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.
AD VAL OREM TAX
Taxes assessed based on the value of the land and improvements
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 opinion 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.
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.
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.
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.
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 opinion of value of the subject property and support that opinion with corroborating information.
APPRAISED VALUE
An opinion of the fair market value of a property as developed by a licensed, certified appraiser following accepted appraisal principals.
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 RATIO
The comparative relationship of a property's assessed value to its market value.
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.
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.
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.
BTU
British Thermal Unit. A unit of measurement used to describe heating or cooling capacity.
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.
CAPE COD COLONIAL
A single-story house style made popular in New England. Often characterized by a steep roof with gables.
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.
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.
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.
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 that requires a complete home inspection before it becomes official.
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.
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.
DETACHED SINGLE-FAMILY HOME A single building improvement intended to serve as a home for one family.
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.
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.
ECONOMIC DEPRECIATION
The decline in property value caused by external forces, such as neighborhood blight or adverse development.
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.
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
ERRORS AND OMISSIONS INSURANCE
An insurance policy taken out by appraisers to cover their liability for any mistakes made during the appraisal process.
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 go into the escrow account each month.
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.
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 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).
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.
FORFEITURE
The loss of property or money due to the failure to meet the obligations of a mortgage or loan secured by that property.
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.
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.
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.
HIDDEN AMENITIES
Assets of a property which contribute to its value, but are not readily apparent. Examples might include upgraded or premium building materials.
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. HECM's typically do not have to be repaid until the borrower is no longer occupying the home.
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.
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 payee's 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.
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.
LEASEHOLD ESTATE A type of property ''ownership'' where the buyer actually has a long-term lease on the property.
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.
LIABILITY INSURANCE
Insurance that covers against potential lawsuit brought against a property owner for alleged negligence resulting in damage to another party.
LIKE-KIND PROPERTY
Any property which is substantially similar to another property.
LOAN-TO-VALUE RATIO (LTV) The comparison of the amount owed on a mortgaged property to its fair market value.
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.
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.
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.
MINERAL RIGHTS
The legal right to exploit and enjoy the benefits of any minerals located below the surface of a parcel of land.
MORTGAGEE
The entity that lends money in a real estate transaction.
MORTGAGE INSURANCE
A policy that fulfills those obligations of a mortgage when the policy holder defaults or is no longer able to make payments.
MORTGAGE INSURANCE PREMIUM (MIP)
A 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.
NATIONAL ASSOCIATION OF MASTER APPRAISERS (NAMA)
A non profit professional association organized in 1982, dedicated to the advancement of professionalism in real estate appraisal.
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.
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.
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.
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.
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 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.
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.
PLANNED UNIT DEVELOPMENT (PUD)
A coordinated, real estate development where common areas are shared and maintained by an owner's association or other entity.
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.
PRIME RATE
The interest rate that banks and other lending institutions charge other banks or preferred customers.
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%.
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 borrower's 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.
RAW LAND
Any land which has not been developed.
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.
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.
REMAINING TERM
The amount of time remaining on the original amortization schedule.
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.
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.
ROOF PITCH
The degree of slope in a roof.
RURAL
An area outside of an established urban area or metropolitan district.
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.
SEMIDETACHED HOUSING
Two residences which share a common wall.
SHEETROCK
Also called drywall, the gypsum board commonly used on interior walls.
SILL PLATE
The lumber used around the foundation to support exterior wall framing.
STUCCO
A textured plaster exterior (and occasionally interior) wall finish.
SUBDIVISION
A residential development that is created from a piece of land which has been subdivided into individual lots.
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.
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 that 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.
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.
ZERO LOT LINE
A municipal zoning category wherein a building or other fixture may abut the property line. |