Glossary of Business Broker Terms

Acknowledge
A declaration by someone that something is true.

Affidavit
A sworn statement; written oath such as acknowledgment.

Affirmation
A solemn declaration; a non-religious oath.

Agency
The legal relationship between a principal and his agent arising from a contract in which the principal engages the agent to perform certain acts on the principals behalf.

Agency Disclosure
A written explanation to be signed by a prospective buyer or seller, explaining to the client the role that the broker plays in the transaction. The purpose of disclosure is to explain whether the broker represents the buyer or seller or is a dual agent (representing both) or a subagent (an agent of the sellers broker). This allows the customer to understand to which party the broker owes loyalty.

Agent
A person (natural), corporation, society, association or partnership (legal persons) acting by authority of a principal in a realty transaction for compensation.

 A bilateral contract whereby buyer promises to buy and seller promises to sell by execution and delivery of deed; also know as Purchase and Sale Agreement (P&S). Agreement means the same as Contract.

Amortization
Act of liquidating an indebtedness by equal and periodic payments usually monthly; this direct reduction method means each payment remains constant but ratio of principal and interest changes with an increasing larger portion credited to reducing debt; savings and loan associations popularized method.

Appraisal
An estimate of value.

Appreciation
Increase in value resulting from market forces such as demand stronger than supply.

Attachment
A writ issued, beginning or during a legal action commanding sheriff to attach (seize) property, rights and effects of defendant to satisfy possible credit demands of plaintiff if judgment comes out in plaintiffs favor.

Attorney-in-Fact
Anyone who is authorized in writing to perform certain acts for another under written power of attorney; valid only during lifetime of party giving this power.

Bill of Sale
A written instrument which is the evidence of transfer of one persons right in personal property to another.

Capital Expenditures
Investments of cash for improvements to remain competitive in a business.

Capitalized Items
Have an economic life of one year or more and the cost is moved to the balance sheet, and then these costs can be written down by depreciation or amortization over time.

Cash Flow
Profit after principal and interest are deducted from net operating income (NOI).

Closing Costs
Costs of seller and buyer at conveyance of realty.

Closing Statement
A written accounting of funds to seller and buyer at passing of papers.

Collateral
A security, such as a mortgage, given to protect debt.

Commingling
The mixing of funds held for the benefit of others with the brokers personal or business funds.

Commission
Money or other valuable consideration given to broker by principal for services rendered; amount is by agreement.

Conditional Sales Contract
A contract in which owner retains title until buyer has met all terms and conditions; a familiar device in land sales; also called land contract or installment contract. Buyer acquires equitable title until final payment; after delivery of deed, buyer has legal title.

Consideration
Something of value exchanged between parties of a contract; money, services, goods or promises.

Contract
A legal instrument between two parties to do or not to do something; in reality, it must be in writing to be enforceable.
Counter Offer: voids first offer and creates new offer.

Covenant
A promise in an agreement or contract agreeing to performance or nonperformance of certain acts, or requiring or preventing certain acts or uses.

Confidentiality Agreement
A pact that forbids buyers, sellers, and their agents in a given business deal from disclosing information about the transaction to others.

Deficiency Judgment
Court award to lender if sale at public auction does not equal mortgage debt.

Depreciation
Decrease in value for various reasons

Due Diligence
Due diligence is often performed on the acquirer as well as the target

Earnest Money
Deposit or binder given with Agreement to Buy.

Equity
Value or interest an owner of realty has above ay debt on property; difference between value and mortgage debt.

Escrow
The holding of something of value by a person (escrowee or escrow agent) for the benefit of other parties.

Exclusive Right to Sell
An employment agreement and contract giving the broker the right to receive a commission if the property or business is sold by anyone including the seller during the term of the agreement.

Expense
Anything that a company buys that has an economic life of less than one year. It shows up immediately on the income statement.

Fiduciary
A position of trust (e.g. broker to principal).

Finders Fee
Fee to broker for arranging loan for client; can also mean fee to broker for locating a property for client

Gross Lease
Owner receives rent and pays out expenses such as in apartment leasing; Net Lease: owner receives rent and tenant also pays out expenses normally paid by owner such as taxes, etc.

Irrevocable
Unchangeable.

Judgment
A court action describing indebtedness of one to another.

Lease
Contract between lessor (landlord) and lessee (tenant) for exclusive possession of realty for specified period under specific terms after which property reverts to lessor.

Leaseback
The purchase of improved property and the leasing of it back to seller; creates capital and favored tax treatment for seller.

Leasehold
The interest which a lessee has in realty.

Letter of Intent
A document agreement between a buyer and a seller used in connection with the acquisition of a company. The letter of intent describes the basic terms and conditions of the transaction between the buyer and the seller, including price, due diligence periods, exclusivity or no-shops, and the basic conditions to closing the deal. Customarily presented before a definitive purchase agreement is entered into, the letter of intent provides a road map for the parties involved in the transaction.

Lien
A debt; a claim against property for payment of some debt.

Lis Pendens
Notice filed in a registry of deeds warning all persons that title to certain property is in litigation.

Listing
A written engagement (contract) between a principal and an agent authorizing the agent to perform services for the principal involving the principals property (business). Generally the services provided by the agent involve the proposed sale of the principals property or business. Also, the property or business listed by the agent is called a Listing.

List
To obtain a Listing Agreement

Procuring Cause
A legal term that means the cause resulting in accomplishing a goal. Used in real estate [or business brokerage] to determine whether a broker is entitled to a commission.

Representation
A statement or condition made that something is true or accurate.

CLP (Certified Lender Program)
This process is for the more sophisticated and experienced lenders who have graduated beyond GP status. Typically, the lender now submits a complete package to the SBA and as a CLP Lender they are guaranteed a 3-day turnaround from the SBA.

GP (General Program)
This is the lowest rating and is given to lenders who know little about the SBA process. These lenders must submit each loan application to the SBA for additional underwriting and ultimate approval. This process can take up to two weeks with multiple requests for additional information.

PLP (Preferred Lender Program)
This is the top designation and enables the respective lenders to approve their own loans with no additional underwriting by the SBA. Typically, this designation means that the lender has sufficient experience and track history to adhere to SBA standards and make quality loans.

Stipulation
To make a special demand for something as a condition of an agreement.

Warranty
An expressed or implied statement that a situation or thing is as it appears to be or is represented to be.