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ABSORPTION RATE
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
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
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
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
The natural growth of a piece of land resulting from forces
of nature.
ACRE
43,560 square feet. A measurement of area.
ACTUAL AGE
The amount of time that has passed since a building or other
structure was built. See also: EFFECTIVE AGE
ADJUSTMENT DATE
The date the interest rate changes on an adjustable rate mortgage.
AD VAL OREM TAX
Taxes assessed based on the value of the land and improvements.
ADDENDUM
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)
A type of mortgage where the interest rate varies based on a
particular index, normally the prime lending rate.
ADJUSTED BASIS
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
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
The additional value a property enjoys based on subjective criteria
such as look or appeal.
AFFIRMATION
A declaration that a certain set of facts are truthful.
AFFORDABILITY ANALYSIS
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
A person who has been appointed to act on behalf of another
for a particular transaction.
AMENITY
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
An organization of appraisal professionals and others interested
in the appraisal profession.
AMORTIZATION
The repayment of a loan through regular periodic payment.
AMORTIZATION SCHEDULE
The breakdown of individual payments throughout the life of
an amortized loan, showing both principal contribution and debt
service (interest) fees.
AMORTIZATION TERM
The length of time over which an amortized loan is repaid. Mortgages
are commonly amortized over 15 or 30 years.
ANNUAL PERCENTAGE RATE (APR)
The rate of annual interest charged on a loan.
ANNUITY
A sum of money paid at regular intervals, often annually.
APPLICATION
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
A ''defensible'' and carefully documented opinion of value.
Most commonly derived using recent sales of comparable properties
by a licensed, professional appraiser.
APPRAISAL FOUNDATION
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
A world-wide organization dedicated to real estate appraisal
education, publication and advocacy.
APPRAISAL PRINCIPLES
The basic building blocks of the property valuation process,
including property inspection, market analysis and basic economics.
APPRAISAL REPORT
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)
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
The estimated fair market value of a property as developed by
a licensed, certified appraiser following accepted appraisal
principals.
APPRAISER
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
The natural rise in property value due to market forces.
ARMS LENGTH TRANSACTION
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
The value of a property according to jurisdictional tax assessment.
ASSESSMENT
The function of assigning a value to a property for the purpose
of levying taxes.
ASSESSMENT RATIO
The comparative relationship of a property's assessed value
to its market value.
ASSESSOR
The jurisdictional official who performs the assessment and
assigns the value of a property.
ASSET
Any item of value which a person owns.
ASSIGNMENT
Transfer of ownership of a mortgage usually when the loan is
sold to another company.
ASSUMABLE MORTGAGE
A mortgage that can be taken over by the buyer when a home is
sold.
ASSUMPTION
When a buyer takes over, or assumes the sellers mortgage.
ATTACHED HOUSING
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
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
The final large payment at the end of a balloon mortgage term.
BANKRUPTCY
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
A physical receipt indicating the sale of property.
BIWEEKLY MORTGAGE
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
Any region of a city or town that has fallen into disrepair
or otherwise has become undesirable.
BONA FIDE
Any genuine offer, made without intent to defraud or deceive.
BRIDGE FINANCING
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
An individual who facilitates the purchase of property by bringing
together a buyer and a seller.
BUFFER ZONE
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
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
The statutory distance between buildings and the property line,
imposed by municipalities, home associations, or other agreements.
BUILT-INS
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
A one-story, home-style dating from the early twentieth century.
Often characterized by a low-pitched roof.
BUY DOWN
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
A clause in a mortgage which allows the lender to demand payment
of the outstanding balance at a specific time.
CAP
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
A single-story house style made popular in New England. Often
characterized by a steep roof with gables.
CAPITAL
Accumulated goods and money which is most often used to generate
additional income.
CAPITAL EXPENDITURE
An outlay of funds designed to improve the income-producing
capabilities of an asset or to extend its economic life.
CASH-OUT REFINANCE
Refinancing a mortgage at a higher amount than the current balance
in order to transform a portion of the equity into cash.
CAVEAT EMPTOR
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
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
An index based on the interest rate of six month CDs. Used to
set interest rates on some Adjustable Rate Mortgages.
CERTIFICATE OF ELIGIBILITY
A document issued by the Veterans Administration that certifies
eligibility for a VA loan.
CERTIFICATE OF OCCUPANCY
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)
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
A document designating the legal owner of a parcel of real estate.
Usually provided by a title or abstract company.
CERTIFIED GENERAL APPRAISER
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
A sub-classification of appraiser who is only licensed to appraise
residential property, usually up to four units.
CHAIN OF TITLE
The complete history of ownership of a piece of property.
CHATTEL
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
Ownership of property that is not encumbered by any counter-claim
or lien.
CLOSING
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
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
The document detailing the final financial arrangement between
a buyer and seller and the costs paid by each.
COLLATERAL
An asset which is placed at risk to secure the repayment of
a loan.
CO-BORROWER
A second person sharing obligation on the loan and title on
the property.
COLLECTION
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
A second party who signs a loan, along with the borrower, and
becomes liable for the debt should the borrower default.
COMMON LAW
As opposed to statute law. Laws that have been established by
custom, usage and courts over many years.
COMMISSION
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
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
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
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
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
Interest paid on the principal amount, as well as any accumulated
interest.
CONCESSIONS
Additional value granted by a buyer or seller to entice another
party to complete a deal.
CONDEMNATION
The official process by which a property is deemed to be uninhabitable
or unusable due to internal damage or other external conditions.
CONDOMINIUM
A development where individual units are owned, but common areas
and amenities are shared equally by all owners.
CONDOMINIUM CONVERSION
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
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
Connected to or touching along an unbroken boundary
CONTINGENCY
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
A legally binding agreement, oral or written, between two parties.
CONVENTIONAL MORTGAGE
A traditional, real estate financing mechanism that is not backed
by any government or other agency (FHA, VA, etc.).
CONVERTIBLE ARM
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)
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
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)
An index of financial institutions costs used to set interest
rates for some Adjustable Rate Mortgages.
COVENANT
A stipulation in any mortgage that, if not met, can be cause
for the lender to foreclose.
CREDIT
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
A record of debt payments, past and present. Used by mortgage
lenders in determining credit worthiness of individuals.
CREDITOR
A person to whom money is owed.
CREDIT REPORT
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
Large companies that gather and store financial and credit information
about individuals who apply for credit.
CUL-DE-SAC
A dead-end street. One with only one entrance/exit.
DATE OF APPRAISAL
The specific point in time as of which an appraiser designates
the value of a home. Often stipulated as the date of inspection.
DEBT
An obligation to repay some amount owed. This may or may not
be monetary.
DEBT EQUITY RATIO
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
A document indicating the ownership of a property.
DEED-IN-LIEU (OF FORECLOSURE)
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
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
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
A document which dismisses a lien or other claim on a property.
DEED OF SURRENDER
A document used to surrender any claim a person has to a property.
DEFAULT
The condition in which a borrower has failed to meet the obligations
of a loan or mortgage.
DELINQUENCY
The state in which a borrow has failed to meet payment obligations
on time.
DEPOSIT
Cash given along with an offer to purchase property, Also called
EARNEST MONEY.
DEPRECIATION
The natural decline in property value due to market forces or
depletion of resources.
DETACHED SINGLE-FAMILY HOME
A single building improvement intended to serve as a home for
one family.
DISCOUNT POINTS
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
A mortgaged property which has been foreclosed on.
DUE-ON-SALE PROVISION
A clause in a mortgage giving the lender the right to demand
payment of the full balance when the borrower sells the property.
DUPLEX
A single-building improvement which is divided and provides
two units which serve as homes to two families.
DWELLING
A house or other building which serves as a home.
DOWN PAYMENT
An amount paid in cash for a property, with the intent to mortgage
the remaining amount due.
EARNEST MONEY DEPOSIT
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
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
The decline in property value caused by external forces, such
as neighborhood blight or adverse development.
ECONOMIC LIFE
The amount of time which any income-producing property is able
to provide benefits to its owner.
EFFECTIVE AGE
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
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
A building or other improvement on one property which invades
another property or restricts its usage.
ENCUMBRANCE
A claim against a property. Examples are mortgages, liens and
easements.
EQUAL CREDIT OPPORTUNITY ACT (ECOA)
U.S. federal law requiring that lenders afford people equal
chance of getting credit without discrimination based on race,
religion, age, sex etc
EQUITY
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
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
An insurance policy taken out by appraisers to cover their liability
for any mistakes made during the appraisal process.
ESCROW
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
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
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
The payout of funds from an escrow account to pay property expenses
such as taxes and insurance.
ESTATE
The total of all property and assets owned by an individual.
EXAMINATION OF TITLE
The report on the title of a property from the public records
or an abstract of the title.
EXCLUSIVE LISTING
An agreement between the owner of a property and a real estate
agent giving the agent exclusive right to sell the property.
EXECUTOR
The person named in a will to administer the estate.
FACADE
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
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
The price at which two unrelated parties, under no duress, are
willing to transact business.
FANNIE MAE
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)
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)
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
A certified, professional appraiser who estimates the fair market
value of property and receives a set fee in exchange.
FEE SIMPLE
A complete, unencumbered ownership right in a piece of property.
FEE SIMPLE ESTATE
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
A mortgage that is insured by the Federal Housing Administration
(FHA).
FINAL VALUE ESTIMATE
The estimated value of a piece of property resulting from an
appraisal following the USPAP guidelines.
FIRST MORTGAGE
The primary loan or mortgage secured by a piece of property.
FIXED-RATE MORTGAGE (FRM)
A mortgage which has a fixed rate of interest over the life
of the loan.
FIXTURE
Any piece of personal property which becomes permanently affixed
to a piece of real property.
FLOOD INSURANCE
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
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
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
The loss of property or money due to the failure to meet the
obligations of a mortgage or loan secured by that property.
FRONTAGE
The segment of a property that runs along a point of access,
such as a street or water front.
FUNCTIONAL OBSOLESCENCE
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
A steeply angled, triangular roof.
GAMBREL ROOF
A ''barn-like'' roof, where the upper portion of the roof is
less-steeply angled than the lower part.
GENERAL LIEN
A broad-based claim against several properties owned by a defaulting
party.
GEORGIAN
A classic, English-style hose characterized by simple rectangular
shape and multiple stories.
GINNIE MAE
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
Any mortgage insured by a government agency, such as the FHA
or VA.
GRADE
The slope of land around a building.
GRANTEE
Any person who is given ownership of a piece of property.
GRANTOR
Any person who gives away ownership of a piece of property.
GROSS AREA
The sum total of all floor space, including areas such as stairways
and closet space. Often measured based on external wall lengths.
HALF-SECTION
320 acres
HAZARD INSURANCE
Insurance covering damage to a property caused by hazards such
as fire, wind and accident.
HEIGHT ZONING
A municipal restriction on the maximum height of any building
or other structure.
HIDDEN AMENITIES
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
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)
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
A type of mortgage loan that allows the borrower to draw cash
against the equity in his home.
HOME INSPECTION
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
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
A policy which covers a home owner for any loss of property
due to accident, intrusion or hazard.
HOMEOWNERS WARRANTY
An insurance policy covering the repair of systems and appliances
within the home for the coverage period.
HUD MEDIAN INCOME
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
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
Any parcel of land which has been changed from its natural state
through the creation of roads, buildings or other structures.
IMPROVEMENTS
Any item added to vacant land with the intent of increasing
its value or usability.
IMPROVEMENT RATIO
The comparative value of a improved piece of land to its natural,
unaltered state.
INCOME APPROACH
The process of estimating the value of property by considering
the present value of a stream of income generated by the property.
INCOME PROPERTY
A piece of property whose highest and best use is the generation
of income through rents or other sources.
INDEPENDENT APPRAISAL
An estimation of value created by a professional, certified
appraiser with no vested interest in the value of the property.
INSPECTION
The examination of a piece of property, its buildings or other
amenities.
INSURABLE TITLE
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
A percentage of a loan or mortgage value that is paid to the
lender as compensation for loaning funds.
INVESTMENT PROPERTY
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
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
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
A type of foreclosure conducted as a civil suit in a court of
law.
JUMBO LOAN
A mortgage loan for an amount greater than the limits set by
Fannie Mae and Freddie Mac. Often called non-conforming loans.
LATE CHARGE
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
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
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
A type of property ''ownership'' where the buyer actually has
a long-term lease on the property.
LEASE OPTION
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
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
The person or entity who loans funds to a buyer. In return,
the lender will receive periodic payments, including principal
and interest amounts.
LIABILITIES
A persons outstanding debt obligations.
LIABILITY INSURANCE
Insurance that covers against potential lawsuit brought against
a property owner for alleged negligence resulting in damage
to another party.
LIEN
Any claim against a piece of property resulting from a debt
or other obligation.
LIFE CAP
A limit on how far the interest rate can move for an Adjustable
Rate Mortgage.
LIKE-KIND PROPERTY
Any property which is substantially similar to another property.
LINE OF CREDIT
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
Any asset which can be quickly converted into cash at little
or no cost, or cash itself.
LOAN
Money borrowed, to be repaid with interest, according to the
specific terms and conditions of the loan.
LOAN OFFICER
A person that sells loans, representing the lender to the borrower,
and the borrower to the lender.
LOAN ORIGINATION
How a lender refers to the process of writing new loans.
LOAN SERVICING
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)
The comparison of the amount owed on a mortgaged property to
its fair market value.
LOCK-IN
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
The amount of time the lender has guaranteed an interest rate
to a borrower.
MANUFACTURED HOUSING
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
The difference between the interest rate and the index on an
adjustable rate mortgage.
MARGINAL LAND
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
An umbrella organization that is made up of multiple, smaller
home owner's associations. Often found in very large developments
or condominium projects.
MATURITY
The date on which the principal balance of a financial instrument
becomes due and payable.
MERGED CREDIT REPORT
A credit report derived from data obtained from multiple credit
agencies.
METES AND BOUNDS
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
The accumulated land in and around a city or other municipality
which falls under the political and economic influence of that
entity.
MINERAL RIGHTS
The legal right to exploit and enjoy the benefits of any minerals
located below the surface of a parcel of land.
MISREPRESENTATION
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
A financial arrangement wherein an individual borrows money
to purchase real property and secures the loan with the property
as collateral.
MORTGAGE BANKER
A financial institution that provides primary and secondary
mortgages to home buyers.
MORTGAGE BROKER
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
The entity that lends money in a real estate transaction.
MORTGAGE INSURANCE
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)
An fee that is often included in mortgage payments that pays
for mortgage insurance coverage.
MORTGAGE LIFE INSURANCE
A policy that fulfills the obligations of a mortgage when the
policy holder dies.
MORTGAGOR
The entity that borrows money in a real estate transaction.
MULTI-FAMILY PROPERTIES
Any collection of buildings that are designed and built to support
the habitation of more than four families.
NATIONAL SOCIETY OF REAL ESTATE APPRAISERS
An organization founded in 1956 which promotes standards of
professionalism in its members.
NATURAL VACANCY RATE
The percentage of vacant properties in a given area that is
the result of natural turnover and market forces.
NEGATIVE AMORTIZATION
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
The evolution of neighborhood use and demographics over time.
Economic fluctuations, municipal zoning changes and population
shifts can effect the life cycle.
NEIGHBORHOOD
A subsection of a municipality that has been designated by a
developer, economic forces or physical formations.
NET LEASABLE AREA
The space in a development, outside of the common areas, that
can be rented to tenants.
NEW ENGLAND COLONIAL
An architectural style dating from early American history typified
by a two-story building with clapboard siding.
NO-COST LOAN
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
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
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
Any asset which can not be quickly converted into cash at little
or no cost.
NOTE
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
The interest rate stated on a mortgage note.
NOTICE OF DEFAULT
Formal written notice from a lender to a borrower that default
has occurred.
OBSOLESCENCE
The process of an assets value diminishing due to the development
of more desirable alternatives or because of the degradation
of its capabilities.
OCCUPANCY
A physical presence within and control of a property.
OCCUPANCY RATE
The percentage of properties in a given area that are occupied.
OFF-SITE IMPROVEMENTS
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
Designated parking spaces associated with a particular building
or other structure which are not located on public streets.
ON-SITE IMPROVEMENTS
Buildings, structures or other amenities that are erected on
a piece of property and contribute to its value.
OPEN SPACE
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
The amount of cash a home buyer initially invests in the home.
ORIGINAL PRINCIPAL BALANCE
The total amount of principal owed on a mortgage loan at the
time of closing.
ORIGINATION FEE
Refers to the total number of points paid by a borrower at closing.
OWNER FINANCING
A transaction where the property owner provides all or part
of the financing.
OWNER OCCUPIED
The state of property wherein the owner occupies at least some
portion of the property.
PARTIAL INTEREST
A shared ownership in a piece of property. May be divided among
two or more parties.
PARTIAL PAYMENT
A payment of less than the regular monthly amount. Usually,
a lender will not accept partial payments.
PERIODIC PAYMENT CAP
The limit on how much regular monthly payments on an Adjustable
Rate Mortgage can change during one adjustment period.
PERIODIC RATE CAP
The limit on how much the interest rate on an Adjustable Rate
Mortgage can change during any one adjustment period.
PERSONAL PROPERTY
Owned items which are not permanently affixed to the land.
PERSONAL RESIDENCE
The primary domicile of a person or family.
PLANNED UNIT DEVELOPMENT (PUD)
A coordinated, real estate development where common areas are
shared and maintained by an owner's association or other entity.
PLAT
A plan or chart of a piece of land which lays out existing or
planned streets, lots or other improvements.
POINT
A percentage of a mortgage amount (one point = 1 percent).
PRE-APPROVAL
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
Any building or portion thereof which is manufactured and assembled
off site, then erected on a property.
PREPAYMENT
Payment made that reduces the principal balance of a loan before
the due date and before the loan has become fully amortized.
PREPAYMENT PENALTY
A fee that may be charged to a borrower who pays off a loan
before it is due.
PRE-QUALIFICATION
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
The interest rate that banks and other lending institutions
charge other banks or preferred customers.
PRINCIPAL
The amount owed on a mortgage which does not include interest
or other fees.
PRINCIPAL BALANCE
The outstanding balance of principal on a mortgage. Does not
included interest due.
PRINCIPAL, INTEREST, TAXES, AND INSURANCE (PITI)
The most common constituents of a monthly mortgage payment.
PRIVATE MORTGAGE INSURANCE (PMI)
A form of mortgage insurance provided by private, non-government
entities. Normally required when the LOAN TO VALUE RATIO is
less that 20%.
PROPERTY
Any item which is owned or possessed.
PURCHASE AGREEMENT
A written contract signed by the buyer and seller stating the
terms and conditions under which a property will be sold.
QUADRAPLEX
Any building designed to accommodate four families.
QUALIFYING RATIOS
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
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
An architectural style typified by a single-story, low-roof
construction. Popular in the western U.S.
RATE LOCK
A guarantee from a lender of a specific interest rate for a
period of time.
RAW LAND
Any land which has not been developed.
REAL ESTATE
A piece of land and any improvements or fixtures located on
that land.
REAL ESTATE AGENT
A licensed professional who facilitates the buying and selling
of real estate.
REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA)
A federal law requiring lenders to give full disclosure of closing
costs to borrowers.
REAL PROPERTY
Land, improvements and appurtenances, and the interest and benefits
thereof.
REALTOR
A real estate agent or broker who is a member of the National
Association of Realtors.
RECORDER
A local government employee whose role it is to keep records
of all real estate transactions within the jurisdiction.
RECORDING
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
A new loan to pay off an existing loan. Typically to gain a
lower interest rate or convert equity into cash.
RELOCATION SERVICE
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
The amount of principal, interest and other costs that has not
yet been repaid.
REMAINING TERM
The amount of time remaining on the original amortization schedule.
REMODEL
An activity designed to improve the value or desirability of
a property through rebuilding, refurbishing, redecorating or
adding on to it.
REPAYMENT PLAN
A plan to repay delinquent payments, agreed upon between a lender
and borrower, in an effort to avoid foreclosure.
REPLACEMENT RESERVE FUND
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
A piece of property whose highest and best use is the maintenance
of a residence.
REVOLVING DEBT
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
An agreement giving a person the first opportunity to buy or
lease a property before the owner offers it for sale to others.
RURAL
An area outside of an established urban area or metropolitan
district.
SALE PRICE
The actual price a property sells for, exclusive of any special
financing concessions.
SALES COMPARISON APPROACH
An appraisal practice which estimates the value of a property
by comparing it to comparable properties which have sold recently.
SCARCITY
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
A loan secured by the equity in a home, when a primary mortgage
already exists.
SECONDARY MORTGAGE MARKET
An economic marketplace where mortgage bankers buy and sell
existing mortgages.
SECURED LOAN
A loan that is backed by collateral. In the case of a mortgage
loan, the collateral is the house.
SECURITY
The property used as collateral for a loan.
SEMIDETACHED HOUSING
Two residences which share a common wall.
SERVICER
A financial institution which collects mortgage payments from
borrowers and applies the appropriate portions to principal,
interest and any escrow accounts.
SERVICING
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
A property designed and built to support the habitation of one
family.
SUBDIVISION
A residential development that is created from a piece of land
which has been subdivided into individual lots.
SUBJECT PROPERTY
A term which indicates a property which is being appraised.
SURVEY
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
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
Any property which is not taxed.
TENANCY
The right to occupy a building or unit.
TENANCY IN COMMON
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
When a lender uses a third party to originate and package loans
for sale to the secondary market (Fannie Mae, Freddie Mac).
TITLE
A specific document which serves as proof of ownership.
TITLE COMPANY
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
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
The process whereby the TITLE COMPANY researches a properties
title history and ensures that no outstanding claims exist.
TRANSFER OF OWNERSHIP
Any means by which the ownership of a property changes hands.
TRANSFER OF TAX
Taxes payable when title passes from one owner to another.
TRUSTEE
A fiduciary who holds or controls property for the benefit of
another.
TRUTH IN LENDING
A federal law requiring full disclosure by lenders to borrowers
of all terms, conditions and costs of a mortgage.
TUDOR
A style of architecture typified by exposed stone, wood and
brick construction. Similar in style to English manor homes.
UNDER IMPROVED LAND
A piece of land which has been improved, but not to the full
extent of its potential.
UNENCUMBERED PROPERTY
Any property which has no outstanding claims or liens against
it.
UNIFORM STANDARDS OF PROFESSIONAL APPRAISAL PRACTICE (USPAP)
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
The span of time over which a property can be used or can provide
benefits to its owner.
VACANCY RATE
The current percentage of vacant properties in a given area,
regardless of why they are vacant.
VA MORTGAGE
A mortgage that is guaranteed by the Department of Veterans
Affairs (VA).
VARIANCE
An exception to municipal zoning regulations granted for a specific
time period to allow for non-conforming use of the land.
VESTED
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)
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
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
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
A term used to indicate the normal damage inflicted on a property
through every-day use.
ZERO LOT LINE
A municipal zoning category wherein a building or other fixture
may abut the property line.
ZONE
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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