontage)

The linear feet of a space fronting on a street, sidewalk, or mall, as applicable. Also known as "frontage." Frontage is a space characteristic that is important to retailers. More frontage relative to depth in a store usually means better visibility, more sales potential, and a higher rental value.

front footage

The measurement of a parcel of land by the number of feet of street or road frontage.

front-end qualification

When qualifying a prospective buyer for financing, the ratio of the borrower's income to monthly debt obligation is a primary consideration. Based on "front-end qualification," the ratio of a prospect's income to their housing expense should not exceed 28%. (See back-end qualification, prequalify)

front-end zero

Under a conventional loan, a borrower may elect to finance the entire mortgage insurance premium, thus incurring no cash obligation for this charge at closing. (See mortgage insurance premium)


The linear distance of a piece of land along a lake, river, street, or highway.

fructus industriales

Corn, wheat and other crops that are produced annually by labor and industry, and not spontaneously, are referred to in Latin as "fructus industriales." (See emblements)

full service gross

Rental rate that includes all property operating expenses and real estate taxes for the first year. The tenant is generally still responsible for any increases in operating expenses over the base year amount. A lease bearing this type of rent is often referred to as a "full service gross lease." (See pass-throughs, gross lease)

full service lease (office)

This lease is typically used for multi-tenant office buildings, in a full service lease the landlord will provide for all of the services typically associated with the lease, such as janitorial, utilities, maintenance, security, etc.: everything is included in the rent. With a Full Service Lease in a typical multi-story office building, the tenant will pay additional rent based on a load factor. The load factor will be that percentage of the common area square footage used by all tenants prorated back to each tenant based on the percent of the tenant's usable space to the total usable space.

fully amortized

A mortgage loan that is fully repaid over the term of the loan through equal monthly payments to principal and interest.

fully amortized loan

One has payments of "interest" and "principal" that are sufficient to "liquidate" the loan over its term. Self-liquidating.

functional obsolescence

A loss in a property’s value due to design features that have become outdated over time or were defective from the outset.

funding fee

A percentage of the loan amount charged on VA loans to provide for administrative costs; the fee has increased over time and is higher for subsequent use by veterans, reservists and National Guard.

future interest

A person's present right to an interest in real property that will not result in possession or enjoyment until some time in the future, such as a reversion or right of reentry.

future worth

The compounding increase in the value of money over time.