obedience
The fiduciary relationship obligates the agent to act in good faith at all times, obeying the principal's instructions in accordance with the contract. However, that obedience is not absolute. The agent may not obey instructions that are unlawful or unethical. Because illegal acts do not serve the principal's best interests, obeying such instructions violates the broker's duty of loyalty. On the other hand, an agent who exceeds the authority assigned in the contract will be liable for any losses that the principal suffers as a result.

obligor
A promisor; one who incurs a lawful obligation to another (the obligee). The maker of a promissory note is an obligor. In a performance bond, the contractor is the obligor. One who guarantees the performance of the obligation is a surety; also called a guarantor.

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.

offer
An offer is a promise made by one party, requesting something in exchange for that promise. The offer is made with the intention that the offeror will be bound to the terms if the offer is accepted. The terms of the offer must be definite and specific and must be communicated to the offeree.

offer and acceptance
Two essential components of a valid contract; a "meeting of the minds."

offeree
The person to whom an offer is made - usually the owner.

offeror
The party who makes an offer - usually the buyer.

offsite improvements
Improvements made outside of a property's boundaries, such as sidewalks and streets.

oil and gas lease
A grant of the sole and exclusive right to extract oil and/or gas from beneath the surface of land. Such a lease is generally for a designated term of years and is subject to a payment of royalties in the event of production, the commencement of drilling operations on or before a specified date and the performance within a specified time of a certain amount of development work. Typically, an express or implied easement is granted to enter the property in order to drill.

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.

open house
The common real estate practice of showing listed homes to the public during established hours.

open listing
A listing given to any number of brokers who can work simultaneously to sell the owner's property. The first broker to secure a buyer who is ready, willing and able to purchase at the terms of the listing earns the commission. In the case of a sale, the seller is not obligated to notify any of the brokers that the property has been sold.

Unlike an exclusive listing, an open listing need not contain a definite termination date. The listing terminates after a reasonable time, usually whatever is customary in the community. Either party can, in good faith, terminate the agency at will.

operating budget
A projection of income and expenses for the operation of a property over a one year period.

operating expenses
Those recurring expenses that are essential to the continuous operation and maintenance of a property. Operating expenses are generally divided into the following categories: fixed expenses such as real property taxes and building insurance; variable costs such as utilities, payroll, administration and property management fees; and reserves for replacement. Operating expenses do not include items such as mortgage payments, capital expenditures and depreciation.

opportunity cost
Earnings that may be available on alternative investments.

option
An agreement to keep open, for a set period, an offer to sell or lease real property.

opinion of title
An opinion of the marketability of a title given by an attorney based on the abstract of title.

original basis
The sum of the purchase price of a property plus buying expenses on acquisition. (See basis)

ostensible agency
A form of implied agency relationship created by the actions of the parties involved rather than by written agreement or document.

other income
Refers to income other than rent, such as vending and laundry machines, storage or parking space income, and so on.

over-built for the neighborhood
A home that has been improved to a point that it exceeds the market value of its neighborhood.

over improvement
An improvement that costs more than the value it adds to the property.

owner-occupied
A property where the owner physically occupies the property.

owner's association
An association made up of the owners in a condominium or neighborhood for the purpose of establishing rule and to regulate and maintain the common grounds.

ownership
The right to use, possess, enjoy, transfer, and dispose of a thing to the exclusion of all others.

owner's title insurance
An insurance policy protecting the buyer for the amount of the purchase price in the event of a future title dispute.