Glossary - V

Vacancy and credit losses
In matters pertaining to real estate investing, the phrase vacancy and credit losses refers to the financial losses suffered by a property owner owing the failure of the payment to pay rental or simply because the property is lying vacant. In other words, the term denoted the sum of money or the proportion of net operating income that is believed not to be realized owing to a property being unoccupied or default by the tenant. Vacancy and credit losses, actually considered to be bad debts, is used by appraisers while reconstructing the property owner's operating statements with the object of evaluating real estate or undertaking an investment analysis. It is important to note that vacancy and credit losses will differ depending on the location of the real estate asset, market conditions and/ or the category of the property.
Commercial real estate practitioners usually make use of a property analysis sheet to create reformed operating systems. These worksheets offer a uniform approach to the study of the operations cash flows resulting in an approximate of value - both market value and investment value. In doing so, the appraisers deduct the anticipated amount for vacancy and credit losses from the prospective income from rental while ascertaining an effectual earnings from rental and eventually, when the other earnings is added, this leads to the gross functional proceeds. Having calculated the gross operational revenue, the appraiser finalizes a comprehensive examination of the expenses that, consecutively, results in an approximation of net operating income (NOI). In effect, the net operating income is utilized in the income approach to value to reach at an approximation of value through direct capitalization. In addition, NOI also forms an element in the use of discounted cash flows and yield capitalization.
The term valid refers to anything having a legal compulsory force and authorized by the law. In the context of real estate this denotes that if the title or ownership of a property is valid then it is also effective or binding by the law.
Value / Value - principles / Value - market
The term value can be precisely defined as the worth, utility or desirability of a goods or service. In other words, the expression denotes the worth of all the advantages and rights that arises from the ownership of any thing. It also refers to the amount of one thing that one is able to acquire in exchange for another thing. In matters pertaining to real estate, money is considered to be the common factor which is used to evaluate the worth of a real property. The usefulness of a product, like a real estate asset, is articulated in the sum of money that would be required to purchase it. Typical users and investors consider value as the current worth of future advantages that will occur owing to ownership and this depends on the necessity as well as availability of a product or service. In other words, value is based on the theory of supply and demand.
Variable annuity
In general, the expression variable annuity refers to an annuity or agreement in which the sum of periodic payment differs as per the earnings produced by assets in an investment portfolio. In other words, a variable annuity denotes an annuity with a somewhat different income flow prototype where the amounts received are irregular, but they are collected regularly. In matters pertaining to real estate, cash flows produced by an investment land or home may be regarded as a type of variable annuity in which the rental fees are usually taken delivery of on a expected base, normally at the start of the month, but may perhaps differ owing to such aspects as escalation articles and extra rents paid by the occupant. Real estate practitioners usually make use of the before tax and after tax cash flows as the base for approximating the value of investing properties and studying their particular advantages.
Variable expenses
From the view point of real estate, variable expenses, also called direct costs, refer to functional expenditures that rise and fall with the sales output, such as advertising and long distance, in place of fixed expenditures that normally continue to be constant as production goes up or falls (for example, rental fees). The notion of preset or fixed and variable expenses is usually made use of in the financial planning process for the mortgage brokerages. As a common rule, majority of the expenses are fixed in the short run or changeable in the long run. Variable expenses are also called on cost, prime cost, operating cost, variable cost or variable expense and they are all clustered under the term variable costs or expenses.
Variable-rate mortgage
A variable-rate mortgage, also called a floating rate mortgage, refers to a mortgage loan in which the rate of interest differs to reveal the market situations. The interest rate will usually differ with the adjustments to the established rates of the central bank and reveal the changing expenses on the credit markets or the guaranteed investment certificate rate for an authorized lender. In such instances, the loan could be proffered at the lender's usual variable rate or base rate. The can be an express and legally delineated relation with the basic index, but in cases where the lender presents no definite connection with the primary market of the index they are able to decide to raise or reduce at their prudence.
Plainly speaking, the term vendor denotes a salesperson without an established place of business selling or vending various items directly to the customers. In the context of real estate, a vendor refers to an individual who sells realty or real property. By tradition, preprinted real estate transactions forms included the terms vendor and purchaser, but now these terms have been replaced by the words seller and buyer respectively.
Real estate practitioners ought to make certain that while drawing up an agreement or contract for a real estate transaction, they include the full names of both the seller and the buyer in the draft. In the instance of the sellers, it may be required to briefly examine the registered property title or ownership to ascertain that all sellers are incorporated in the agreement or contract. On the other hand, while dealing with companies, the precise corporate name of the firm is needed. In the event of the original owner of the property having expired, it is essential to indicate the names of the former's personal representatives as members who would be signing the agreement on behalf of the estate. Majority of the residential properties are found to be jointly owned by both spouses. In the event the home is considered to be matrimonial or marital as per the provincial legislation, the spouse who is not an owner of the home too needs to give his or her consent to the contract, while only the owner will be considered/ shown as the main seller of the property. In case there is any uncertainty over any issue, it is the responsibility of the salesperson or vendor to decide on what signatures are needed.
Vendor take back mortgage
A vendor take back mortgage refers to a form of mortgage loan where the seller offers to lend money to the buyer to help expedite the process of purchasing a property. In fact, the take-back mortgage usually signifies a secondary lien on the property, as, apart from the seller, majority of the buyers will have a primary source of funding. In most instances, the take-back mortgage is tendered at a rate that is below the prevailing value in the market. This aspect, in fact, makes a take-back mortgage more attractive for the buyer, while it also benefits the seller through a fast sale of the property owing to the primary source of funding. In effect, take back mortgages enable the buyers to acquire a property valued above their usual financing ceilings. This type of mortgage is attractive as well as advantageous for a buyer, but may often turn out to be a complicated affair. Thus, any individual considering securing a vendor take back mortgage should seek the help of a competent lawyer to be sure of all the aspects of this form of mortgage loan.
Verification of employment
In the real estate context, the phrase verification of employment refers to a document signed by the employer of the borrower to authenticate the latter's position and salary. Lenders need that the borrower finalizes the verification of employment mentioning all positions held for the previous two years of employment history. This verification from the borrower's place of employment that authenticates a loan application is true regarding the place where the borrower works and the salary earned by him or her.
It may be noted that several mortgage loans require both written as well as verbal verification of the borrower's employment. Once a lender receives the primary loan application, he or she then sends a preprinted form to all present and previous employers during the last two year as declared on the application. According to practice, this form needs to be filled by authorized representative of the employer and should include the dates of employment, position or positions held by the borrower in those firms and also a detailed report on the compensation received by him or her. When the lender receives all the information from the borrower's employer, he or she will compare it with two other documents - the loan application and the income document.
After the lender agrees to a mortgage loan, the borrower requires signing his or her mortgage documents. After that, a Verbal Verification of Employment is conducted with all current employers before the loan is actually given. This step is essential to make sure that the borrower has not stopped working since the time the application was submitted. If the borrower has stopped working, this can have a negative influence on the conditions on which the loan was approved earlier.
The term void denotes having no effect or not legally in force. In matters pertaining to real estate, a contract that is considered to be void is actually a cipher or zilch at law having no legal effect whatsoever. To the extent that the law matters, the contract does not exist at all. In such a situation, neither party is able to implement the contract, nor does any party have any liabilities under it.
It may be noted that the matter of void and voidable agreements are actually associated with much bigger questions relating to evading an agreement. Explicitly speaking, there are likely to be instances where the aspects of a valid or legitimate agreement exists (i.e., not void or annulled), but where the pledge by one or both parties involved in the agreement had been granted depending on or influenced by some sort of misinterpretation, fake persuasion, coercion or the like, and this provides the wronged or offended party the privilege to seek redress. Usually, in such instances, the offended party is entitled to seek two types of redresses - either completely avoid or nullify the contract or get recompensed for the damages endured by him or her owing to the other party's actions or conduct. Such cases entail voidable contracts rather than void contracts or agreements that do not exist. Hence, in order to comprehend the matter better, it is important for one to distinguish between voidable contracts and void contracts.
The term voidable refers to an aspect of a contract that can be canceled under some specific situations, for example, misrepresentation, non-disclosure or errors by one or more parties involved in the agreement or contract. In other words, the expression denotes a contract that is legitimate, enforceable and obligatory till it is rendered null and void. In such instances, a voidable contract is an agreement in which the wronged party is free to make a preference. The offended party may opt to avoid the contract and consider it as being closed or terminated or may even regard it as existing and implement it against the offending party. Generally speaking, in a voidable contract, one party will have the privilege to choose whether to cancel the deal or establish it. In the United States and Canada, the act of annulling the contract by the party exercising its right to cancel the voidable contract is referred to as voiding the contract.
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