“Overall rate” or “overall capitalization rate.” (See capitalization rate)


The fiduciary relationship obligates the agent to act in good faith at all times, obeying the principal's instructions in accordance with the contract. However, that obedience is not absolute. The agent may not obey instructions that are unlawful or unethical. Because illegal acts do not serve the principal's best interests, obeying such instructions violates the broker's duty of loyalty. On the other hand, an agent who exceeds the authority assigned in the contract will be liable for any losses that the principal suffers as a result.

obligatory advances

Advances a lender is obligated to make to a borrower.


The person in whose favor an obligation is entered into. Example: Jackson promises to manage the property of Kindall, an out-of-town investor. In this arrangement, Kindall is the "obligee;" Jackson is the "obligor."


A promisor; one who incurs a lawful obligation to another (the obligee). The maker of a promissory note is an obligor. In a performance bond, the contractor is the obligor. One who guarantees the performance of the obligation is a surety; also called a guarantor. (See payor)


The loss of value due to factors that are outmoded or less useful. Obsolescence may be functional or economic.

occupancy date

Indicates the date the space will become available. "Immediate" means the space is currently available.

occupancy permit

A permit issued by the appropriate local governing body to establish that the property is suitable for habitation by meeting certain safety and health standards.

occupancy rate

The percentage rate derived by dividing the amount of space physically occupied as of the survey date by the total inventory.

occupied space

This is the amount of space that is physically occupied by workers, supplies, equipment or anything else. Obviously, this includes space that is being used for storage. One assumes that occupied space is being used for the production of goods or services. The total amount of occupied space is calculated by subtracting the amount of vacant space from the amount of existing space at that point in time.


An offer is a promise made by one party, requesting something in exchange for that promise. The offer is made with the intention that the offeror will be bound to the terms if the offer is accepted. The terms of the offer must be definite and specific and must be communicated to the offeree.

offer and acceptance

Two essential components of a valid contract; a "meeting of the minds." (See acceptance, offer)


One who receives an offer. Generally, a buyer offers a purchase contract to an owner, which makes the owner the "offeree." When the seller offers a contract to a buyer, the buyer is the "offeree." Example: Brewster offers Smithson a contract in which Brewster offers to pay $120,000 for a property. Smithson is the "offeree."

offering memorandum

A sales package containing comprehensive property and related information, typically prepared by the listing agent when marketing larger investment properties and customarily distributed to select buyers and agents.


One who extends an offer to another. Example: Brewster offers Smithson $120,000 for a property. Brewster is the "offeror."

offer to lease

An offer from a tenant to a landlord to lease space on specified terms and conditions. Can be verbal, but it is often submitted in writing.

office building types BOMA

Low-rise: Fewer than seven stories high above ground level. Mid-rise: Between seven and twenty-five stories above ground level. High-rise: Higher than twenty-five stories above ground level.

Office of Thrift Supervision (OTS)

Monitors and regulates the savings and loan industry. OTS was created by FIRREA.

office park

Typically a project comprised of multiple office buildings; the office park may also include amenities such as hotels and restaurants.

office showroom

Single story (or mezzanine) with 10 to 16 foot ceilings with frontage treatment on one side and dock-height loading or grade level roll-up doors on the other. Less than 15% office.

offset core

A building in which the core is located midway between each side and center.

offsite improvements

Improvements made outside of a property's boundaries, such sidewalks and streets.

oil and gas lease

A grant of the sole and exclusive right to extract oil and/or gas from beneath the surface of land. Such a lease is generally for a designated term of years and is subject to a payment of royalties in the event of production, the commencement of drilling operations on or before a specified date and the performance within a specified time of a certain amount of development work. Typically, an express or implied easement is granted to enter the property in order to drill.

one-hundred-percent commission plan

Some firms have adopted a 100 percent commission plan. Salespersons in these offices pay a monthly service charge to their brokers to cover the costs of office space, telephones and supervision in return for keeping 100 percent of the commissions from the sales they negotiate. The 100 percent commission salesperson pays all of his or her own expenses.

online listing service

An Internet-based service that contains information on commercial properties available for sale and lease. Listing agents are customarily charged a fee; buyer’s agents may access some property listing information for free, and some may require that a fee be paid.

open house

The common real estate practice of showing listed properties to the public during established hours.

open listing

A non-exclusive listing for property that obligates the principal only to pay a commission to the agent who delivers the buyer or tenant.


This agreement is a nonexclusive agency contract between a broker and a buyer. It permits the buyer to enter into similar agreements with an unlimited number of brokers. The buyer is obligated to compensate only the broker who locates the property the buyer ultimately purchases.

open-end fund

A commingled fund with no infinite life, which allows continuous entry and exit of investors, and typically engages in ongoing investment purchase and sale activities.

open-end loan

A mortgage loan that is expandable by increments up to a maximum dollar amount, the full loan being secured by the same original mortgage.

open-end mortgage

A "mortgage" under which the "mortgagor" (borrower) may secure additional funds from the "mortgagee" (lender), usually stipulating a ceiling amount that can be borrowed. Example: Poole obtains an "open-end mortgage" to purchase a home. Under the mortgage agreement, Poole may borrow additional funds over the "maturity" of the loan as long as the unpaid "principal" does not exceed 80% of the home's "appraised" value.

open-end trust deed

An expandable loan in which the borrower is given a limit up to which he or she may borrow, with each incremental advance to be secured by the same trust deed.

open-market operations

The buying and selling of government securities by the Federal Reserve to control the amount of money in circulation.

operating cash flow

Annual net operating income less the non-operating costs required to keep an investment property occupied and producing income. Used in the discounted cash flow analysis technique of valuation.

operating cost escalation

The adjustment of rent over time to cover increases in operating expenses, pursuant to a clause in the lease agreement.

operating expense ratio

The mathematical relationship derived by dividing "operating expenses" by "potential gross income." Examples: Apartments generally have "operating expense ratios" between 30% and 50%; this figure may be exceeded where the lessor pays utilities, or in low-rent areas. Office buildings often have higher "operating expense ratios" (40% to 60%), because more intensive management and maintenance, such as cleaning services, are provided.

operating expenses

When used in the context of commercial property leases, the actual cost of operating investment property, including utilities, property taxes, insurance, maintenance, and repairs, etc. When used as part of the operating statement in the income capitalization approach to value, operating expenses refers to the costs and expenses required to operate a property at market standards, including variable expenses, fixed expenses, and a reserve for replacements.

operating lease

A "lease" between the "lessee" and the sublessee who actually occupies and uses the property. See "sublease."

operating statement

The projection of income and expenses for an investment property.

opinion of title

A certificate, generally from an attorney, as to the validity of "title" to property being sold. See "title abstract." Example: Based upon the attorney's "opinion of title," the title "insurance" company insured titled to the property.

opportunity buyer

A commercial property buyer who buys for high profit or yield.

opportunity cost

Earnings that may be available on alternative investments.


The voluntary exercisable rights of a tenant or landlord in connection with a lease. The option always benefits the party receiving the option (the "optionee").

option listing

A listing in which the broker also retains an option to purchase the property for the broker's own account. In view of the body of litigation involving breach of fiduciary duties by brokers who conceal offers from buyers until after the broker has exercised the option, full and fair disclosure must be given to the seller. (See listing agreement)

option to purchase

A contract that give one the right (but not the obligation) to buy a property, within a certain time, for a specified amount, and subject to specified conditions. Example: Marco needs two adjacent parcels of land for a project he wishes to build. He can obtain an "option to purchase" one of them; if he is able to buy the other, he can use his option to buy the first one. If he cannot buy the other, he can let the option expire.


Municipal rules governing the use of land. Examples: specify certain land uses in certain areas, regulate "nuisances," specify the manner in which structures are constructed or maintained, specify the manner in which "subdivisions" are designed, regulate rental practices, regulate condominium "conversion" practices.

original basis

The sum of the purchase price of a property plus buying expenses on acquisition. (See basis)

ostensible agency

A form of implied agency relationship created by the actions of the parties involved rather than by written agreement or document. (See implied agency)

other income and expense recoveries

An addition to gross potential annual rent that accounts for non-rent income and tenant payments to a landlord’s expenses in addition to base rent. It is part of the operating statement used in the income capitalization approach to value.

outlet center

Usually located in rural or occasionally in tourist locations, outlet centers consist mostly of manufacturers' outlet stores selling their own brands at a discount. These centers are typically not anchored. A strip configuration is most common, although some are enclosed malls, and others can be arranged in a "village."

overage rent

The rent in excess of base rent, calculated as a percentage of retail sales, paid to a landlord by a retail tenant during a rent period.

overage rent percentage and breakpoint

Rent, computed as a percentage of actual retail sales in excess of an established threshold (breakpoint), paid by tenants in addition to contract rent. Also known as "Percentage Rent." [NAREIM]

overall rate

See capitalization rate.


  1. A fee paid to someone higher in the organization, or above a certain amount. Example: In the agreement the salesman was required to pay an "override" of 10% of his gross "commissions" to the managing "broker."
  2. An "estate" carved out of a working interest in an "oil or gas lease." Example: The "overriding" "royalty" required 2% of the production of the well be paid to the attorney who negotiated the oil lease.

overriding trust deed

See wraparound mortgage.


A property where the owner physically occupies the property.

owner's title insurance

An insurance policy protecting the buyer for the amount of the purchase price in the event of a future title dispute. (See mortgagee's title insurance, title insurance)


The rights to use, possess, enjoy, transfer, and dispose of a thing to the exclusion of all others.


A user of office, industrial, or retail space that also owns the fee simple interest to the property. See also fee simple.