Glossary - G

Gain: In the context of investment, the term gain denotes the sum of an investor's earnings that is regarded as capital gains for the purpose of taxation. This denotes the income from any sale minus the cost of the item, including any changes. In other words, the term gain refers to an enhanced value, for instance, of an asset, and is an antonym of loss.
When talking about real estate, the expression gain refers to the augmentations in the owner's equity owing to a deal that does not form a part of the usual, routine operations and is also not a part of the owner's savings or withdrawals. In fact, gains or profit as well as losses are usually applicable in the case of non-operating, subsidiary, marginal or exceptional deals. For instance, the gain or profit from the sale of a land, quite the opposite of gross profit on the sale of stock.
Gap loan: The term gap loan refers to a temporary financing to fill in a real estate developer's discrepancy between a construction loan and a permanent mortgage. For instance, a developer makes an arrangement of a permanent mortgage that will finance $1 million when the apartments being constructed by him are 80 per cent occupied. However, the mortgage is only $700,000 between the period from the completion of the construction and 80 per cent occupancy of the apartments. In this case, the developer arranges for a $300,000 gap loan for the intervening period.
Although there is no typical state-of-affairs while arranging or granting a gap loan, usually it is related to some specific situations. For instance, an interim lender of a large construction project that makes funds available in advance depending on the estimated costs. On the other hand, a permanent lender or mortgagee usually advances funds only after the completion of a project and with the promise that there will be a flow of earnings from the real property. There are instances when though the project is complete, but the permanent lender provides only a part of the advance funds as the developer fails to secure occupancy of the space as needed in the mortgage pledge. It may be mentioned here that the permanent lender only makes advance payment of 75 per cent funds of the entire commitment as 25 per cent of the floor space or apartments still remain unoccupied. Therefore, the gap loan is utilized to meet the developer's financial requirements till he or she secures full occupancy of the space and secures 100 per cent advances from the permanent lender.
Garnishment: The term garnishment refers to a legal procedure whereby the personal property of a borrower or defendant lying in the hands of a third party (called garnishee), such as a bank, employer, customer, etc., is forfeited in partially of completely to make payments towards a debt or court award. In other words, the term denotes a legal proceeding in which money or property due by a debtor, but in the possession of another is used to pay for the debt owned by the plaintiff or the debtor. It is important to note here that in this case the legal procedure involves both the debtor as well as the garnishee.
GE Mortgage Insurance Canada: The GE Mortgage Insurance Canada is a Canada-based private firm providing indemnity to mortgage default. In fact, GE Mortgage Insurance is the only non-government mortgage default assurance in Canada, while the other similar service provider is the Canada Mortgage and Housing Corporation (CMHC) - a government agency. GE Mortgage offers an assortment of adaptable insurance products with the objective of purchasing, renovating or funding homes.
It is interesting to note that GE Mortgage did not possess any home insurance portfolio since its inception, but obtained it from the Mortgage Insurance Company of Canada (MICC) in 1995. In fact, the MICC was initially established to offer mortgage insurance that lessened the risk of the lenders or mortgagees whenever there is a default or non-reimbursement of the loans. Although most of the loans covered are high ratio mortgages, there are instances when indemnity is also offered on traditional funding. In this case, the insurance charges are usually borne by the borrower. In order to be eligible for the loans, the mortgagor ought to fulfill certain prerequisites laid down by the insuring firm and the lending organizations. Furthermore, it is essential for the financial institution offering the loan to meet the precise lending policies that have been defined by that particular insuring business.
Presently, the GE Mortgage Insurance Canada proffers a completely computerized assessment and distribution method known as the GE Excel that receives applications from the clients by means of an electronic mode, deals with the applications and grants the requests within a span of few minutes. In fact, the GE Excel merges a tallying procedure regarding property data and endorsing rules to make sure that the decisions are reliable and, at the same time, the process is fast.
General account - real estate brokerage: The phrase general account - real estate brokerage denotes an account or financial credit set up by a brokerage firm with the view to meet the routine office expenditures. In fact, the money received from the shares of commission or other payments are also deposited into this general account with the objective of distributing the money to the salespersons of the brokerage as well as its other staff members. Nevertheless, there are a few exceptions in this case too. For instance, amounts payable to the brokerage's salespersons are occasionally put in a different account sustained by the brokerage for allocation. Such an account is called a commission trust account.
General partner: Normally speaking, the term general partner, also called full partners, refers to one of the co-owners in an unincorporated business who is in command of the business and, different from a limited or nominal partner, has restricted accountability for the debts of the firm. On the other hand, any action taken by one general partner is obligatory on the other general partners. In brief, the term general partner denotes the participant in a limited partnership who actually handles the operations of the business and is accountable for all the debts incurred by the firm. In the context of real estate, the general partner is normally a developer who enables other persons, in this case, limited partners, to take part in a project to arrange for the requisite finances.
It is likely that the general partner will arrange for the projections that indicate the feasibility of the project as well as the resultant gains that may by acquired by the limited partners. It may be mentioned here that the general partner may perhaps also integrate a shell corporation whose assets are restricted to the amounts put in by the limited partners. In such an understanding, the limited partners will have no option or power to compel the general partner to discharge the liabilities even in the event of the project proving to be a failure. Hence, the limited partners may possibly look further than the stipulations of the joint venture contract to make certain that the general partner offers adequate supplementary assurances to secure the positions of the limited partners.
Gift: The term gift refers to the transfer of an item or an asset from one entity to another without any transfer of cash between the two. It also means a transfer of something, without any requirement for compensation that is involved in trade. The gift is basically a voluntary act and does not require anything in return. A gif may include the transfer of money, real estate, any asset or something valuable. In the context of real estate, gifts may possibly large transactions and the donors ought to make sure with a tax lawyer prior to making a gift pledge to guarantee that all tax end results are comprehended and taken into consideration.
Going-in capitalization rate: In the context of real estate, the phrase going-in capitalization rate refers to a rate utilized to translate the earnings from a real property to its capital or investment worth. Contrary to the terminal capitalization rate that is used to approximated income at an expected time of its disposal or sale, the going-in capitalization rate pertains to the existing period of time. However, in general, the terminal capitalization rate as well as the going-in capitalization rate is basically a capitalization rate comprising two sections - the rate of return (income) on the investment and the rate of return of the investment. Contemporary researches in the real estate market form the basis of the going-in capitalization rates. On the other hand, the terminal capitalization rates are anticipated making use of several hypotheses, one of them being the component of possible risk in the future.
Graduated payment mortgage: A graduated payment mortgage, often referred to as GMP, is a loan with a small preliminary monthly payment, but steadily enhances over a particular time span. Usually, such mortgage loans are best suited for young men and women who do not have enough money to make high monthly payments, but hope to be financially better off in future. The sum as well as the time of the increases in the monthly payments is ascertained on the basis of a preset method. In fact graduated payment mortgage is a type of negative amortization where the monthly payments normally increase by around five per cent every year and this constitutes a part of the agreement. The preliminary years of a graduated payment mortgage, which is around 10 years, depicts an enhancement in the actual principal sum due since the monthly payments towards the principal and the interest are not sufficient to address the collective interest accumulated on the loan. After the first 10 years, the monthly payments increase substantially and this gradually not only clears the balance interest amount, but also reduces the principal amount considerably. For the remaining period of the mortgage, this flat rate of interest remains the same.
Grant
Grantee / Grantor: Granter or the buyer is the party who receives the ownership of real property from its seller in a real estate transaction. In matters pertaining to real estate business, the grantor denotes the seller who transfers the ownership of a property to the buyer.
Gross debt service ratio (DGS): This term refers to the proportion of total monthly income needed to deal with the payments related to housing - mortgage, taxes on the principal loan amount and the interest on it, secondary funding, space heating and, if applicable, 50 per cent of the condominium fees. In other words, the term denotes the total monthly mortgage payments, property taxes, utilities and maintenance fees as a percentage of the total monthly income. In fact, the ideal gross debt service ration should not go beyond 32 per cent of the gross monthly income.
Gross income (Brokerage): In matters pertaining to real estate, gross income denotes the total earnings of a brokerage from all possible sources. In the conventional real estate brokerage proffering merely fees or commission is divided among the salespersons and there is no charges called desk fees. A characteristic list of account that composes the gross income may comprise earnings from commissions, referral income, payment of commission income by the owner, and other earnings. On the other hand, in the instance of a desk fee brokerage, the gross income includes common levies, individual promotions, management and/or dispensation charges, fine or late fees and all other incomes.
Gross income multiplier: In the context of real estate, the term gross income multiplier is a ratio that is made use of to translate yearly earnings from a real property to its market value while evaluating industrial and commercial real properties. In brief, the term denotes the relationship or ratio between the sale price or value and the effective annual gross income or potential. Conventionally, the term GIM is also referred as the gross rental multiplier (GRM) and was established with a view to reveal the fact that gross income often entails things other than revenue from rentals in the case of commercial properties. In addition, the GRM usually entailed unadjusted rental sums, such as, only gross rental amounts. However, presently the gross income multipliers (GIMs) make use of the gross proceeds or adjusted income statistics. This assessment largely depends on the accessibility and extent of information on similar sales. In fact, real estate practitioner will often come across varying computing methods in the market.
For the purpose of elucidation, the gross income multiplier (GIM) is thrashed out on the basis of effectual gross income. Evaluators basically used the term effective gross income does not usually prevail in the real estate market. Occasionally, commercial real estate practitioners turn to operating income. Irrespective of this, the computing process of the gross income multiplier is basically no different - it is gross income minus an allowance for vacancy and bad debt added with any other secondary earnings.
Gross lease: Gross lease refers to a lease contract whereby the tenant or the lessee only pays a predetermined or fixed rental, while the owner or the lessor is in charge for all related common expenditures like insurance, maintenance fees and taxes on the property. In the instance of property leases, the lessor is also responsible for paying the charges for utilities, security and even garbage collection. In fact, this kind of understanding has led to different types of net leases as landlords generally favor net leases. This is simply owing to the fact that in the instance of any unexpected hike in the costs, they need to be borne by the owner under the gross lease, but can be passed on to the tenant in the case of a net lease. All operating leases are gross leases, but capital leases come under a different category.
Ground lease: A ground lease, also referred to as a land lease, only relates to the leasing of the land. Generally, ground leases are for a long period of time, often 99 years, and enacted to allow construction of buildings or undertaking land improvements. On the maturity or end of the lease, the land along with all the structures and developments on it is transferred back to the land owner. In most case, ground leases involve non-agricultural and non-recreational tracts of land, for instance investment property, commercial or industrial lands. The buildings constructed on the land serve as a security for the rentals and in the event of the tenant becoming a defaulter, the land owner reserves the right to cease the lease agreement. In highly advantageous areas, the land owners may often prefer to go in for land or ground leases, instead of renting it otherwise. Land leases are also attractive to tenants as they are able to erect constructions without having to make any additional expenditure on the property. In fact, ground leases offer a system whereby the tenants are able to control their current financial reserves and basically utilize the land at a lesser expense compared to the costs incurred if the property had be bought. Nevertheless, as far as the tenant is concerned, ground leases also have their shortcomings. A tenant may face problems if there is a need for an expansion of the buildings on the land, or if the lessee or the tenant requires added funding and the land owner gets in the way of the modifications by virtue of his or her impartial attitude as the land owner and landlord and declines to accept the fresh requirements of the tenant.
Grow house: The expression grow house is generally related to residential or dwelling real estate that are used for cultivating marijuana illegally. Engaging in such unlawful activities usually entails larger residential houses, for instance, homes having an area of 2,200 square feet or more, with incomplete basements that are either purchased outright or taken on rent. Nevertheless, one may find grow operations in many other types of structures too. A common residential grow operation entails equipment and seedling plants carried via the garage and established in the basement - either the main section or the higher planes. In fact, it has been found that a basement is able to accommodate just about 400 marijuana plants that attain maturity in more or less three months. The plants require adequate heat, fertilizer, water and humidity in order to mature rapidly. It may be mentioned here that the amount of electricity required for grow house operations may be considerable.
The grow house operators not only illegally cultivate the marijuana plants in residential complexes, but they also possess highly developed system to evade existing electric and water meters and tap into water, hydro, and gas lines unlawfully. Considering the heat and water needed to grow the marijuana plants indoors, heavy condensation takes place and this need to be emitted through holes incised in floors, ceilings and roofs. In addition, the existing chimneys and other outlets, for instance, fireplaces, also need to be utilized to vent the intense condensation.
Guarantor: In matters relating to real estate business, a guarantor denotes person who endorses a three-party agreement to ensure that the pledges made by the first party (the borrower) to the second party (the lender) will be performed and assumes responsibility if the first party fails to fulfill the promises or defaults in the event of a mortgage, lease or personal loan. In the event of a default, the guarantor ought to recompense the lender and normally obtains an instant right of action against the first party or the borrower for the payments made by him or her under the guarantee. While agreeing to become a guarantor in an agreement, an individual usually consents to undertake the following responsibilities:
- Execute as well as achieve the commitments drawn out in the mortgage document, and
- Make the requisite payments on the precise dates specified in the mortgage document.
Normally, a guarantor is not set free or does not obtain a release until all the commitments specified in the mortgage agreement are fulfilled. Moreover, it is not essential for the mortgagee or the lender to use all the possible methods of recovering his or her money from the borrower or mortgagor before initiating action against the guarantor. What is worse is that the guarantor is generally not informed that there has been a default by the mortgagor and it is also not necessary that the mortgagee will initiate the same actions would against the guarantor and with the degree of clemency as might have been exercised against the actual borrower. There are assortments of sections for counting a guarantor in a mortgage agreement or as an add-on to the document.