Copyright 2023
NREsystems
Buyer Listing - A prospective buyer is one of four types of principals in the marketplace. A buyer listing inventories what the prospective buyer is offering to the marketplace (dollars) and what the buyer is looking for in the marketplace (real estate). Buyer listings are classified by NRE as type-1 listings. Under certain circumstances, a buyer can be the 'cash-out' in a 1031 exchange transaction.
Capitalization Rate
- One of numerous investment property 'rule-of-thumb' measurements, it
is the net operating income (NOI) divided by the list price, expressed
as a percentage. A $250,000 property with NOI of $30,000 would have a
cap rate of 12.0%.
Combination (mathematics) - An arrangement of the elements of a set without regard
to the order of selection. For example, arrangements of A,
B, and C could be ABC, ACB, BAC,
BCA, CAB, and CBA. They would all be considered to
be the same combination, however, because order of selection doesn't
differentiate them. (see Permutation)
Commission Splits
- The division of commissions is entirely up to the brokers involved
in a transaction. There are, however, a number of methods which have
been used over the years in an attempt to compensate fairly the brokers
involved.
One of these methods is called the 'Pool and Split' method in
which all of the commissions are added together and divided by the
number of 'legs' in the transaction. Each broker thus receives the
same amount of commission. This is fine for the brokers representing
the smaller commission amounts, however it is not generally acceptable
to the brokers who represent the larger commission amounts.
The 'You Keep, We Keep' method, in which each broker receives
only the entire commission from their listing, is not fair to a
broker representing a buyer, for example, in that they would
typically be looking to a portion of the commission pool being paid in the
transaction.
Perhaps the fairest division of commissions comes from the '50/50
Wheel' method of commission division (introduced by NRE) in
which each broker receives half of the commission from their
client, and half of the commission from the property being received.
This method treats each 'leg' of a transaction individually insofar as
commissions are concerned, and no broker receives less than they
would receive if it were a 2-way transaction.
Economically Feasible - All transactions are not economically feasible. In
other words, there may be a cash deficiency wherein the parties are
unwilling or unable to add more cash either from third-party lenders or
their own resources, and they are also unwilling to adjust the
transaction cash requirement downward to meet the total cash available.
NRE/IMS 'closes' every potential transaction (virtually) to
determine whether or not it 'makes economic sense,' another term for
'economically feasible.'
Exchange
- A transaction wherein each party gives up what they are offering
to the marketplace in return for what they are looking for in the
marketplace. Every transaction is an 'exchange' in that sense.
Exchange-only Listing
- An exchange owner is also one of four types of principals in the
marketplace. An exchange-only listing inventories what the property
owner is offering to the marketplace (real estate) and what they are looking for in the marketplace (other real estate). It may or may
not be part of a Section 1031 exchange. Exchange-only listings are
classified by NRE as type-3 listings.
Legs (Transaction Legs)
- A 'leg,' or 'transaction leg,' is a two-listing combination where the
owner of the first listing is willing to give up what they are
offering to the marketplace in return for what the owner of the second
listing is offering to the marketplace. In a three-way transaction
(ABC), for example, A-to-B is leg-1, B-to-C is
leg-2, and C-to-A is leg-3. That transaction cannot go together
unless A is willing to accept B, B is willing to accept C, and C is
willing to accept A, and even then only if the transaction is
economically feasible, and each participant is satisfied with their numbers. There are always the same number of 'legs' in a
transaction as there are principals. In other words, a 4-way
transaction will always have four legs.
Level-1 Transaction - In
NRE/IMS parlance, a level-1 transaction is an economically
feasible potential transaction that is identified and structured from a
pool of all potential takers and havers prior to any confirmation or
rejection of havers by potential takers.
Level-2 Transaction
- A level-2 transaction is an economically feasible
transaction put together from a pool of all potential takers and
havers, but not including those havers which have been rejected by
potential takers.
Level-3 Transaction
- A level-3 transaction is an economically feasible
transaction put together from a pool of potential takers and havers
that includes only those havers which have been confirmed as acceptable
by potential takers.
Listing System
- A listing system (as opposed to a marketing system) is a passive
system in which information primarily on sellers is submitted to
computer centers by participating brokers and agents, and that
information is made available for retrieval by participating brokers,
their agents, and potential buyers. Multiple Listing Systems are
typically passive listing systems.
Marketing System - A
marketing system (as opposed to a listing system) is an active
system in which information on buyers and owners is submitted to a
single computer center by participating brokers and agents, and that
information provides the basis upon which potential transactions are
identified, structured, and presented back to the participating brokers
and agents. Through a series of distilling processes, economically
feasible and mutually acceptable 2-way, 3-way, 4-way, and 5-way
transactions are the result. It is a totally win/win process for
all concerned. The NRE/IMS (Internet Marketing System) is such
an active marketing system.
NRE
- An acronym for a small corporation founded in 1974 to develop
computerized procedures to assist real estate professionals in
identifying, structuring, and closing multi-party transactions.
NRE is the parent company of NREsystems and its
NRE/IMS.
NRE/IMS
- An acronym for the NRE Internet Marketing System, an
Internet-based service to real estate professionals for listing buyer
and owner information, structuring potential 2-way to 5-way
transactions, and facilitating the closing of those transactions.
Permutation (mathematics) - An ordered arrangement of the elements of a set. For
example, arrangements of A, B, and C could be
ABC, ACB, BAC, BCA, CAB, and
CBA. They would all be considered to be different permutations,
however, because the order of selection is different in each case. Then
if these represented 3-way real estate transactions, all but two would
have to be discarded because ABC would be the same as BCA
and CAB, and ACB would be the same as CBA and
BAC! Confused? Don't worry about it. The NRE/IMS
computers have 'graduate degrees' and understand all of this perfectly.
(see Combination)
Sale-only Listing
- A seller is also one of four types of principals in the
marketplace. A sale-only listing inventories what the property
owner is offering to the marketplace (real estate) and what they are looking for in the marketplace (dollars). Sale-only listings are
classified by NRE as type-2 listings. Under certain
circumstances, a sale listing can be part of a 1031 exchange.
Sale-or-Exchange Listing
- An owner who is willing to sell OR exchange is also one of the four
types of principals in the marketplace. A sale-or-exchange listing
inventories what the property owner is offering to the marketplace
(real estate) and what they are looking for in the marketplace
(other real estate or dollars). It may or may not be part of a Section
1031 exchange. Sale-or-exchange listings are classified by NRE
as type-4 listings.
Transaction - A
transaction in the present context is the vehicle whereby two or
more parties are willing to give up what they are offering to the
marketplace in return for what they are seeking from the
marketplace. NRE/IMS transactions are structured to involve two,
three, four, or five parties.
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