Glossary of real estate terms used on this site

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Term Definition
AAA tenant

A rating given to a prime tenant with the highest credit rating. The term is often used to describe the credit rating of a retail store. For example, a developer who plans to build a shopping center will seek a "Triple A" tenant to help secure financing.

Absorption rate

A rate that is a forecast of how quickly properties can be sold or leased in a given area. For example, if a developer can lease 20\% of the units available to the market in a given area for a given time, the absorption rate is 20 percent.

Abstract of title

A summary of the public records relating to the title to a particular piece of land. An attorney or title insurance company reviews an abstract of title to determine whether there are any title defects which must be cle ared before a buyer can purchase clear, marketable, and insurable title.

Abut

Connect or join. If two pieces of property touch each other, they abut each other.

Abutment

A load-bearing vertical member of a structure. A wall or a column are examples of abutments.

Acceleration Clause

A provision in a mortgage that gives the lender the right to demand payment of the entire principal balance if a monthly payment is missed.

Acceptance

An offeree's consent to enter into a contract and be bound by the terms of the offer.

Accessibility

All new construction of covered multifamily buildings must include certain features of accessible and adaptable design. Units covered are all those in buildings with four or more units and one or more elevators, and all ground floor units in buildings without elevators.

Accessory building

A building or structure detached from but on the same property as a main building. Examples of accessory buildings are garages, storage buildings and guest houses.

Accident and health premium

A premium paid by a mortgagor for an insurance policy to ensure the continuance of mortgage payments if the borrower is disabled or ill.

Accommodation party

One who accommodates another by signing a note or a bill without receiving compensation (a note being a negotiable instrument such as a promissory note).

Accrued interest

Interest earned but not paid since the last due date.

Acoustical tile

Tile that absorbs sound. Is often used in the ceilings of apartment units and offices.

Acre (AC)

Land that measures 43,560 square feet. A lot 208.71' x 208.71' is 4,840 square yards, 4,047 square meters, 160 square rods, 0.4047 hectare or 43,560 square feet.

Act of God

An event that causes damage by nature such as a flood, earthquake or winds; an occurrence not caused by man.

Action to quiet title

A court action to establish ownership of real property. This court action usually removes any interest or claim to title of real estate. The action results in removing any cloud on the title. Normally a lender will not commit to a mortgage with a cloud on the title. If the complainant is successful in the court action, the title is made quiet, or is clean.

Ad valorem

A method of taxation using a fixed proportion of property value; for example, real estate taxes collected at the rate of a specific dollar amount of appraised value or assessment. People use the ad valorem method as a formula to decide how much tax to pay the government. A commonly used formula for computing taxes is as follows (assumptions: properties are assessed at 25\% of valuation, appraisal is $100,000 and the tax rate is $7.50 per $100): $100,000 x 25\% = $25,000 1?2 $100 = 250 ($100 units), 250 x $7.50 = $1,875 1?2 12 (12 months) = $156.25 per month

Adaptive reuse

Providing a new use for an older, but sound, structure. An example would be an abandoned warehouse converted into business or residential condominiums.

Add-on interest

Interest added to the amount of the loan on the front end, or beginning of the loan repayment period. The balance is then paid by installments. This form of interest is much more expensive than simple interest paid on the entire amount for the entire term of the loan.

Additional Principal Payment

A payment by a borrower of more than the scheduled principal amount due in order to reduce the remaining balance on the loan.

Adjoin

Connect or join. If two pieces of property touch each other, they adjoin or abut each other.

Adjustable living expenses

Expenses you can change, such as costs of groceries, utilities, telephone.

Adjustable-Rate Mortgage (ARM)

A mortgage where the interest rate is not fixed, but changes during the life of the loan in line with movements in an index rate. The rate is usually based on indexes tied to the nation's economy. You may also see ARMs referred to as AMLs (adjustable mortgage loans) or VRMs (variable-rate mortgages).

Adjusted Basis

The original cost of a property plus the value of any capital expenditures for improvements to the property minus any depreciation taken.

Adjustment Date

The date on which the interest rate changes for an adjustable-rate mortgage (ARM).

Adjustment Period

The period that elapses between the adjustment dates for an adjustable-rate mortgage (ARM).

Administrative Services Center

HUD field offices providing administrative support in the areas of staffing, labor relations, computer, and a variety of day-to-day operational support needs such as space, supplies, equipment, furniture and mail to HUD employees in the field. (HUDWEB)

Administrator

A person appointed by a probate court to administer the estate of a person who died intestate.

Advance

To give someone a draw or payment by making them a loan.

Affidavits

As part of the closing process, you're likely to sign numerous affidavits. You may be required, for example, to sign an affidavit of occupancy. It states that you will use the property as a principal residence. Or, you and the seller may have to sign an affidavit stating all of the improvements to the property required in the sales contract were completed before closing.Your lender can provide additional information regarding any of these documents you will sign.

Affordability Analysis

A detailed analysis of your ability to afford the purchase of a home. An affordability analysis takes into consideration your income, liabilities, and available funds, along with the type of mortgage you plan to use, the area where you want to purchase a home, and the closing costs that you might expect to pay.

Affordable Housing Program (AHP)

A program of the Federal Home Loan Bank system which allows the Regional Banks of the System to make subsidized funds available through member institutions for the production of affordable housing to serve f amilies below 80 \% of their area median income (AMI).

Agrarian

Something that relates to land or to a distribution or division of land.

Agreement of sale

Known by various names, such as contract of purchase, purchase agreement, or sales agreement according to location or jurisdiction. A contract in which a seller agrees to sell and a buyer agrees to buy, under certain speci fic terms and conditions spelled out in writing and signed by both parties.

Air rights

The right to use the space or air above the ground but not the ground itself. can be sold or leased. Ownership of land includes air rights above the property. Some use of air rights, such as traveling through airspace by airplane no longer require the approval of the property owner.

Alcove

A recessed room connected to a main or larger room.

Alienation

A transfer or conveyance of property. is voluntary when it is with the consent of the owner. Involuntary alienation is a transfer of property without the consent of the owner, as in a foreclosure, adverse possess ion and eminent domain.

Alienation clause

A clause closely associated in meaning with Due-On-Sale Clause and Acceleration Clause. An alienation clause in a mortgage can give the lender the option to call the loan (declare the entire balance due) when the proper ty owner transfers ownership, title or interest without the lender' s consent.

All Inclusive Trust Deed (AITD)

Also known as a Wraparound Mortgage. A junior lien on a property which encompasses the senior financing. Enables the borrower to increase the amount of borrowing without paying off the original loan or paying the higher interest rates associated with other types of secondary financing. The borrower makes one payment (usually to the seller) from which the senior financing is paid with the balance going to ward the holder of the Note. May be advantageous to the seller in that he can experience an additional return on money (the senior financing) which he never loaned.

Allodial system

Ownership of land with the owner having full and absolute dominion over the property. This system is the basis for our property rights in the United States. A contrasting system is the feudal system, which gives owners hip to a king or sovereign who gives rights to the citizenry to occupy the land for a period of time.

Allowance for vacancy and income loss

An allowance used on pro-forma or profit-and-loss projections for income properties. You subtract an allowance for vacancy from gross income to decide net effective income (income before expenses). An investor cannot use rental property that is 100\% occupied. Depending on the market area, the vacancy allowance for income properties such as apartments is usually from 5\% to 10\% of the gross rental.

Alluvion

The gradual building up of soil deposited by water against a shore. Also Alluvium.

Amenity

A feature of real property that enhances its attractiveness and increases the occupant's or user's satisfaction although the feature is not essential to the property's use. Natural amenities include a pleasant or desirable location near water, scenic views of the surrounding area, etc. Human-made amenities include swimming pools, tennis courts, community buildings, and other recreational facilities.

American Bankers Association (ABA)

A professional organization of banks based in Washington, D.C., that lobbies the federal government and monitors federal and state laws and regulations on issues pertinent to the banking industry.

American Institute Of Architects (AIA)

A professional organization of architects. All registered architects subscribe to AIA' s standards of ethical practice.

American Institute Of Certified Public A

A professional organization of certified public accountants. AICPA is responsible for developing "GAAP" accounting -- generally accepted accounting principles. AICPA awards th e CPA designation.

American Institute Of Real Estate Apprai

American Institute Of Real Estate Appraisers (AIREA) Formerly a member organization of the National Association of REALTORS (NAR). AIREA severed its affiliation with NAR in 1990 and merged with the Society of Real Estate Appraisers to form The Appraisal Institute. The Appraisal Institute officially began operation on January 1, 1991.

American Land Title Association (ALTA)

An organization comprising title insurance companies, abstractors and attorneys specializing in real property law. ALTA has adopted many title insurance policy forms that standardize coverage nation ally for property owners and lenders. Many states require ALTA standardized title insurance policies.

Amortization

The gradual repayment of a mortgage loan by installments.

Amortization Schedule

A timetable for payment of a mortgage loan. An amortization schedule shows the amount of each payment applied to interest and principal and shows the remaining balance after each payment is made.

Amortization Term

The amount of time required to amortize the mortgage loan. The amortization term is expressed as a number of months. For example, for a 30-year fixed-rate mortgage, the amortization term is 360 months.

Amount financed

The base loan amount without regard to closing costs, discount points or mortgage insurance premiums. This dollar amount is associated with a disclosure statement used in compliance with the Truth-in-Lending Act.

Anaconda mortgage

A mortgage that uses the subject property as collateral for all debts from various loans owed to the lender. Courts may disagree with what an anaconda mortgage intends since they may require a direct relationship between each loan and the collateral acquired by the loan proceeds.

Analysis of Impediments (AI)

A HUD requirement for each state to conduct an analysis to determine impediments to fair housing choice within the state. The Commonwealth must take appropriate actions to overcome the effects of any impediments identified through that analysis. Fair Housing Planning Guide, Volume I, Department of Housing and Urban Development, 1993

Anchor bolt

A bolt that attaches the sill of a house to the foundation wall.

Anchor tenant

A retail store in a shopping center used as a major draw to the center. The presence of an anchor tenant helps secure financing for the center and enhances the chance of success for other tenants as it draws the public to i ts store. The store is normally part of a major chain and is a name easily recognized by the public. Depending on the size of the shopping center, there can be several anchor tenants.

Ancillary income

Income that is secondary in nature and not the main reason for being in the business; income that an investor would not receive if they were not in a particular business.

Annex

To attach or add; to add to something else.

Annual Debt Service (ADS)

The total amount of principal and interest to be paid each year to satisfy the obligations of a loan contract.

Annual Mortgagor Statement

A report sent to the mortgagor each year. The report shows how much was paid in taxes and interest during the year, as well as the remaining mortgage loan balance at the end of the year.

Annual Percentage Rate

The cost of a mortgage stated as a yearly rate; includes such items as interest, mortgage insurance, and loan origination fee (points).

Annual Percentage Rate (APR)

A method for calculating an interest rate to the interest collected, discount points charged to either purchaser or seller or both, certain costs related to closing and mortgage insurance premiums.

Annuity

An amount paid yearly or at other regular intervals, often on a guaranteed dollar basis.

Application

A form used to apply for a mortgage loan and to record pertinent information concerning a prospective mortgagor and the proposed security.(See also "Loan Application")

Appointments

Decorative items such as furnishings and equipment in a building.

Apportionment

A division of expenses, liabilities, responsibilities or property among individuals.

Appraisal

A written analysis of the estimated value of a property prepared by a qualified appraiser. Contrast with home inspection.

Appraisal Institute

An organization that officially began operation on January 1, 1991. The Appraisal Institute is the result of a merger of the former American Institute of Real Estate Appraisers (AIREA) and the Society of Real Estate A ppraisers. The surviving designations are the MAI (Member of the Appraisal Institute) and SRA (Senior Residential Appraiser).

Appraised Value

An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property.

Appraiser

A person qualified by education, training, and experience to estimate the value of real property and personal property.

Appreciation

An increase in the value of a property due to changes in market conditions or other causes. The opposite of depreciation.

Appropriation

The private taking of property and dedicating it to public use. It is also the dedication of public land for a private use.

Appurtenance

An item attributable to the land, such as improvements or an easement. Something that comes from outside the property but is considered part of the property and transfers with the property upon sale or other transfer. A u tility easement is an example of an appurtenance.

Apron

An area such as the entrance to a driveway or the concrete portion around a swimming pool.

Arm's-length transaction

A transaction between individuals who do not have a conflict of interest or reason for collusion. The parties are as strangers to each other. The value of property should be questioned for fairness or accuracy if there is not an arm's-length transaction between the seller and buyer. An appraiser should not use comparable sales not closed by an arm's-length transaction in the market approach to value.

Army Corps of Engineers (COE)

The Corps of Engineers is an agency of the U.S. Army that provides comprehensive engineering, management and technical support to the Department of Defense, other agencies, and to State and Local governments. Army Corps of Engineers Internet site: www.ace.army.mil

Arrears

At the end of a period. You pay interest on home mortgages in arrears. You pay rent in advance. For example, a mortgage payment due May 1 is for the interest for April; rent due May 1 is for the month of May. The term ca n pertain to delinquent mortgage payments. A mortgage loan that is three months delinquent can be said to be three months in arrears.

Artesian well

A deep well where water rises to the surface by natural pressure.

As is

Property sold in its present condition with no warranties made about the plumbing, heating, electrical system or infestation of termites is said to be sold "as-is."

Assemblage

Combining pieces of property to make one large, attractive property. The added value is plottage. People often use option contracts with the practice of assemblage.

Assessed value

The valuation placed upon property by a public tax assessor for purposes of taxation.

Assessment

The process of placing a value on property for the strict purpose of taxation. May also refer to a levy against property for a special purpose, such as a sewer assessment.

Assessment Rolls

The public record of taxable property.

Assessor

A public official who establishes the value of a property for taxation purposes.

Asset

Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, and so on).

Assign

The act of transferring rights or property to another.

Assignee

One who receives rights or property. An assignee stands in the place of the assignor for rights, liabilities and interest in the property.

Assignment

The transfer of a mortgage from one person to another.

Assignment of Mortgage (A/M)

A transfer of a mortgage from one mortgagee to another. Sometimes, FHA will accept an assignment of a mortgage to help a qualified, distressed mortgagor.

Assignment of servicing

A process of assigning the servicing rights from one lender to another.

Assignor

One who assigns rights or property.

Assumability

When a home is sold, the seller may be able to transfer the mortgage to the new buyer. This means the mortgage is assumable. Lenders generally require a credit review of the new borrower and usually charge a fee for the assumpt ion. Most mortgages now contain a due-on-sale clause, which means that the mortgage may not be transferable to a new buyer. Instead, the lender may insist that the entire balance is paid in full when the home is sold. Assumability may benefit the seller especially during periods of higher interest rates or after periods of property depreciation.

Assumable Mortgage

A mortgage that can be taken over ("assumed") by the buyer when a home is sold. A provision in an assumable mortgage allows a buyer to assume responsibility for the mortgage from the seller. The loan does not need to be paid in full by the original borrower upon the sale or transfer of the property.

Assumption

The transfer of the seller's existing mortgage to the buyer.(See also "Assumable Mortgage")

Assumption Clause

A provision in an assumable mortgage that allows a buyer to assume responsibility for the mortgage from the seller. The loan does not need to be paid in full by the original borrower upon sale or transfer of the property.

Assumption Fee

The fee paid to a lender (usually by the purchaser of real property) resulting from the assumption of an existing mortgage.

Assumption of mortgage

An obligation undertaken by the purchaser of property to be personally liable for payment of an existing mortgage. In a full assumption, the purchaser is substituted for the original mortgagor in the mortgage instr ument and the original mortgagor is to be released from further liability in the assumption, the mortgagee's consent is usually required. The original mortgagor should always obtain a written release from further liability if he desires to be fully released under the assumption. Failure to obtain such a release renders the original mortgagor liable if the person assuming the mortgage fails to make the monthly payments. (Not to be confused with a subject-to purchase.)

Atrium

Usually a space in the center of a building with a translucent ceiling and sometimes decorated with such amenities as a water fountain and tropical plants.

Attachment

The actual taking of property into the custody of a court to serve as collateral for a judgment sought in an impending suit. Law, not private consent, creates the lien. This form of legal action is not available for obligation s secured by collateral, as in the case of a mortgage.

Attestation

The act of witnessing a signature on an instrument.

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