Dictionary of Terms - O

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Observed Condition Depreciation: A method of computing depreciation in which the appraiser estimates the loss in value for all items of depreciation. (See also incurable depreciation and curable depreciation.)
Observed Depreciation: The loss in utility and value of property as compared with a new property or one capable of rendering maximum benefits, the estimate of which is based upon direct inspection, detailed estimates of accrued deterioration, studies of functional deficiencies and other observable conditions affecting the property and its desirability.
Obsolescence: The loss of value due to factors that are outmoded or less useful. Obsolescence may be functional or economic.
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 of total rental units occupied and producing income.
Occupancy: Possession and use of property as owner or tenant.
Offer And Acceptance: Two essential components of a valid contract; a "meeting of the minds.
Offeror/offeree: The person who makes the offer is the offeror. The person to whom the offer is made is the offeree.
Office Of Thrift Supervision (OTS): A government agency which governs the practices of fiduciary lenders. OTS was created by the Financial Institutions Reform Recovery and Enforcement Act (FIRREA).
Off-Site Improvements: Physical improvements that affect the use and the value of a parcel of land but that are not directly located upon the land; examples would include streets, curbs and open space.
One-year Adjustable Rate Mortgage: A mortgage whose interest rate changes yearly. The rate is usually based on movements of a published index plus a specified margin.
Open Listing: A listing contract under which the broker's commission is contingent on the broker's producing a ready, willing and able buyer before the property is sold by the seller or another broker.
Open Space: Land that has not been improved with buildings; such land is often left by a developer in a subdivision for recreational use and enjoyment by all the property owners.
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.
Operating Expense Ratio: The ratio of total operating expenses to effective gross income.
Operating Expenses: The cost; of all goods and services used or consumed in the process of obtaining and maintaining income. (See also fixed expenses, maintenance expenses and reserves for replacement.)
Operating Statement Ratio: Relationship of a property's expenses to income, found by dividing total operating expenses by effective gross income.
Operating Statement: The written record of a business's gross income, expenses and resultant net income.
Opportunity Cost: The value differential between alternative investments with differing rates of return.
Option Arm Loan: A home loan where the borrower has multiple payment options each month.
Option Listing: Listing with a provision that gives the listing broker the right to purchase the listed property.
Option: A right given for a valuable consideration to purchase or lease property at a future date, for a specified price and terms. The right may or may not be exercised at the option holder's (optionee's) discretion.
Orientation: Positioning a structure on its lot with regard to exposure to the sun, prevailing winds, privacy and protection from noise.
Original Principal Balance: The amount of principal owed on a loan before a borrower makes any payments.
Origination Fee: A fee charged by most mortgage lenders to cover costs of arranging the loan.
Ostensible Agency: A form of implied agency relationship created by the actions of the parties involved rather than by written agreement or document.
Overage Rent: Rent paid over a base amount in a percentage lease.
Overall Capitalization Rate: A rate of investment return derived by comparing the net income and sales prices of comparable properties.
Overall Rate: The direct ratio between a property's annual net income and its sales price.
Overimprovement: An improvement to property that is more than warranted by the property's highest and best use and thus not likely to contribute its cost to the total market value of the property.
Owner Financing: A transaction in which the seller of a property agrees to finance all or part of the purchase.
Ownership In Severalty: Individual ownership of real estate, not to be confused with the use of the word several to mean "more than one"; also called tenancy in severalty, sole tenancy or separate ownership.

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