naked title

Bare title to the property, lacking the usual rights and privileges of ownership. A trustee in a deed of trust securing instrument may hold the title to a secured property, but only such title as is needed to carry out the terms of the lien document. (See deed of trust)

National Association of Independent Fee Appraisers (NAIFA)

A professional association of appraisers with more than 2,000 members nationally. NAIFA offers the specialty designations IFA (member), IFAS (senior member) and IFAC (appraiser-counselor).

National Association of REALTORS® (NAR)

Formerly known as the National Association of Real Estate Boards (NAREB), NAR is the largest and most prestigious real estate organization in the world. Its members include REALTORS® and REALTOR-ASSOCIATES® representing all branches of the real estate industry. The national organization functions through local boards and state associations. Active brokers who have been admitted to membership in state and local NAR boards are allowed to use the trademark REALTOR®. Salespeople are admitted on a REALTOR-ASSOCIATE® active status. NAR members subscribe to a strict Code of Ethics.

National Bank Act of 1863

In 1863, President Abraham Lincoln, at the urging of Salmon Chase, the Secretary of the Treasury, signed the National Bank Act. The Act established a national banking system and a uniform national currency to be issued by new "national" banks. The banks were required to purchase U.S. government securities as backing for their National Bank notes. In 1865, a 10-percent tax levied against State Bank notes essentially taxed those notes out of existence. From 1863 to 1877, National Bank notes were printed privately by the issuing banks. After 1877, the Bureau of Engraving and Printing, a division of the U.S. Department of the Treasury, assumed responsibility for printing all notes.

National Environmental Policy Act

The Act requires an environmental impact statement for federal actions that significantly affect the quality of the environment. (See environmental impact statement)

natural hazards

Those elements of the physical environment that are harmful to a property and which are caused by forces external to it. These are typically location- driven and include earthquakes, floods, fires, and wind. Buying or selling properties located within areas susceptible to natural hazards has both disclosure and insurance implications.

natural vacancy rate

The average "vacancy rate" for a rental property market that would result if supply and demand were in balance. The level to which vacancy rates adjust over the long term. A benchmark by which current vacancy rates in the market are considered high or low. Example: During a period of rapid population growth, apartment vacancy rates fell to less than 1%. The "natural vacancy rate" for the local market was 5%. Because of the unusually low vacancy rate, rent soared and plans were started on new apartment developments in the area.


Generally, a necessary is an article indispensable or proper and useful, for the sustenance of human life (i.e., food, drink, clothing, medical attention).

negative amortization

A financing arrangement in which the monthly payments are less than the true amortized amounts and the loan balance increases over the term of the loan rather than decreases; an interest shortage that is added to unpaid principal.

negative cash flow

Situation in which a property owner must make an outlay of funds to operate a property.

negative declaration

A declaration by a developer that a project will not have a negative impact on the environment.

negative easement

An easement where the owner of a servient estate is prohibited from doing something on his or her estate that is otherwise lawful, because it will affect the dominant estate. (See easement)

negative leverage

The condition that exists when a property’s capitalization rate is lower than the property loan’s debt service constant. (See positive leverage)


The failure to use ordinary or reasonable care under the circumstances.

negligent misrepresentation

A negligent misrepresentation occurs when the broker should have known that a statement about a material fact was false. The fact that the broker may actually be ignorant about the issue is no excuse.

negotiable instrument

A written promise or order to pay a specific sum of money that may be transferred by endorsement or delivery. The transferee then has the original payee's right to payment.


The process of bargaining that precedes an agreement. Successful negotiation generally results in a "contract" between the parties.

neighborhood center

This center is designed to provide convenience shopping for the day-to-day needs of consumers in the immediate neighborhood. According to ICSC's SCORE publication, roughly half of these centers are anchored by a supermarket, while about a third have a drugstore anchor. These anchors are supported by stores offering drugs, sundries, snacks and personal services. A neighborhood center is usually configured as a straight-line strip with no enclosed walkway or mall area, although a canopy may connect the storefronts.

neighborhood information request

A questionnaire used by brokers to obtain information about the neighborhood where a listed property is located. The questionnaire is completed by the homeowner and can provide valuable information that will aid in the sale of the property. The questionnaire should include questions about neighborhood schools, recreational facilities, churches, shopping centers, medical facilities, and other features that may be important to prospective buyers.

net absorption

A measure of the total square feet of office, industrial, or retail space leased in a market area over a period of time, taking into consideration the space vacated in the same area during the same period. Net absorption is often the most meaningful measure of a market's overall growth. (See absorption, gross absorption)

net assets

Total Assets on a market value basis less total liabilities on a market value basis.

net income

The amount by which revenues exceed expenses in any given time period. Contrast to Net Loss.

net income approach

A method of pricing multiple unit rental properties where the desire to buy is driven by the property's ability to generate cash flow and profit. Most often used to price rental properties of 2 or more units. (See market approach, net operating income)

net income multiplier

A factor which, when applied by multiplication to a property's "net operating income," results in a property value estimate. Example: A duplex generates $20,000 of gross rental income and requires $8,000 of "operating expenses," providing $12,000 of net operating income. If similar properties in the area typically sell for 10 times net operating income, this duplex would be worth $120,000 (10 x $12,000) using the "net income multiplier."

net investment in real estate

Gross Investment in Real Estate less the outstanding debt balance.

net investment income

The income or loss of a portfolio or entity resulting after deducting all expenses, including portfolio and asset management fees, but before realized and unrealized gains and losses on investments.

net leasable area

In a building or project, floor space that may be rented to tenants. The area upon which rental payments are based. Generally excludes common areas and space devoted to the heating, cooling, and other equipment of a building. Example: A building with 10 floors, each containing 3,000 square feet of space (totaling 30,000 square feet), may have a "net leasable area" of 25,000 square feet. Elevators, hallways, etc., absorb the remaining 5,000 square feet.

net lease

A lease in which the tenant pays, in addition to rent, certain costs associated with a leased property, such as property taxes, insurance premiums, repairs, utilities, and maintenance. There are also "net-net" (double net) and "net-net-net" (triple net) leases, depending upon the degree to which the tenant is responsible for operating costs. In a triple net lease, the tenant is essentially responsible for paying all property operating expenses.

net listing

An employment contract in which the broker receives as commission all excess monies over and above the minimum sales price agreed on by broker and seller. Because of the danger of unethical practices in such a listing, its use is discouraged in most states. (See listing agreement)

net net net rent

A lease in which the tenant is responsible for all expenses and real estate taxes associated with its proportionate share of occupancy of the building.

net new construction (supply)

The amount (square feet) of new construction minus the amount (square feet) of buildings that have been demolished or judged obsolete during a specific time period. This includes completed build-to-suits and speculative buildings.

net new supply

Net new construction including build-to-suit and speculative construction less any demolished properties.

net operating income (in appraisal)

Gross potential revenue less vacancy allowance, bad debt allowance, and total operating expenses. This amount is calculated excluding income tax, mortgage payments, and depreciation expense or capital cost allowance.

net operating income (NOI)

Net operating income equals the annual effective gross income less operating expenses. Part of the operating statement used in the income capitalization approach to value, often called “NOI.”

net present value (NPV)

In commercial leasing, an analytical method that takes into account the time value of money. A net present value (NPV) lease analysis uses the principle of compound interest and makes it possible to directly compare leases with very different rents, costs, concessions, and other financial terms by applying a discount rate to the projected cash flows of each alternative. In investment property sales, NPV refers to the estimated value of a property by using discounted cash flow analysis.

net proceeds

The cash received after paying all liens and expenses.

net purchase price

Gross Purchase Price less associated debt financing.

net real estate investment value

The market value of all real estate less property-level debt.

net rentable area

See rentable area.

net rentable area - BOMA

Net rentable area shall be computed by measuring inside finish of permanent outer building walls or from glass line where at least 50% of the outer building wall is glass. Net rentable area shall include all area within outside walls less stairs, elevator shafts, flues, pipe shafts, vertical ducts, balconies, air conditioning rooms, janitor closets, electrical closets, washrooms, public corridors—and such other rooms not actually available to the tenant for his furnishings and personnel—and their enclosing walls. No deductions shall be made for columns and projections necessary to the building.

net sales proceeds

Proceeds from the sale of an asset or part of an asset less brokerage commissions, closing costs, and marketing expenses. [NAREIM]

net worth

Assets less liabilities (See asset, liability)

net yield

The return on an investment after subtracting all expenses. See also "current yield," "yield to maturity." Example: "Equity" paid for an investment is $10,000. "Net income" is $1,000. Therefore, the investment generates a $1,000 "net yield."


Generating prospects through a real estate professional's communications with friends and professional associates. (See prospecting)

new construction

New construction includes build-to-suit and speculative buildings completed and available for occupancy within a given time period.


See under triple net rent.

no capacity to contract

The inability of a person to enter into a valid contract under any circumstances. Such inability can arise when a person has been adjudicated insane or is an officer of a corporation who is not authorized to execute a contract in behalf of a corporation.

no disturbance clause

An agreement where the mortgagee agrees to honor a tenant's lease in the event that the mortgage is foreclosed.

no loan, no commission

A listing agreement requiring that escrow be closed and title transferred before an agent is entitled to a commission. (See listing agreement)

no-choice rule

If a real estate transaction qualifies as an exchange, it must be treated as an exchange. An exchanger who qualifies for the 1031 tax-deferred exchange has "no choice," they cannot recognize the gain or loss. (See exchange)

no-loss rule

If a real estate transaction qualifies as an exchange, "no loss" can be recognized. (See exchange)

nominal damages

Monetary damages of a token amount awarded for a wrongful act where no loss occurred. (See compensatory damages, exemplary damages)

nominal interest rate

The stated interest rate in a note or contract, which may differ from the true or effective interest rate, especially if the lender discounts the loan and advances less than the full amount. (See effective interest rate)


An intermediary between a buyer and seller, or landlord and tenant, who assists both parties with a transaction without representing either. Also known as a facilitator, transaction broker, transaction coordinator and contract broker.

non-assumable loan

A loan that does not permit a subsequent buyer to take over the position of the original borrower. The loan agreement clause that may specify this prohibition is known as a “due on sale clause” or an “alienation clause.”

non-compete clause

A clause that can be inserted into a lease specifying that the business of the tenant is exclusive in the property and that no other tenant operating the same or similar type of business can occupy space in the building.

non-conforming loan

A mortgage loan that does not meet Fannie Mae and Freddie Mac underwriting guidelines. Non-conforming loans are available as both fixed and adjustable rate mortgages. (See Fannie Mae, Freddie Mac)

nonconforming use

A use of property that is permitted to continue after a zoning ordinance prohibiting it has been established for the area.


An institutional investment property that doesn’t fit within an investor’s strategy.

noncumulative zoning

Zoning that allows only the stated use and not more restrictive uses. (See zoning)


A provision in a lease whereby the landlord or mortgagee of the building agree not to disturb the tenant's right of occupancy in the event of a sale, foreclosure, or other event of ownership.

nongeographic farming

Farming/prospecting a particular segment of the market such as an ethnic group or nationality, as opposed to a geographic area. (See farming, geographic farming)


A lack of uniformity; dissimilarity. Because no two parcels of land are exactly alike, real estate is said to be nonhomogeneous. (See homogeneous).

noninstitutional lenders

Credit unions, pension funds, private individuals and real estate investment trusts. (See credit unions, institutional lenders, pension funds, real estate investment trusts).

nonjudicial foreclosure

The process of selling real property under a power of sale in a mortgage or deed of trust that is in default. One disadvantage is that the lender cannot obtain a deficiency judgment. Also, some title insurance companies are reluctant to issue a policy unless a court has judicially foreclosed the mortgagor's interest. (See judicial foreclosure, strict foreclosure)

nonparticipating mortgage note

A loan secured by real property, payable at one or more stated interest rates.

non-recourse financing

A loan made where the property is the sole security for the loan and the lender cannot make claims against the borrower’s other assets in the event of a default.

normal wear and tear

The deterioration or loss in value caused by the tenant's customary and reasonable use. In many leases, the tenant is not responsible for normal wear and tear.


To attest in one's capacity as a "notary public," to the genuineness of a signature. Example: Before a county clerk will record certain types of documents, they must be "notarized" to assure the signature is not forged.

notary public

An officer who is authorized to take "acknowledgements" to certain types of documents, such as "deeds," "contracts," and "mortgages," and before whom "affidavits" may be sworn. Example: Eakins and Finwick agree to transfer a piece of property. At the "closing," a "notary public" serves to witness the signing of all documents.


A document signed by the borrower of a loan and stating the loan amount, the interest rate, the time and method of repayment and the obligation to repay. The note serves as evidence of the debt. When secured by a mortgage, it is called a mortgage note, and the mortgagee is named as the payee. In a trust deed, the note is usually made payable to the bearer or holder. The note may also contain some of the same provisions as in the mortgage or trust deed document, such as prepayment or acceleration.

notice of cessation

A notice that gives subcontractors 30 days and prime contractors 60 days to file liens from the date of cessation of work. (See cessation of work)

notice of completion

A document recorded to give constructive notice that a building job has been completed. (See constructive notice)

notice of default

A notice to a defaulting party announcing that a default has occurred. The defaulting party is usually provided a grace period during which to cure the default. Notices of default are frequently provided for in contracts for deed and mortgages and are sometimes required by operation of law.

notice of delinquency

In junior financing, where the borrower gives the senior lender permission to notify the junior lender in the event of a default. (See default, junior mortgage, senior loan)

notice of nonresponsibility

A legal notice designed to relieve a property owner of responsibility for the cost of improvements ordered by another person (such as a tenant). The owner usually gives notice that he or she will not be responsible for the work done by posting notice in some conspicuous place on the property, and by recording a verified copy in the public records.


The replacement of a lease with a new lease, typically involving the replacement of a tenant with a new tenant.


That which annoys and disturbs one in possession of his or her property, rendering its ordinary use physically uncomfortable.

null and void

That which cannot be legally enforced, as with a "contract" provision that is not in conformance with the law. Example: Ivenson sells a property and places in the "deed" a "covenant" that the property may never be sold to someone of a minority race. Since this provision is in defiance of the U.S. Constitution, it could never be enforced and is thereby "null and void."

nuncupative will

An oral will declared by the testator in his or her final illness, made before witnesses and afterward reduced to writing.