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Glossary of Terms
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
ABSORPTION RATE Back to
top
The ratio of the number of properties in an area that have been sold
against the number available. Used to show the volatility of a
market.
ABSTRACTION METHOD Back to top
This method
of estimating the value of property uses similar properties available in the
same market to extract the value of a parcel of land.
ACCELERATION CLAUSE
Back to top
A provision in a mortgage that gives the
lender the right to demand immediate payment of the outstanding loan balance
under certain circumstances. Usually when the borrower defaults on the
loan.
ACCESSORY BUILDING Back to top
A building
separate from the main structure on a property. Often used for a specific
purpose, such as a workshop, storage shed or garage.
ACCRETION Back to top
The natural growth of a piece of land resulting
from forces of nature.
ACRE Back to top
43,560
square feet. A measurement of area.
ACTUAL AGE Back to
top
The amount of time that has passed since a building or other
structure was built. See also: EFFECTIVE AGE
ADJUSTMENT DATE Back to top
The date the interest rate changes on an
adjustable rate mortgage.
AD VAL OREM TAX Back to
top
Taxes assessed based on the value of the land and
improvements.
ADDENDUM Back to top
A supplement to
any document that contains additional information pertinent to the subject.
Appraisers use an addendum to further explain items for which there was
inadequate space on the standard appraisal form.
ADJUSTABLE-RATE MORTGAGE
(ARM) Back to top
A type of mortgage where the interest
rate varies based on a particular index, normally the prime lending
rate.
ADJUSTED BASIS Back to top
The value of an
asset (property or otherwise) that includes the original price plus the value of
any improvement, and less any applicable depreciation.
ADJUSTED SALES
PRICE Back to top
An estimate of a property's sales price,
after adjustments have been made to account for differences between it and
another comparable property.
AESTHETIC VALUE Back to
top
The additional value a property enjoys based on subjective criteria
such as look or appeal.
AFFIRMATION Back to top
A
declaration that a certain set of facts are truthful.
AFFORDABILITY
ANALYSIS Back to top
A calculation used to determine an
individual's likelihood of being able to meet the obligations of a mortgage for
a particular property. Takes into account the down payment, closing costs and
on-going mortgage payments.
AGENT Back to top
A
person who has been appointed to act on behalf of another for a particular
transaction.
AMENITY Back to top
Any feature of a
property that increases its value or desirability. These might include natural
amenities such as location or proximity to mountains, or man-made amenities like
swimming pools, parks or other recreation.
AMERICAN SOCIETY OF APPRAISERS
Back to top
An organization of appraisal professionals and
others interested in the appraisal profession.
AMORTIZATION Back to top
The repayment of a loan through regular periodic
payment.
AMORTIZATION SCHEDULE Back to top
The
breakdown of individual payments throughout the life of an amortized loan,
showing both principal contribution and debt service (interest)
fees.
AMORTIZATION TERM Back to top
The length of
time over which an amortized loan is repaid. Mortgages are commonly amortized
over 15 or 30 years.
ANNUAL PERCENTAGE RATE (APR) Back to
top
The rate of annual interest charged on a loan.
ANNUITY Back to top
A sum of money paid at regular intervals, often
annually.
APPLICATION Back to top
A form used to
apply for a mortgage loan that details a potential borrowers income, debt,
savings and other information used to determine credit
worthiness.
APPRAISAL Back to top
A ''defensible''
and carefully documented opinion of value. Most commonly derived using recent
sales of comparable properties by a licensed, professional
appraiser.
APPRAISAL FOUNDATION Back to top
A
not-for-profit educational organization established by the appraisal profession
in the United States in 1987. It is dedicated to the advancement of professional
valuation and responsible for establishing, improving, and promoting the Uniform
Standards of Professional Appraisal Practice (USPAP).
APPRAISAL INSTITUTE
Back to top
A world-wide organization dedicated to real
estate appraisal education, publication and advocacy.
APPRAISAL
PRINCIPLES Back to top
The basic building blocks of the
property valuation process, including property inspection, market analysis and
basic economics.
APPRAISAL REPORT Back to top
The
end result of the appraisal process, usually consists of one major, standardized
form such as the Uniform Residential Appraisal Report form 1004, as well as all
supporting documentation and additional detail information. The purpose of the
report is to convey the estimated value of the subject property and support that
estimate with corroborating information.
APPRAISAL STANDARDS BOARD (ASB)
Back to top
An independent board of the APPRAISAL
FOUNDATION, which writes, amends, and interprets USPAP. The ASB is composed of
up to seven appraisers appointed by the Foundation's Board of Trustees. The ASB
holds public meetings throughout the year to interpret and amend
USPAP.
APPRAISED VALUE Back to top
The estimated
fair market value of a property as developed by a licensed, certified appraiser
following accepted appraisal principals.
APPRAISER Back to
top
An educated, certified professional with extensive knowledge of real
estate markets, values and practices. The appraiser is often the only
independent voice in any real estate transaction with no vested interest in the
ultimate value or sales price of the property.
APPRECIATION Back to top
The natural rise in property value due to market
forces.
ARMS LENGTH TRANSACTION Back to top
Any
transaction in which the two parties are unconnected and have no overt common
interests. Such a transaction most often reflects the true market value of a
property.
ASSESSED VALUE Back to top
The value of a
property according to jurisdictional tax assessment.
ASSESSMENT Back to top
The function of assigning a value to a property
for the purpose of levying taxes.
ASSESSMENT RATIO Back
to top
The comparative relationship of a property's assessed value to its
market value.
ASSESSOR Back to top
The
jurisdictional official who performs the assessment and assigns the value of a
property.
ASSET Back to top
Any item of value which
a person owns.
ASSIGNMENT Back to top
Transfer of
ownership of a mortgage usually when the loan is sold to another
company.
ASSUMABLE MORTGAGE Back to top
A mortgage
that can be taken over by the buyer when a home is sold.
ASSUMPTION Back to top
When a buyer takes over, or assumes the sellers
mortgage.
ATTACHED HOUSING Back to top
Any number
of houses or other dwellings which are physically attached to one another, but
are occupied by a number of different people. The individual houses may or may
not be owned by separate people as well.
BALLOON MORTGAGE
Back to top
A mortgage loan in which the monthly payments
are not large enough to repay the loan by the end of the term. So at the end of
the term, the remaining balance comes due in a single large
payment.
BALLOON PAYMENT Back to top
The final
large payment at the end of a balloon mortgage term.
BANKRUPTCY Back to top
When a person or business is unable to pay their
debts and seeks protection of the state against creditors. Bankruptcies remain
on credit records for up to ten years and can prevent a person from being able
to get a loan.
BILL OF SALE Back to top
A physical
receipt indicating the sale of property.
BIWEEKLY MORTGAGE Back to top
A mortgage where you make half payments every two
weeks, rather than one payment per month. This results in making the equivalent
of 13 monthly payments per year, rather than 12, significantly reducing the time
it takes to pay off a thirty year mortgage.
BLIGHTED AREA Back to top
Any region of a city or town that has fallen into
disrepair or otherwise has become undesirable.
BONA FIDE Back to top
Any genuine offer, made without intent to defraud
or deceive.
BRIDGE FINANCING Back to top
An interim
loan made to facilitate the purchase of a new home before the buyer's current
residence sells and its equity is available to fund the new purchase.
BROKER Back to top
An individual who facilitates
the purchase of property by bringing together a buyer and a seller.
BUFFER ZONE Back to top
A segment of land between
two disparate municipal zones which acts as a shield to keep one zone from
encroaching upon the other. Often used to separate residential districts from
commercial areas.
BUILDING CODE Back to
top
Regulations that ensure the safety and material compliance of new
construction within a municipality. Building codes are localized to ensure they
are adequate to meet the risk of common hazards.
BUILDING LINE OR
SETBACK Back to top
The statutory distance between
buildings and the property line, imposed by municipalities, home associations,
or other agreements.
BUILT-INS Back to
top
Specific items of personal property which are installed in a real
estate improvement such that they become part of the building. Built-in
microwave ovens and dishwashers are common examples.
BUNGALOW Back to top
A one-story, home-style dating from the early
twentieth century. Often characterized by a low-pitched roof.
BUY DOWN
Back to top
Extra money paid in a lump sum to reduce the
interest rate of a fixed rate mortgage for a period of time. The extra money may
be paid by the borrower, in order to have a lower payment at the beginning of
the mortgage. Or paid by the seller, or lender, as incentive to buy the property
or take on the mortgage.
CALL OPTION Back to
top
A clause in a mortgage which allows the lender to demand payment of
the outstanding balance at a specific time.
CAP Back to
top
Associated with Adjustable Rate Mortgages. A limit on how high
monthly payments or how much interest rates may change within a certain time
period or the life of the mortgage.
CAPE COD COLONIAL Back
to top
A single-story house style made popular in New England. Often
characterized by a steep roof with gables.
CAPITAL Back to
top
Accumulated goods and money which is most often used to generate
additional income.
CAPITAL EXPENDITURE Back to
top
An outlay of funds designed to improve the income-producing
capabilities of an asset or to extend its economic life.
CASH-OUT
REFINANCE Back to top
Refinancing a mortgage at a higher
amount than the current balance in order to transform a portion of the equity
into cash.
CAVEAT EMPTOR Back to top
Literally
translated: ''Let the buyer beware.'' A common business tenet whereby the buyer
is responsible for verifying any and all claims by the seller of property.
CERTIFICATE OF DEPOSIT Back to top
A document
showing that the bearer has a certain amount of money, at a particular amount
interest, on deposit with a financial institution.
CERTIFICATE OF DEPOSIT
INDEX Back to top
An index based on the interest rate of
six month CDs. Used to set interest rates on some Adjustable Rate
Mortgages.
CERTIFICATE OF ELIGIBILITY Back to top
A
document issued by the Veterans Administration that certifies eligibility for a
VA loan.
CERTIFICATE OF OCCUPANCY Back to
top
Issued by an appropriate jurisdictional entity, this document
certifies that a building complies with all building codes and is safe for use
or habitation.
CERTIFICATE OF REASONABLE VALUE (CRV) Back
to top
Usually based on an independent appraisal, a CRV for a particular
property establishes the maximum amount which can be secured by a VA
mortgage.
CERTIFICATE OF TITLE Back to top
A
document designating the legal owner of a parcel of real estate. Usually
provided by a title or abstract company.
CERTIFIED GENERAL APPRAISER Back to top
Generally, any professional who has met the local
or state requirements, and passed the appropriate certification exam, and is
capable of appraising any type of property.
CERTIFIED RESIDENTIAL
APPRAISER Back to top
A sub-classification of appraiser
who is only licensed to appraise residential property, usually up to four
units.
CHAIN OF TITLE Back to top
The complete
history of ownership of a piece of property.
CHATTEL Back
to top
Any personal property which is not attached to or an integral part
of a property. Chattel is not commonly taken into consideration when appraising
the value of real property.
CLEAR TITLE Back to
top
Ownership of property that is not encumbered by any counter-claim or
lien.
CLOSING Back to top
A torturous process
designed to induce cramping in a home buyer's hands by requiring signature on
countless pieces of documentation that nobody has ever read. Or, the process
whereby the sale of a property is consummated with the buyer completing all
applicable documentation, including signing the mortgage obligation and paying
all appropriate costs associated with the sale (CLOSING COSTS).
CLOSING
COSTS Back to top
All appropriate costs generated by the
sale of property which the parties must pay to complete the transaction. Costs
may include appraisal fees, origination fees, title insurance, taxes and any
points negotiated in the deal.
CLOSING STATEMENT Back to
top
The document detailing the final financial arrangement between a
buyer and seller and the costs paid by each.
COLLATERAL Back to top
An asset which is placed at risk to secure the
repayment of a loan.
CO-BORROWER Back to top
A
second person sharing obligation on the loan and title on the
property.
COLLECTION Back to top
The process a
lender takes to pursue a borrower who is delinquent on his payments in order to
bring the mortgage current again. Includes documentation that may be used in
foreclosure.
CO-MAKER Back to top
A second party
who signs a loan, along with the borrower, and becomes liable for the debt
should the borrower default.
COMMON LAW Back to
top
As opposed to statute law. Laws that have been established by custom,
usage and courts over many years.
COMMISSION Back to
top
A percentage of the sales price or a fixed fee negotiated by an agent
to compensate for the effort expended to sell or purchase property.
COMMON AREA ASSESSMENTS Back to top
Fees which are
charged to the tenets or owners of properties to cover the costs of maintaining
areas shared with other tenets or owners. Commonly found in condominium, PUD or
office spaces.
COMMON AREAS Back to top
Any areas,
such as entryways, foyers, pools, recreational facilities or the like, which are
shared by the tenets or owners of property near by. Commonly found in
condominium, PUD or office spaces.
COMMUNITY PROPERTY Back to top
In many jurisdictions, any property which has
been acquired by a married couple. The ownership of the property is considered
equal unless stipulated otherwise by both parties.
COMPARABLES Back to top
An abbreviated term used by appraisers to
describe properties which are similar in size, condition, location and amenities
to a subject property who's value is being determined. The Uniform Standards of
Professional Appraisal Practice (USPAP) establish clear guidelines for
determining a comparable property.
COMPOUND INTEREST Back
to top
Interest paid on the principal amount, as well as any accumulated
interest.
CONCESSIONS Back to top
Additional value
granted by a buyer or seller to entice another party to complete a
deal.
CONDEMNATION Back to top
The official process
by which a property is deemed to be uninhabitable or unusable due to internal
damage or other external conditions.
CONDOMINIUM Back to
top
A development where individual units are owned, but common areas and
amenities are shared equally by all owners.
CONDOMINIUM CONVERSION Back to top
Commonly, the conversion of a rental property
such as an apartment complex into a CONDOMINIUM-style complex where each unit is
owned rather than leased.
CONSTRUCTION LOAN Back to
top
A loan made to a builder or home owner that finances the initial
construction of a property, but is replaced by a traditional mortgage one the
property is completed.
CONTIGUOUS Back to
top
Connected to or touching along an unbroken boundary
CONTINGENCY Back to top
Something that must occur
before something else happens. Often used in real estate sales when a buyer must
sell a current home before purchasing a new one. Or, when a buyer makes an offer
the requires a complete home inspection before it becomes
official.
CONTRACT Back to top
A legally binding
agreement, oral or written, between two parties.
CONVENTIONAL MORTGAGE Back to top
A traditional, real estate financing mechanism
that is not backed by any government or other agency (FHA, VA, etc.).
CONVERTIBLE ARM Back to top
A mortgage that begins
as and adjustable, that allows the borrower to convert the loan to a fixed rate
within a specific timeframe.
COOPERATIVE (CO-OP) Back to
top
A form of ownership where each resident of a multiunit property owns
a share in a cooperative corporation that owns the building. With each resident
having rights to a specific unit within the building.
CORPORATE
RELOCATION Back to top
A situation where a person's
employer pays all or some of the expenses associated with moving from one
location to another, usually over a substantial distance. Relocation expenses
often include the amounts, such as brokerage fees, incurred in the selling and
buying of the employee's primary residence.
COST OF FUNDS INDEX (COFI)
Back to top
An index of financial institutions costs used
to set interest rates for some Adjustable Rate Mortgages.
COVENANT Back to top
A stipulation in any mortgage that, if not met,
can be cause for the lender to foreclose.
CREDIT Back to
top
A loan of money for the purchase of property, real or personal.
Credit is either secured by an asset, such as a home, or
unsecured.
CREDIT HISTORY Back to top
A record of
debt payments, past and present. Used by mortgage lenders in determining credit
worthiness of individuals.
CREDITOR Back to top
A
person to whom money is owed.
CREDIT REPORT Back to
top
A detailed report of an individuals credit, employment and residence
history prepared by a credit bureau. Used by lenders to determine credit
worthiness of individuals.
CREDIT REPOSITORY Back to
top
Large companies that gather and store financial and credit
information about individuals who apply for credit.
CUL-DE-SAC Back to top
A dead-end street. One with only one
entrance/exit.
DATE OF APPRAISAL Back to
top
The specific point in time as of which an appraiser designates the
value of a home. Often stipulated as the date of inspection.
DEBT Back to top
An obligation to repay some amount owed. This may
or may not be monetary.
DEBT EQUITY RATIO Back to
top
The ratio of the amount a mortgagor still owes on a property to the
amount of equity they have in the home. Equity is calculated at the fair-market
value of the home, less any outstanding mortgage debt.
DEED Back to top
A document indicating the ownership of a
property.
DEED-IN-LIEU (OF FORECLOSURE) Back to
top
A document given by a borrower to a lender, transferring title of the
property. Often used to avoid credit-damaging foreclosure
procedures.
DEED OF TRUST Back to top
A document
which transfers title in a property to a trustee, who's obligations and powers
are stipulated. Often used in mortgage transactions.
DEED OF RECONVEYANCE
Back to top
A document which transfers ownership of a
property from a Trustee back to a borrower who has fulfilled the obligations of
a mortgage.
DEED OF RELEASE Back to top
A document
which dismisses a lien or other claim on a property.
DEED OF SURRENDER Back to top
A document used to surrender any claim a person
has to a property.
DEFAULT Back to top
The
condition in which a borrower has failed to meet the obligations of a loan or
mortgage.
DELINQUENCY Back to top
The state in
which a borrow has failed to meet payment obligations on time.
DEPOSIT Back to top
Cash given along with an offer to purchase
property, Also called EARNEST MONEY.
DEPRECIATION Back to
top
The natural decline in property value due to market forces or
depletion of resources.
DETACHED SINGLE-FAMILY HOME Back
to top
A single building improvement intended to serve as a home for one
family.
DISCOUNT POINTS Back to top
Points paid in
addition to the loan origination fee to get a lower interest rate. One point is
equal to one percent of the loan amount.
DISTRESSED PROPERTY Back to top
A mortgaged property which has been foreclosed
on.
DUE-ON-SALE PROVISION Back to top
A clause in a
mortgage giving the lender the right to demand payment of the full balance when
the borrower sells the property.
DUPLEX Back to
top
A single-building improvement which is divided and provides two units
which serve as homes to two families.
DWELLING Back to
top
A house or other building which serves as a home.
DOWN PAYMENT
Back to top
An amount paid in cash for a property, with
the intent to mortgage the remaining amount due.
EARNEST
MONEY DEPOSIT Back to top
A cash deposit made to a home
seller to secure an offer to buy the property. This amount is often forfeited if
the buyer decides to withdraw his offer.
EASEMENT Back to
top
The right of a non-owner of property to exert control over a portion
or all of the property. For example, power companies often own an easement over
residential properties for access to their power lines.
ECONOMIC
DEPRECIATION Back to top
The decline in property value
caused by external forces, such as neighborhood blight or adverse
development.
ECONOMIC LIFE Back to top
The amount
of time which any income-producing property is able to provide benefits to its
owner.
EFFECTIVE AGE Back to top
The subjective,
estimated age of a property based on its condition, rather than the actual time
since it was built. Excessive wear and tear can cause a property's effective age
to be greater than its actual age.
EMINENT DOMAIN Back to
top
The legal process whereby a government can take ownership of a piece
of property in order to convert it to public use. Often, the property owner is
paid fair-market value for the property.
ENCROACHMENT Back to top
A building or other improvement on one property
which invades another property or restricts its usage.
ENCUMBRANCE Back to top
A claim against a property. Examples are
mortgages, liens and easements.
EQUAL CREDIT OPPORTUNITY ACT (ECOA) Back to top
U.S. federal law requiring that lenders afford
people equal chance of getting credit without discrimination based on race,
religion, age, sex etc
EQUITY Back to top
The
difference between the fair market value of a property and that amount an owner
owes on any mortgages or loans secured by the property.
EQUITY BUILDUP
Back to top
The natural increase in the amount of equity
an owner has in a property, accumulated through market appreciation and debt
repayment.
ERRORS AND OMISSIONS INSURANCE Back to
top
An insurance policy taken out by appraisers to cover their liability
for any mistakes made during the appraisal process.
ESCROW Back to top
An amount retained by a third party in a trust to
meet a future obligation. Often used in the payment of annual taxes or insurance
for real property.
ESCROW ACCOUNT Back to top
An
account setup by a mortgage servicing company to hold funds with which to pay
expenses such as homeowners insurance and property taxes. An extra amount is
paid with regular principal and interest payments that goes into the escrow
account each month.
ESCROW ANALYSIS Back to top
An
analysis performed by the lender usually once each year to see that the amount
of money going into the escrow account each month is correct for the forecasted
expenses.
ESCROW DISBURSEMENTS Back to top
The
payout of funds from an escrow account to pay property expenses such as taxes
and insurance.
ESTATE Back to top
The total of all
property and assets owned by an individual.
EXAMINATION OF TITLE Back to top
The report on the title of a property from the
public records or an abstract of the title.
EXCLUSIVE LISTING Back to top
An agreement between the owner of a property and
a real estate agent giving the agent exclusive right to sell the
property.
EXECUTOR Back to top
The person named in
a will to administer the estate.
FACADE Back
to top
The front exposure of any building. Often used to describe an
artificial or false front which is not consistent with the construction of the
rest of the building.
FAIR CREDIT REPORTING ACT Back to
top
A federal law regulating the way credit agencies disclose consumer
credit reports and the remedies available to consumers for disputing and
correcting mistakes on their credit history.
FAIR MARKET VALUE Back to top
The price at which two unrelated parties, under
no duress, are willing to transact business.
FANNIE MAE Back to top
A private, shareholder-owned company that works
to make sure mortgage money is available for people to purchase homes. Created
by Congress in 1938, Fannie Mae is the nation's largest source of financing for
home mortgages.
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) Back to top
The U.S. Government agency created in 1933 which
maintains the stability of and public confidence in the nation's financial
system by insuring deposits and promoting safe and sound banking
practices.
FEDERAL HOUSING ADMINISTRATION (FHA) Back to
top
A sub-agency of the U.S. Department of Housing and Urban Development
created in the 1930's to facilitate the purchase of homes by low-income,
first-time home buyers. It currently provides federally-subsidized mortgage
insurance for private lenders.
FEE APPRAISER Back to
top
A certified, professional appraiser who estimates the fair market
value of property and receives a set fee in exchange.
FEE SIMPLE Back to top
A complete, unencumbered ownership right in a
piece of property.
FEE SIMPLE ESTATE Back to top
A
form or ownership, or holding title to real estate. It is the most complete form
of title, having an unconditional and unlimited interest of perpetual
duration.
FHA MORTGAGE Back to top
A mortgage that
is insured by the Federal Housing Administration (FHA).
FINAL VALUE
ESTIMATE Back to top
The estimated value of a piece of
property resulting from an appraisal following the USPAP
guidelines.
FIRST MORTGAGE Back to top
The primary
loan or mortgage secured by a piece of property.
FIXED-RATE MORTGAGE
(FRM) Back to top
A mortgage which has a fixed rate of
interest over the life of the loan.
FIXTURE Back to
top
Any piece of personal property which becomes permanently affixed to a
piece of real property.
FLOOD INSURANCE Back to
top
Supplemental insurance which covers a home owner for any loss due to
water damage from a flood. Often required by lenders for homes located in
FEMA-designated flood zones.
FLOOR PLAN Back to
top
The representation of a building which shows the basic outline of the
structure, as well as detailed information about the positioning of rooms,
hallways, doors, stairs and other features. Often includes detailed information
about other fixtures and amenities.
FORECLOSURE Back to
top
The process whereby a lender can claim the property used by a
borrower to secure a mortgage and sell the property to meet the obligations of
the loan.
FORFEITURE Back to top
The loss of
property or money due to the failure to meet the obligations of a mortgage or
loan secured by that property.
FRONTAGE Back to
top
The segment of a property that runs along a point of access, such as
a street or water front.
FUNCTIONAL OBSOLESCENCE Back to
top
A decrease in the value of property due to a feature or lack thereof
which renders the property undesirable. Functional obsolescence can also occur
when the surrounding area changes, rendering the property unusable for its
originally intended purpose.
GABLE ROOF Back to top
A steeply angled, triangular roof.
GAMBREL
ROOF Back to top
A ''barn-like'' roof, where the upper
portion of the roof is less-steeply angled than the lower part.
GENERAL
LIEN Back to top
A broad-based claim against several
properties owned by a defaulting party.
GEORGIAN Back to
top
A classic, English-style hose characterized by simple rectangular
shape and multiple stories.
GINNIE MAE Back to
top
A wholly owned corporation created in 1968 within the U.S. Department
of Housing and Urban Development to serve low-to moderate-income homebuyers.
GOVERNMENT MORTGAGE Back to top
Any mortgage
insured by a government agency, such as the FHA or VA.
GRADE Back to top
The slope of land around a
building.
GRANTEE Back to top
Any person who is
given ownership of a piece of property.
GRANTOR Back to
top
Any person who gives away ownership of a piece of
property.
GROSS AREA Back to top
The sum total of
all floor space, including areas such as stairways and closet space. Often
measured based on external wall lengths.
HALF-SECTION Back to top
320 acres
HAZARD INSURANCE Back to top
Insurance covering damage to a property caused by
hazards such as fire, wind and accident.
HEIGHT ZONING Back to top
A municipal restriction on the maximum height of
any building or other structure.
HIDDEN AMENITIES Back to
top
Assets of a property which contribute to its value, but are not
readily apparent. Examples might include upgraded or premium building materials.
HIGHEST AND BEST USE Back to top
The most
profitable and likely use of a property. Selected from reasonably probable and
legal alternative uses, which are found to be physically possible, appropriately
supported and financially feasible to result in the highest possible land
value.
HOME EQUITY CONVERSION MORTGAGE (HECM) Back to
top
Also known as a reverse annuity mortgage. It allows home owners
(usually older) to convert equity in the home into cash. Normally paid by the
lender in monthly payments. HECMs typically dont have to be repaid until the
borrower is no longer occupying the home.
HOME EQUITY LINE OF CREDIT Back to top
A type of mortgage loan that allows the borrower
to draw cash against the equity in his home.
HOME INSPECTION Back to top
A complete examination of a building to determine
its structural integrity and uncover any defects in materials or workmanship
which may adversely affect the property or decrease its value.
HOMEOWNER'S ASSOCIATION Back to top
An
organization of home owners in a particular neighborhood or development formed
to facilitate the maintenance of common areas and to enforce any building
restrictions or covenants.
HOMEOWNER'S INSURANCE Back to
top
A policy which covers a home owner for any loss of property due to
accident, intrusion or hazard.
HOMEOWNERS WARRANTY Back to
top
An insurance policy covering the repair of systems and appliances
within the home for the coverage period.
HUD MEDIAN INCOME Back to top
Median family income for a particular county or
metropolitan statistical area (MSA), as estimated by the Department of Housing
and Urban Development (HUD).
HUD-1 STATEMENT Back to
top
A standardized, itemized list, published by the U.S. Department of
Housing and Urban Development (HUD), of all anticipated CLOSING COSTS connected
with a particular property purchase.
IMPROVED LAND Back to top
Any parcel of land which has been changed from
its natural state through the creation of roads, buildings or other structures.
IMPROVEMENTS Back to top
Any item added to vacant
land with the intent of increasing its value or usability.
IMPROVEMENT
RATIO Back to top
The comparative value of a improved
piece of land to its natural, unaltered state.
INCOME APPROACH Back to top
The process of estimating the value of property
by considering the present value of a stream of income generated by the
property.
INCOME PROPERTY Back to top
A piece of
property whose highest and best use is the generation of income through rents or
other sources.
INDEPENDENT APPRAISAL Back to
top
An estimation of value created by a professional, certified appraiser
with no vested interest in the value of the property.
INSPECTION Back to top
The examination of a piece of property, its
buildings or other amenities.
INSURABLE TITLE Back to
top
The title to property which has been sufficiently reviewed by a title
insurance company, such that they are willing to insure it as free and
clear.
INTEREST RATE Back to top
A percentage of a
loan or mortgage value that is paid to the lender as compensation for loaning
funds.
INVESTMENT PROPERTY Back to top
Any piece of
property that is expected to generate a financial return. This may come as the
result of periodic rents or through appreciation of the property value over
time.
JOINT TENANCY Back to top
A
situation where two or more parties own a piece of property together. Each of
the owners has an equal share, and may not dispose of or alter that share
without the consent of the other owners.
JUDGMENT Back to
top
An official court decision. If the judgment requires payment from one
party to another, the court may put a lien against the payees property as
collateral.
JUDICIAL FORECLOSURE Back to top
A type
of foreclosure conducted as a civil suit in a court of law.
JUMBO LOAN Back to top
A mortgage loan for an amount greater than the
limits set by Fannie Mae and Freddie Mac. Often called non-conforming
loans.
LATE CHARGE Back to
top
An extra charge, or penalty added to a regular mortgage payment when
the payment is made late by an amount of time specified in the original loan
document.
LATENT DEFECTS Back to top
Any defect in
a piece of property which is not readily apparent, but which has an impact of
the value. Structural damage or termite infestation would be examples of latent
defects.
LEASE Back to top
A contract between a
property owner and a tenant specifying the payment amount, terms and conditions,
as well as the length of time the contract will be in force.
LEASEHOLD
ESTATE Back to top
A type of property ''ownership'' where
the buyer actually has a long-term lease on the property.
LEASE OPTION Back to top
A lease agreement that gives the tenant an option
to buy the property. Usually, a portion of the regular monthly rent payment will
be applied towards the down payment.
LEGAL DESCRIPTION Back to top
The description of a piece of property,
identifying its specific location in terms established by the municipality or
other jurisdiction in which the property resides. Often related in specific
distances from a known landmark or intersection.
LENDER Back to top
The person or entity who loans funds to a buyer.
In return, the lender will receive periodic payments, including principal and
interest amounts.
LIABILITIES Back to top
A
persons outstanding debt obligations.
LIABILITY INSURANCE Back to top
Insurance that covers against potential lawsuit
brought against a property owner for alleged negligence resulting in damage to
another party.
LIEN Back to top
Any claim against a
piece of property resulting from a debt or other obligation.
LIFE CAP Back to top
A limit on how far the interest rate can move for
an Adjustable Rate Mortgage.
LIKE-KIND PROPERTY Back to
top
Any property which is substantially similar to another
property.
LINE OF CREDIT Back to top
An extension
of credit for a certain amount for a specific amount of time. To be used by the
borrower at his discretion.
LIQUID ASSET Back to
top
Any asset which can be quickly converted into cash at little or no
cost, or cash itself.
LOAN Back to top
Money
borrowed, to be repaid with interest, according to the specific terms and
conditions of the loan.
LOAN OFFICER Back to top
A
person that sells loans, representing the lender to the borrower, and the
borrower to the lender.
LOAN ORIGINATION Back to
top
How a lender refers to the process of writing new loans.
LOAN
SERVICING Back to top
The processing of payments, mailing
of monthly statements, management and disbursement of escrow funds etc Typically
carried out by the company you make payments to.
LOAN-TO-VALUE RATIO
(LTV) Back to top
The comparison of the amount owed on a
mortgaged property to its fair market value.
LOCK-IN Back
to top
An agreement between a lender and a borrower, guaranteeing an
interest rate for a loan if the loan is closed within a certain amount of
time.
LOCK-IN PERIOD Back to top
The amount of time
the lender has guaranteed an interest rate to a borrower.
MANUFACTURED HOUSING Back to top
Once known as
''mobile homes,'' manufactured housing is any building which has been
constructed off site, then moved onto a piece of real property.
MARGIN
Back to top
The difference between the interest rate and
the index on an adjustable rate mortgage.
MARGINAL LAND Back to top
Land whose value has been diminished due to some
internal defect or external condition. In most cases, the cost to correct the
flaw or condition is as much or more than the expected return from the property.
MASTER ASSOCIATION Back to top
An umbrella
organization that is made up of multiple, smaller home owner's associations.
Often found in very large developments or condominium projects.
MATURITY
Back to top
The date on which the principal balance of a
financial instrument becomes due and payable.
MERGED CREDIT REPORT Back to top
A credit report derived from data obtained from
multiple credit agencies.
METES AND BOUNDS Back to
top
A traditional way of describing property, generally expressed in
terms of distance from a known landmark or intersection, and then following the
boundaries of the property back to its origin.
METROPOLITAN AREA Back to top
The accumulated land in and around a city or
other municipality which falls under the political and economic influence of
that entity.
MINERAL RIGHTS Back to top
The legal
right to exploit and enjoy the benefits of any minerals located below the
surface of a parcel of land.
MISREPRESENTATION Back to
top
A statement by one party in a transaction that is incorrect or
misleading. Most misrepresentations are deemed to be intentional and thus may
constitute fraud. Others, however, some are rendered through simple mistakes,
oversights or negligence.
MORTGAGE Back to top
A
financial arrangement wherein an individual borrows money to purchase real
property and secures the loan with the property as collateral.
MORTGAGE
BANKER Back to top
A financial institution that provides
primary and secondary mortgages to home buyers.
MORTGAGE BROKER Back to top
A person or organization that serves as a
middleman to facilitate the mortgage process. Brokers often represent multiple
mortgage bankers and offer the most appropriate deal to each
buyer.
MORTGAGEE Back to top
The entity that lends
money in a real estate transaction.
MORTGAGE INSURANCE Back to top
A policy that fulfills that obligations of a
mortgage when the policy holder defaults or is no longer able to make
payments.
MORTGAGE INSURANCE PREMIUM (MIP) Back to
top
An fee that is often included in mortgage payments that pays for
mortgage insurance coverage.
MORTGAGE LIFE INSURANCE Back
to top
A policy that fulfills the obligations of a mortgage when the
policy holder dies.
MORTGAGOR Back to top
The
entity that borrows money in a real estate transaction.
MULTI-FAMILY
PROPERTIES Back to top
Any collection of buildings that
are designed and built to support the habitation of more than four
families.
NATIONAL SOCIETY OF REAL ESTATE APPRAISERS Back to top
An organization founded in 1956 which promotes
standards of professionalism in its members.
NATURAL VACANCY RATE Back to top
The percentage of vacant properties in a given
area that is the result of natural turnover and market forces.
NEGATIVE
AMORTIZATION Back to top
When the balance of a loan
increases instead of decreases. Usually due to a borrower making a minimum
payment on an Adjustable Rate Mortgage during a period when the rate fluctuates
to a high enough point that the minimum payment does not cover all of the
interest.
NEIGHBORHOOD LIFE-CYCLE Back to top
The
evolution of neighborhood use and demographics over time. Economic fluctuations,
municipal zoning changes and population shifts can effect the life cycle.
NEIGHBORHOOD Back to top
A subsection of a
municipality that has been designated by a developer, economic forces or
physical formations.
NET LEASABLE AREA Back to
top
The space in a development, outside of the common areas, that can be
rented to tenants.
NEW ENGLAND COLONIAL Back to
top
An architectural style dating from early American history typified by
a two-story building with clapboard siding.
NO-COST LOAN Back to top
Many lenders offer loans that you can obtain at
"no cost." You should inquire whether this means there are no "lender" costs
associated with the loan, or if it also covers the other costs you would
normally have in a purchase or refinance transactions, such as title insurance,
escrow fees, settlement fees, appraisal, recording fees, notary fees, and
others. These are fees and costs which may be associated with buying a home or
obtaining a loan, but not charged directly by the lender. Keep in mind that,
like a "no-point" loan, the interest rate will be higher than if you obtain a
loan that has costs associated with it.
NO-POINT LOAN Back
to top
A loan with no points. The interest rate on such a loan will be
higher than a loan with points paid. Also sometimes refers to a refinance loan
where closing costs are included in the loan.
NON-CONFORMING USE Back to top
The use of land for purposes contrary to the
applicable municipal zoning specifications. Often occurs when zoning changes
after a property is in use.
NONLIQUID ASSET Back to
top
Any asset which can not be quickly converted into cash at little or
no cost.
NOTE Back to top
A legal document that
obligates a borrower to repay a mortgage loan at a stated interest rate during a
specified period of time.
NOTE RATE Back to top
The
interest rate stated on a mortgage note.
NOTICE OF DEFAULT Back to top
Formal written notice from a lender to a borrower
that default has occurred.
OBSOLESCENCE Back
to top
The process of an assets value diminishing due to the development
of more desirable alternatives or because of the degradation of its
capabilities.
OCCUPANCY Back to top
A physical
presence within and control of a property.
OCCUPANCY RATE Back to top
The percentage of properties in a given area that
are occupied.
OFF-SITE IMPROVEMENTS Back to
top
Buildings, structures or other amenities which are not located on a
piece of property, but are necessary to maximize the use of the property or in
some way contribute to the value of the property.
OFF-STREET PARKING Back to top
Designated parking spaces associated with a
particular building or other structure which are not located on public
streets.
ON-SITE IMPROVEMENTS Back to
top
Buildings, structures or other amenities that are erected on a piece
of property and contribute to its value.
OPEN SPACE Back
to top
Any land which has not had any significant buildings or structures
erected on it. Most often used to describe desirable neighborhood features like
parks.
ORIGINAL EQUITY Back to top
The amount of
cash a home buyer initially invests in the home.
ORIGINAL PRINCIPAL
BALANCE Back to top
The total amount of principal owed on
a mortgage loan at the time of closing.
ORIGINATION FEE Back to top
Refers to the total number of points paid by a
borrower at closing.
OWNER FINANCING Back to top
A
transaction where the property owner provides all or part of the
financing.
OWNER OCCUPIED Back to top
The state of
property wherein the owner occupies at least some portion of the property.
PARTIAL INTEREST Back to top
A
shared ownership in a piece of property. May be divided among two or more
parties.
PARTIAL PAYMENT Back to top
A payment of
less than the regular monthly amount. Usually, a lender will not accept partial
payments.
PERIODIC PAYMENT CAP Back to top
The
limit on how much regular monthly payments on an Adjustable Rate Mortgage can
change during one adjustment period.
PERIODIC RATE CAP Back to top
The limit on how much the interest rate on an
Adjustable Rate Mortgage can change during any one adjustment
period.
PERSONAL PROPERTY Back to top
Owned items
which are not permanently affixed to the land.
PERSONAL RESIDENCE Back to top
The primary domicile of a person or
family.
PLANNED UNIT DEVELOPMENT (PUD) Back to
top
A coordinated, real estate development where common areas are shared
and maintained by an owner's association or other entity.
PLAT Back to top
A plan or chart of a piece of land which lays out
existing or planned streets, lots or other improvements.
POINT Back to top
A percentage of a mortgage amount (one point = 1
percent).
PRE-APPROVAL Back to top
The process of
applying for a mortgage loan and becoming approved for a certain amount at a
certain interest rate before a property has been chosen. Pre-approval allows the
borrower greater freedom in negotiations with sellers.
PREFABRICATED Back to top
Any building or portion thereof which is
manufactured and assembled off site, then erected on a property.
PREPAYMENT Back to top
Payment made that reduces
the principal balance of a loan before the due date and before the loan has
become fully amortized.
PREPAYMENT PENALTY Back to
top
A fee that may be charged to a borrower who pays off a loan before it
is due.
PRE-QUALIFICATION Back to top
Less formal
that pre-approval, pre-qualification usually means a written statement from a
loan officer indicating his or her opinion that the borrower will be able to
become approved for a mortgage loan.
PRIME RATE Back to
top
The interest rate that banks and other lending institutions charge
other banks or preferred customers.
PRINCIPAL Back to
top
The amount owed on a mortgage which does not include interest or
other fees.
PRINCIPAL BALANCE Back to top
The
outstanding balance of principal on a mortgage. Does not included interest
due.
PRINCIPAL, INTEREST, TAXES, AND INSURANCE (PITI) Back
to top
The most common constituents of a monthly mortgage payment.
PRIVATE MORTGAGE INSURANCE (PMI) Back to top
A
form of mortgage insurance provided by private, non-government entities.
Normally required when the LOAN TO VALUE RATIO is less that 20%.
PROPERTY
Back to top
Any item which is owned or
possessed.
PURCHASE AGREEMENT Back to top
A written
contract signed by the buyer and seller stating the terms and conditions under
which a property will be sold.
QUADRAPLEX Back to top
Any building designed to accommodate four
families.
QUALIFYING RATIOS Back to top
Two ratios
used in determining credit worthiness for a mortgage loan. One is the ratio of a
borrowers monthly housing costs to monthly income. The other is a ratio of all
monthly debt to monthly income.
QUITCLAIM DEED Back to
top
A legal document which transfers any ownership an individual has in a
piece of property. Often used when the amount of ownership is not known or is
unclear.
RANCH HOUSE Back to top
An
architectural style typified by a single-story, low-roof construction. Popular
in the western U.S.
RATE LOCK Back to top
A
guarantee from a lender of a specific interest rate for a period of
time.
RAW LAND Back to top
Any land which has not
been developed.
REAL ESTATE Back to top
A piece of
land and any improvements or fixtures located on that land.
REAL ESTATE
AGENT Back to top
A licensed professional who facilitates
the buying and selling of real estate.
REAL ESTATE SETTLEMENT PROCEDURES
ACT (RESPA) Back to top
A federal law requiring lenders to
give full disclosure of closing costs to borrowers.
REAL PROPERTY Back to top
Land, improvements and appurtenances, and the
interest and benefits thereof.
REALTOR Back to
top
A real estate agent or broker who is a member of the National
Association of Realtors.
RECORDER Back to top
A
local government employee whose role it is to keep records of all real estate
transactions within the jurisdiction.
RECORDING Back to
top
The filing of a real estate transaction with the appropriate
government agent (normally the RECORDER). A real estate transaction is
considered final when it is recorded.
REFINANCE TRANSACTION Back to top
A new loan to pay off an existing loan. Typically
to gain a lower interest rate or convert equity into cash.
RELOCATION
SERVICE Back to top
Any company or agency that assists
corporate employees in relocating from one place to another. Services may
include hiring and coordinating real estate agents, moving companies, utilizes
and the like.
REMAINING BALANCE Back to top
The
amount of principal, interest and other costs that has not yet been
repaid.
REMAINING TERM Back to top
The amount of
time remaining on the original amortization schedule.
REMODEL Back to top
An activity designed to improve the value or
desirability of a property through rebuilding, refurbishing, redecorating or
adding on to it.
REPAYMENT PLAN Back to top
A plan
to repay delinquent payments, agreed upon between a lender and borrower, in an
effort to avoid foreclosure.
REPLACEMENT RESERVE FUND Back
to top
An account, or fund, setup for the replacement of short life items
, such as carpeting, in the common areas of a cooperative
property.
RESIDENTIAL PROPERTY Back to top
A piece
of property whose highest and best use is the maintenance of a residence.
REVOLVING DEBT Back to top
A type of credit that
allows the borrower/customer to make charges against a predetermined line of
credit. The customer then pays monthly installments on the amount borrowed, plus
interest.
RIGHT OF FIRST REFUSAL Back to top
An
agreement giving a person the first opportunity to buy or lease a property
before the owner offers it for sale to others.
RURAL Back
to top
An area outside of an established urban area or metropolitan
district.
SALE PRICE Back to top
The
actual price a property sells for, exclusive of any special financing
concessions.
SALES COMPARISON APPROACH Back to
top
An appraisal practice which estimates the value of a property by
comparing it to comparable properties which have sold recently.
SCARCITY
Back to top
An economic principal that dictates the price
of a good or service through the interaction of supply and demand. When an item
is scarce, its price tends to rise, given a constant demand. Real Estate is a
classic example of scarcity.
SECOND MORTGAGE Back to
top
A loan secured by the equity in a home, when a primary mortgage
already exists.
SECONDARY MORTGAGE MARKET Back to
top
An economic marketplace where mortgage bankers buy and sell existing
mortgages.
SECURED LOAN Back to top
A loan that is
backed by collateral. In the case of a mortgage loan, the collateral is the
house.
SECURITY Back to top
The property used as
collateral for a loan.
SEMIDETACHED HOUSING Back to
top
Two residences which share a common wall.
SERVICER Back to top
A financial institution which collects mortgage
payments from borrowers and applies the appropriate portions to principal,
interest and any escrow accounts.
SERVICING Back to
top
The processing of payments, mailing of monthly statements, management
and disbursement of escrow funds etc Typically carried out by the company you
make payments to.
SINGLE-FAMILY PROPERTY Back to
top
A property designed and built to support the habitation of one
family.
SUBDIVISION Back to top
A residential
development that is created from a piece of land which has been subdivided into
individual lots.
SUBJECT PROPERTY Back to top
A
term which indicates a property which is being appraised.
SURVEY Back to top
A specific map of a piece of property which
includes the legal boundaries and any improvements or features of the land.
Surveys also depict any rights-of-way, encroachments or easements.
SWEAT
EQUITY Back to top
The method whereby a home owner
develops equity in a property, either during the purchase or throughout its
life, by personally constructing improvements rather than paying to have them
built.
TAX-EXEMPT PROPERTY Back to
top
Any property which is not taxed.
TENANCY Back
to top
The right to occupy a building or unit.
TENANCY IN COMMON
Back to top
A form of holding title, whereby there are two
or more people on title to a property, ownership does not pass on to the others
upon the death of one individual.
THIRD PARTY ORIGINATION Back to top
When a lender uses a third party to originate and
package loans for sale to the secondary market (Fannie Mae, Freddie
Mac).
TITLE Back to top
A specific document which
serves as proof of ownership.
TITLE COMPANY Back to
top
An organization which researches and certifies ownership of real
estate before it is bought or sold. Title companies also act at the facilitator
ensures all parties are paid during the real estate transaction.
TITLE
INSURANCE Back to top
A policy which insures a property
owner should a prior claim arise against the property after the purchase has
been completed. This also covers a lender should a question of ownership
arise.
TITLE SEARCH Back to top
The process whereby
the TITLE COMPANY researches a properties title history and ensures that no
outstanding claims exist.
TRANSFER OF OWNERSHIP Back to
top
Any means by which the ownership of a property changes hands.
TRANSFER OF TAX Back to top
Taxes payable when
title passes from one owner to another.
TRUSTEE Back to
top
A fiduciary who holds or controls property for the benefit of
another.
TRUTH IN LENDING Back to top
A federal law
requiring full disclosure by lenders to borrowers of all terms, conditions and
costs of a mortgage.
TUDOR Back to top
A style of
architecture typified by exposed stone, wood and brick construction. Similar in
style to English manor homes.
UNDER IMPROVED LAND Back to top
A piece of land which has been improved, but not
to the full extent of its potential.
UNENCUMBERED PROPERTY Back to top
Any property which has no outstanding claims or
liens against it.
UNIFORM STANDARDS OF PROFESSIONAL APPRAISAL PRACTICE
(USPAP) Back to top
Developed in 1986 by the Ad Hoc
Committee on Uniform Standards and copyrighted in 1987 by The Appraisal
Foundation, USPAP forms the guidelines followed by every licensed and certified
real estate appraiser in the United States. The purpose of these Standards is to
establish requirements for professional appraisal practice, which includes
appraisal, appraisal review, and appraisal consulting. The intent of these
Standards is to promote and maintain a high level of public trust in
professional appraisal practice.
USEFUL LIFE Back to
top
The span of time over which a property can be used or can provide
benefits to its owner.
VACANCY RATE Back to
top
The current percentage of vacant properties in a given area,
regardless of why they are vacant.
VA MORTGAGE Back to
top
A mortgage that is guaranteed by the Department of Veterans Affairs
(VA).
VARIANCE Back to top
An exception to
municipal zoning regulations granted for a specific time period to allow for
non-conforming use of the land.
VESTED Back to
top
Having the right to use a portion of a fund such as an IRA. Typically
vesting occurs over time. If you are 100% vested, you have a right to 100% of
the fund.
VETERANS AFFAIRS, DEPARTMENT OF (VA) Back to
top
The successor to the Veteran's Administration, this government agency
is responsible for ensuring the rights and welfare of our nation's veterans and
their dependents. Among other duties, the VA insures home loans made to
veterans.
WALK-THROUGH INSPECTION Back to
top
A process whereby an appraiser examines a property in preparation for
estimating its value. Also, the process of inspecting a property for any damage
prior to that property being bought or sold.
WARRANTY Back to top
An affidavit given to stipulate the condition of
a property. The person giving the warranty assumes liability if the condition
turns out to be untrue.
WEAR AND TEAR Back to top
A
term used to indicate the normal damage inflicted on a property through
every-day use.
ZERO LOT LINE
Back to top
A municipal zoning category wherein a building
or other fixture may abut the property line.
ZONE Back to
top
A specific area within a municipality or other jurisdiction which
conforms to certain guidelines regarding the use of property in the zone.
Typical zones include single-family, multi-family, industrial, commercial and
mixed-use.
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