| AAA TENANT
A tenant with a top credit rating. To a real estate developer,
attracting such a tenant is important since the ability
to arrange both construction and permanent financing for
a major commercial project, such as a shopping center
or office building, is often dependent upon pre- leasing
a certain amount of the space to an AAA tenant(s).
AAE Accredited
Assessment Evaluator. A professional designation awarded
by the International Association of Assessing Officers.
ABANDONMENT
The voluntary release of a claim or right one has in
a piece of property with the clear intention of terminating
possession or interest and without giving this interest
to anyone else. Abandonment includes both the intention
to release any claim one has against the property as
well as the actual act of "abandoning" the
property.
ABATEMENT
A decrease or reduction in the amount of a charge such
as rent. For example, a tenant receives an abatement
of rent during the time the leased space cannot be inhabited
due to fire or flood damage.
ABLE A term
referring to the financial capability of a purchaser.
The word is often used in a phrase appearing in real
estate listing agreements and sales contracts as "ready,
willing and able."
ABNORMAL SALE
A sale that is not typical within the context of what
is happening in the marketplace.
ABODE A
home or place of residence.
ABROGATE
To repeal or cancel. For example, a law could be repealed
(abrogated) by legislative
action.
ABSENTEE OWNER
The owner(s) of property who does not physically reside
on the property. When this occurs both the rental as
well as the upkeep of the property are normally done
by someone other than the actual owner, such as a property
manager.
ABSORPTION RATE
The percentage of a particular type of real estate that
can be sold or leased in a particular location during
a certain period of time.
ABSTRACT OF TITLE
A condensed chronological history of all recorded instruments
in the chain of title which affect the title.
ABSTRACTION (EXTRACTION)
METHOD A method of estimating the value of
land by establishing a ratio of site value to total
property value based on data from comparable improved
properties. The ratio derived from comparable properties
is then applied to the total value of the property being
appraised to estimate the value of the land.
ABUT To
border on or to share a common boundary. For example,
a property owner could have land that "abuts"
a highway, which means the two properties border each
other.
ACCELERATED DEPRECIATION
The method(s) of depreciation for income tax purposes
which increases the write-off at a rate higher than
under the straight-line method of depreciation.
ACCELERATION CLAUSE
A clause in a promissory note, mortgage or deed of trust
giving the creditor (mortgagee) the legal right to demand
immediate payment of all future payments due to the
occurrence of some event such as the default on an installment
payment or the failure to keep the property adequately
insured.
ACCEPTANCE
A voluntary expression by the person receiving the offer
(the offeree, and quite often the seller of the property)
to be bound by the exact terms of the offer in the manner
requested or authorized by the person making the offer
(the offeror, and quite often the potential buyer of
the property). An acceptance must be unequivocal and
unconditional.
ACCESS The
right to enter upon and leave property. The owner of
land which abuts or adjoins a road or highway normally
has a vested right to come and go from his or her land
to the highway without obstruction, subject to limitations
imposed by the governing body.
ACCESSIBILITY
The ease with which a person can either enter or exit
a particular parcel of land. The accessibility of a
particular parcel is a function of many things such
as frontage to a road, traffic flow, and topography.
Good accessibility will usually result in higher value;
likewise, a parcel of land with poor accessibility will
normally sell for less in the marketplace.
ACCESSION
The legal right that entitles the owner of land to all
that the soil produces or all that is added to the land
either intentionally or by mistake.
ACCESSORY BUILDING
A second building on a lot and one that is not considered
to be the primary building. A storage shed or a detached
garage would be an accessory building.
ACCORD AND SATISFACTION
An agreed-to substitution of a different performance
for the original obligation, the accord being the agreement
and the satisfaction the execution or performance.
ACCREDITED RESIDENTIAL
MANAGER (ARM) A professional designation awarded
by the Institute of Real Estate Management (IREM), an
affiliate of the National Association of Realtors. The
designation is intended for those persons specializing
in the management of residential property.
ACCRETION
The accumulation of land (soil) as a result of the gradual
washing or motion of water (alluvion).
ACCRUED
An accumulation over a certain period of time, such
as accrued depreciation or accrued interest.
ACCRUED DEPRECIATION
Any diminishment or loss of utility or value of a building
from the time of initial construction to the present.
Accrued depreciation is calculated as the difference
between what it would cost to replace the building new
and the current appraised value of the building.
ACCRUED INTEREST
Unpaid interest that has already been earned.
ACKNOWLEDGMENT
A formal declaration to a public official by a person
who has signed (executed) an instrument which states
that the signing was voluntary.
ACQUISITION
The act or process by which property ownership is achieved.
The ways in which title to real property is transferred
may be classified as (1) voluntary conveyance (deed),
(2) transfer by devise (dying with a will) or descent
(dying without a will), (3) transfer by adverse possession,
(4) transfer by accession and (5) transfer by public
action or by operation of law.
ACQUISITION COST
The total cost of purchasing or acquiring title to real
property. In addition to the sales price, additional
costs could also include loan origination fees, appraisal
fee, credit report fee, title charges, attorney fees
and other normal closing costs.
ACRE A measure
of land in whatever shape equal to 43,560 square feet,
4,840 square yards or 160 square rods. A square parcel
of land measuring 208.71 feet on each side contains
one acre. There are 640 acres in a section of land.
ACREAGE PROPERTY
A large tract of land that has had few, if any, improvements
made either "to" the land, such as roads or
the platting of individual lots, or "on" the
land, such as buildings.
ACTION TO QUIET TITLE
A lawsuit filed by a person to remove a cloud on title
or clear the claims of others filed against a parcel
of property. The objective of such action is to have
a court rule that the claims filed against the property
are invalid.
ACT OF GOD
Any act of nature such as rain, lightning, floods or
earthquakes. Many casualty insurance policies do not
cover losses resulting from an "Act of God."
ACTUAL AGE
The historical (chronological) age of a building, as
for example a building constructed ten years ago is
ten years old in actual age. Actual age should not be
confused with effective age which is the age of a building
that is indicated by the condition and utility of the
improvement. It should be clear that the amount of maintenance
and care given to a building helps determine its effective
age. For example, a ten-year-old building might have
an effective age of twenty-five years because of poor
or deferred maintenance.
ACTUAL AUTHORITY
The power that a principal has expressly conferred upon
an agent or any power that is incidental or necessary
to carry out the express power of the agency. This power
may be broad, general power or it may be limited, special
power.
ACTUAL CASH VALUE
The monetary worth of a structure for insurance purposes.
Actual cash value is calculated by taking the replacement
cost of the property and then subtracting the value
of the physical wear and tear of the property.
ACTUAL DAMAGES
The compensation received by an injured party for the
actual injuries or loss suffered by the party.
ACTUAL EVICTION
The violation of any material breach of covenants by
the landlord or any other act which wrongfully deprives
the tenant of the possession of the premises.
ACTUAL POSSESSION
The physical occupancy and control by someone of a parcel
of real estate. For example, if John has clear title
to his house and is living in the house then he is in
actual possession of the house. A distinction should
be made between actual possession and constructive possession
which occurs when a person has the legal right to assume
occupancy but does not actually occupy the space.
ADC LOAN
A type of loan intended to cover the three phases of
a project: (1) acquisition, (2) development, and (3)
construction. Such loans, while considered more risky
than some other types of real estate loans, are normally
made with a variable interest rate and are expected
to be repaid over a reasonably short period of time.
ADDENDUM
Something that is added and thus made part of a document.
Quite often a real estate listing agreement or sales
contract is a pre-printed form and thus may not have
the space within the document to include specific and
detailed information that the parties to the contract
wish to include.
ADD-ON-INTEREST
A method of calculating the amount of interest due by
taking the simple interest that would be charged if
the loan principal amount was not amortized over the
term of the loan. Periodic installments are thus calculated
by dividing the sum of the add-on interest and original
principal by the number of periods in the term.
ADEQUATE PUBLIC FACILITIES
ORDINANCE A local government ordinance that
requires that certain public facilities such as road
and utilities be completed or soon to be completed before
any new real estate development can be permitted. This
technique is used by municipalities to control growth
and direct new development toward areas where adequate
public facilities exist.
ADJACENT LAND
Land lying close to or near another parcel, though the
two parcels may not actually touch. The term should
not be confused with adjoining land which exists when
two parcels are actually jointed to each other.
ADJUNCTION
The process of adding or annexing a parcel of land to
a larger parcel.
ADJUSTABLE RATE MORTGAGE
(ARM) A type of real estate loan in which either
the interest rate charged or the length of the loan,
or both, can change. Adjustable rate mortgages became
very popular during the 1980s due primarily to the reluctance
of lenders to quote a fixed interest rate loan to potential
borrowers. By using an ARM, a lender is able to pass
on the uncertainty of changes in interest rates to the
borrower if rates change during the life of the loan.
ARMs are normally tied to some index such as government
securities.
ADJUSTED COST BASIS
The value of property for accounting purposes used to
determine the amount of gain or loss realized by the
owner upon the sale of the property.
ADJUSTED SALES PRICE
The estimated sales price of a comparable property after
additions and/or subtractions have been made to the
actual sales price for improvements and deficiencies
when compared to the subject property being appraised.
ADJUSTMENTS The
additions and subtractions made in the market data or
comparable sales approach to value to account for differences
in location, design, age, etc. between the properties
being used as comparables and the subject property being
appraised.
ADMINISTRATOR
A person appointed by a court to administer or settle
the estate of a deceased person who has died intestate
(dying without a will).
ADMINISTRATRIX
Feminine form of administrator.
ADMINISTRATOR'S DEED
A conveyance of property which is issued to a grantee
(purchaser) who purchases property from an estate.
ADULT A
person who has attained the age of majority and thus
has the legal capacity to be bound under a contract.
The age of majority varies from state to state.
AD VALOREM
A Latin prefix meaning "according to value."
Local and state governments levy taxes on real property
based on the assessed value of the property. Two different
pieces of property with the same assessed value have
the same ad valorem tax.
ADVANCE
The word has two common meanings in real estate finance:
(1) to pay or advance money before it is due, and (2)
to disburse working capital to a builder/developer through
a construction loan. Under the first meaning, an owner
might have both a first mortgage and a second mortgage
on a parcel of real estate.
ADVERSE POSSESSION
A method of acquiring title to real property by possession
for a statutory period of time.
AESTHETIC VALUE
The intangible value of property created when the property
possesses unique characteristics or features that make
it attractive.
AFFIANT
The person who makes an affidavit.
AFFIDAVIT
Latin meaning "has pledged his faith." A written
statement of facts made voluntarily and sworn to under
oath before a public official or other persons authorized
to administer such an oath.
AFFIDAVIT OF TITLE
A sworn statement by the seller of real estate that
no defects of title other than those stated in the sales
contract or deed exist in the title being conveyed.
AFFIRM Ratification
of a voidable contract by the party who is to be bound
under the contract.
AFFIRMATION
A solemn and formal declaration attesting to the truth
of some matter. In certain instances, an affirmation
is substituted for an oath, as for example, when a person
for religious or personal reasons does not wish to take
an oath.
AFFIRMATIVE FAIR
HOUSING MARKETING PLAN Action taken with the
intent of encouraging minority integration in housing.
The Department of Housing and Urban Development (HUD)
has required an affirmative fair housing marketing plan
from all subdivisions, multi-family projects and mobile
home parks of five or more units before these projects
are eligible for participation in various federal programs,
including home mortgage programs.
AFTER ACQUIRED TITLE
Legal ownership in real property acquired by someone
who had previously transferred his or her legal interest
in the property.
AFTER-TAX CASH FLOW
The spendable cash from an income- producing asset,
such as an office building or apartment complex, calculated
by taking gross income and subtracting fixed and variable
costs, replacement for reserves, debt service plus tax
savings or minus tax liability.
AFTER-TAX EQUITY
YIELD RATE The internal rate of return on the
equity investment after considering federal income taxes.
AFTER-TAX PROCEEDS
FROM RESALE The amount of money a property
seller would receive from a property sale after subtracting
transaction costs, capital gains taxes and other expenses.
Generally, this figure is calculated by taking the selling
price less the sum of the existing debt, the income
or capital gains taxes, and the expenses of sale.
AGE-LIFE METHOD
A method of estimating accrued depreciation by applying
to the reproduction cost new of the property the ratio
of the property's effective age to its economic useful
life.
AGENCY A
relationship in which one party (known as the principal)
authorizes another party (the agent) to act as the principal's
representative in dealing with third parties. Agency
law generally involves rights and liabilities among
these three parties.
AGENCY BY ESTOPPEL
(Ostensible Agency) A type of agency relationship that
occurs when the principal in a principal-agent relationship
leads a third person to believe that someone is an agent.
The principal may create the impression of agency either
intentionally or negligently.
AGENCY BY NECESSITY
An agency relationship in which authority to act is
created by operation of law in an emergency. During
such an emergency, it is generally unnecessary to gain
consent from a principal in order for a person to act
to protect property or person.
AGENCY BY RATIFICATION
A type of agency relationship that occurs when a principal
agrees to be bound by the acts of a person purporting
to act as an agent, even though the person was not in
fact an agent. The principal may also be bound if there
are acts of an agent who acted beyond the scope of authority.
AGENT One
who acts for and in the place of a principal for the
purpose of affecting the principal's legal relationship
with third persons. The power of an agent to affect
the principal's legal relations for lawful purposes
is called authority.
AG LAND
Land zoned for agricultural use such as farmland or
land used to raise livestock.
AGGRAVATION COSTS
The annoyance and irritation to a driver or passenger
during a linkage trip caused by congestion, bad weather,
delay or other inconveniences.
AGREEMENT
An expression of mutual assent, or a meeting of the
minds, by two or more parties on a given proposition.
AGRICULTURAL PROPERTY
Land zoned for agricultural or farming activities.
AIR RIGHTS
The right to use, control and occupy the space above
a particular parcel of real estate.
ALC Accredited
Land Consultant. A professional designation awarded
by the Realtors Land Institute to people involved in
the marketing and brokerage of land.
ALIENATION
The voluntary transfer of property and possession of
the land or tenements from one party to another.
ALIENATION CLAUSE
A provision often included in a mortgage or
deed of trust that legally permits the lender (mortgagee)
to demand payment of all the outstanding principal if
the property is sold or transferred by the borrower
(mortgagor). Such a provision is also commonly known
as a due-on-sale clause.
ALLOCATION (ABSTRACTION)
METHOD An appraisal technique used to estimate
the value of the site (land) by deducting the value
of the improvements from the total sales price of the
property.
ALLODIAL SYSTEM
The free and complete ownership of land by individuals.
The allodial system is the system of property ownership
in America today. The term allodial means free from
the tenurial or vested rights in the king or feudal
overlord.
ALLUVION
The increase of soil, gravel or sand upon the bank of
a stream or river or the shore of a sea due to the flow
or current of the water. The actual act of the soil
being added is known as accretion.
ALONSO, WILLIAM
An urban economist who believed that urban sites are
composed of both land and location. In his book, Location
and Land Use, Alonso explained the trade-off that exists
between land rent and the transportation cost incurred
by individuals in determining where to locate within
an urban area.
ALTERATION
An unauthorized modification of a contract by one of
the parties to the contract. The alteration is considered
material when it affects the rights of the parties to
the contract. If the alteration is intentional and material,
it will be treated as fraud and the innocent party may
void the contract at his or her option.
AMENITY
A feature or benefit received from a particular parcel
of property which increases the satisfaction received
by the owner or user of that property. Amenities may
be both natural, for example, location or scenic view,
and manmade, such as a swimming pool or tennis courts.
Both material and manmade amenities increase the desirability
of a certain location or parcel of land and thus that
particular land will normally have a higher value than
a parcel of land without the amenities.
AMERICAN BANKERS
ASSOCIATION (ABA) Membership in the American
Bankers Association is comprised of persons employed
in the commercial banking business. The organization
serves as a spokesman for the banking community. The
Association is headquartered at Connecticut Avenue,
N.W., Washington, D.C. 20036; (202) 663-5000.
AMERICAN ECONOMIC
DEVELOPMENT COUNCIL (AEDC) The American Economic
Development Council is an international organization
whose mission is to advance the art and science of economic
development. AEDC publishes a journal, Economic Development
Review, and awards the professional designation CIDICED
(Certified Industrial or Economic Developer). The council's
address is Suite 22, 4849 North Scott Street, Schiller
Park, Illinois 60176.
AMERICAN INSTITUTE
FOR PROPERTY AND LIABILITY UNDERWRITER The
American Institute for Property and Liability Underwriters
is the main professional organization of property insurance
agents. In addition to numerous educational programs
and seminars, a professional designation, CPCU (Chartered
Property Casualty Underwriter), is sponsored by the
institute. The mailing address is Providence and Sugartown
Roads, Malvern, Pennsylvania 19355; (215) 64-2100.
AMERICAN INSTITUTE
OF ARCHITECTS This institute awards the designation
AL4 and is the primary group for promoting architecture
as a profession. Among the group's activities is its
national committee on housing which provides numerous
services in an effort to improve the quality of the
living environment. The institute is located at 1735
New York Avenue, N.W., Washington, D.C 20006; (202)
626-7300.
AMERICAN INSTITUTE
OF HOUSING CONSULTANTS This organization works
with nonprofit sponsors in developing low-income housing.
The institute also serves as a spokesman for low-income
housing.
AMERICAN LAND DEVELOPMENT
ASSOCIATION (ALDA) The American Land Development
Association is a trade organization comprised primarily
of land developers. The association's primary function
is to represent the interstate land development industry
in matters related to land development. The mailing
address is 1200 L Street, N.W., Washington, D.C. 20005;
(202) 371-6700.
AMERICAN LAND TITLE
ASSOCIATION (ALTA) An association, founded
in 1907, representing more than 2,100 title abstractors,
title insurance companies, title insurance agents, and
associate members. Since the role and responsibility
of the title industry, and of its ALTA members, is to
guarantee the safe, efficient transfer of real property,
the ALTA membership functions cooperatively and effectively
to provide protection for consumers and lenders alike.
Members of the association use standardized title insurance
forms developed by ALTA to provide uniformity within
the industry. The ALTA staff represents specialists
in the fields of government relations, public affairs,
research and state governmental affairs. ALTA’s
national headquarters is located at 1828 L Street, N.W.,
Suite 303, Washington, D.C. 20036; (202) 296-3671.
AMERICAN PLANNING
ASSOCIATION (APA) A professional trade association
comprised of both publicly and privately employed planners.
APA was formed by the merger of the American Institute
of Planners and the American Society of Planning Officials.
The association is located at 1313 East 60th Street,
Chicago, Illinois 60637; (312) 947-2560.
AMERICAN REAL ESTATE
AND URBAN ECONOMICS ASSOCIATION (AREUEA) The
principal professional organization of real estate education,
AREUEA consist of both educators and professional practitioners.
The association publishes a journal of articles dealing
with land use, urban economics and related topics.
AMERICAN SOCIETY
OF APPRAISERS An appraisal organization consisting
of persons involved in the appraisal of both real and
personal property. The society sponsors the designation
ASA. The society's mailing address is Dulles International
Airport, P.O. Box 17265, Washington, D.C. 20041; (703)
478-2228.
AMERICAN SOCIETY
OF CONSULTING PLANNERS A professional society
whose membership is limited to private planning firms.
The society offers various services to its members and
serves as a spokesman for consulting planners. The address
is Suite 647, 210 7th Street, S.E., Washington, D.C.
20003; (202) 544-0035.
AMERICAN SOCIETY
OF HOME INSPECTORS, INC. (ASHI) A professional
trade organization whose membership specializes in the
physical inspection of homes. ASHI publishes numerous
pamphlets and proceedings, conducts seminars and provides
a Standards of Practice. The society's address is 7th
Floor, 3299 K Street, N.W., Washington, D.C. 20007;
(202) 842- 3096.
AMERICAN SOCIETY
OF REAL ESTATE COUNSELORS (ASREC) As an affiliate
with the National Association of Realtors, this society
consists of real estate brokers, appraisers, and consultants
involved in assisting people in the buying and selling
of real estate. The professional designation CPE (Counselor,
Real Estate) is awarded by the society. The mailing
address is 430 North Michigan Avenue, Chicago, Illinois
60611; (312) 440-8091.
AMO Accredited
Management organization. A professional designation
awarded by the Institute of Real Estate Management to
companies involved in the management of property.
AMORTIZATION
The repayment of a financial obligation over a period
of time in a series of periodic installments. Specifically,
this is the payback of the principal owed to the lender.
The effect of amortization is to build up the paper
value of the investor's (owner's) equity and to reduce
the debt obligation. It should be noted that a portion
of each payment consists of a blend of interest and
amortization of principal. The interest portion is tax
deductible, whereas the amortization is not.
AMORTIZATION RATE
The percentage of a periodic payment that is applied
to the reduction of the principal; in a level- payment
mortgage this corresponds to the sinking fund factor.
AMORTIZATION TERM
The time period over which the principal amount would
be retired on the basis of the periodic installments
paid.
AMORTIZED LOAN
A financial obligation that is repaid over a period
of time by a series of periodic payments.
ANACONDA MORTGAGE
A type of mortgage in which a clause is included which
states that the mortgage secures all debts of the mortgagor
(borrower) that may be due and payable to the mortgagee
(lender). Such a provision is also referred to as a
Mother Hubbard clause.
ANALYST
An individual who performs various studies and calculations
to help make decisions or solve problems concerning
real estate investments.
ANCHOR TENANT
A well-known commercial retail business such as a national
chain store or regional department store strategically
placed in a shopping center so as to generate the most
amount of customers for all of the stores located in
the shopping center.
ANNEXATION
The act of adding, joining and attaching one thing to
another. With respect to the annexing of land, from
time to time municipalities legally incorporate into
the existing town or city limits a certain amount of
land or territory outside their legal boundary. This
may be done to consolidate two governments into one
or perhaps to increase property tax revenue for the
municipality.
ANNUAL Occurring
once a year.
ANNUAL DEBT SERVICE
Total payments required in one year in regard to a loan.
The amount of payment is affected by either a change
in the interest rate or a change in the payback period.
ANNUAL LOAN CONSTANT
A ratio of the annual debt payment on a loan to the
original amount borrowed. The loan constant is also
referred to as a mortgage constant.
ANNUAL PERCENTAGE
RATE (APR) The actual yearly cost of credit
stated to the nearest one-fourth of one percent. Any
lender subject to the federal Truth-in-Lending Act must
fully disclose the APR to the borrower.
ANNUITY
A series of payments made or received at even intervals
either for life or for a fixed number of years.
ANNUITY IN ADVANCE
An annuity in which payments are made at the beginning
of each period as contrasted with an ordinary annuity
in which payments are made at the end of each period.
ANNUITY METHOD
A means of capitalizing future income streams from an
investment. The procedure uses compound interest formulas
that treat the income stream as an annuity providing
for both a return "on" the investment and
a return "of" the investment.
ANTICIPATION, PRINCIPAL
OF A basic value principle which states that
value changes in expectation of some future benefit
or detriment affecting the property. For example, the
value of a vacant parcel of land may increase if an
office building is constructed next to it; likewise,
use of land as an open dump may result in decreased
values of surrounding residential properties.
ANTITRUST LAWS
State and federal laws enacted to protect individuals
and business entities from monopolies and unfair restrictions.
For example, local real estate boards cannot require
its members to charge a certain brokerage commission
rate since to do so would be in violation of federal
antitrust laws.
APARTMENT BUILDING
A type of property intended for permanent residents
who lease a specific space or unit. Payment for use
of the space is referred to as rent.
APPARENT AUTHORITY
In agency law such authority which a third person can
reasonably assume that an agent has on the basis of
actions or inactions of the principal. This is so despite
the fact that the agent may not have actual authority.
APPEALS BOARD
A means by which a property owner can formally protest
a tax bill and seek a change in the assessed value of
his or her property. Jurisdictions that have such a
board normally require the property owner to have first
met with the tax assessor prior to appealing the property
tax.
APPOINTMENTS
Items such as furniture or equipment found in a building
that may increase or decrease the intrinsic value of
the property.
APPORTIONMENT A
division or allocation of responsibility among two or
more persons. In regard to the sale of real estate,
the allocation is typically of a cost or expense such
as property taxes between the purchaser and the seller,
or, in the case of income producing property, the allocation
of rental income between the purchaser and seller. Normally
the seller is responsible for expenses up to and including
the day of settlement or closing.
APPORTIONMENT CLAUSE
A clause normally included in standard insurance policies
to prevent financial gain by the insured as a result
of insuring the same property with two or more companies
and hoping to collect more than the loss.
APPRAISAL
An estimate or opinion of value supported by factual
information as of a certain date.
APPRAISAL FOUNDATION
An educational self-regulatory organization which functions
for the purpose of developing appraisal standards and
appraiser qualifications. The Appraisal Foundation is
comprised of member organizations representing various
appraisal groups, users of appraisal services and the
public at large. The address is 1029 Vermont Avenue,
N.W., Suite 900, Washington, D.C, 20005; (202) 347-7722.
APPRAISAL INSTITUTE
A professional real estate appraisal organization whose
members specialize in valuation and market analysis.
The mailing address is 225 North Michigan Avenue, Chicago,
Illinois 60611; (8ffl) 732-7732.
APPRAISAL INSTITUTE
OF CANADA An appraisal organization comprised
of persons doing appraisal work in Canada. The institute
offers membership to those appraisers in the United
States who do appraisal work in Canada. The address
is 177 Lombard Avenue, Winnipeg, Manitoba, Canada; (204)
942-0751.
APPRAISAL PRINCIPLES
Economic concepts used to explain the rationale and
process of market behavior. Appraisal principles include
anticipation, change, competition, substitution, and
supply and demand.
APPRAISAL PROCESS
A systematic step-by-step analysis used by the appraiser
to accurately reach an opinion of value. While each
appraisal assignment varies according to the purpose
of the appraisal and the approach(es) used, a well-done
estimate of value will follow some standardized procedure.
APPRAISAL REPORT
A written report submitted by the appraiser to support
and document the opinion of value rendered by the appraiser.
The form of the appraisal report can be a letter of
valuation, a single page standard form or a more elaborate
report.
APPRAISED VALUE
An estimate of value based on the appraiser's analysis
of data within the context of the appraisal problem
that the appraiser was employed to solve.
APPRAISER
An individual who has the experience, training, and
legal qualifications to appraise real or personal property.
Effective July 1, 1991, appraisers must be state certified
or licensed in order to appraise property involving
a federally insured or regulated agency.
APPRECIATION An
increase in an asset's market value over its value at
some previous point in time. The increase can be a result
of inflation, increased demand or some other related
cause. The term denotes the opposite of depreciation.
APPROACHES TO VALUE
The various acceptable methods used by appraisers in
deriving an estimate of value. There are three traditional
approaches to value: (1) cost approach, (2) sales comparison
approach, and (3) income approach.
APPURTENANCE
That which belongs to something else and thus passes
with the property. Examples would include riparian rights,
easements, barns and other outbuildings, gardens and
orchards.
ARA An appraisal
designation for Accredited Rural Appraiser awarded by
the American Society of Farm Managers and Rural Appraisers.
ARM Accredited Resident
Manager. A professional designation awarded
by the Institute of Real Estate Management to individuals
involved in the management of property.
ARBITRATION
A procedure for resolving disputes out of court by an
impartial third party chosen by the disputing parties
who agree to abide by the decision of the arbitrator.
While disagreements and disputes involving real estate
often result in court action, disputing parties sometimes
agree to settlement through arbitration.
"ARM'S LENGTH"
TRANSACTION A transaction such as a sale of
property or the lending of money in which all parties
involved are acting in their own self-interest and are
under no undue influence or pressure from the other
parties. Such a situation is the basis for deriving
fair market value, and if the transaction is not at
arm's length then the actual selling price will likely
be less than or greater than the market value.
ARPEN(ARPENT)
A French measurement term used to denote an area equal
to seven-eighths of one acre. (See Acre)
ARREARS
Money which is not paid on time, as for example, if
a borrower has not made the last two mortgage payments,
he or she is said to be in arrears. In many political
jurisdictions, property taxes are paid at the end of
the year rather than at the beginning and are thus referred
to as due in arrears rather than in advance.
ARTERIAL STREET
A major road designed to be a through street and to
handle a large volume of traffic.
ARTIFICIAL PERSON
A person created and recognized by law as having legal
rights, an example being corporation. Within a legal
context, such a person should be distinguished from
natural person.
ASA Senior
Member, American Society of Appraisers. A professional
designation awarded to individuals involved in the appraisal
of both real and personal property.
AS IS A
phrase included in a contract of sale disclaiming any
warranty or guarantee on the part of the seller. A person
purchasing real estate "as is" takes it in
exactly the condition in which it is found and must
trust his or her own inspection of the property.
ASKING PRICE
The listed price of the property. Often such a price
denotes a willingness on the part of the owner to sell
the property for a lower price.
ASSEMBLAGE
The combining of two or more adjoining lots into a single
large lot. Often the purpose of bringing a number of
lots together under one ownership is to allow a developer/investor
to construct a large building or buildings on a single
lot. By assembling the lots, the single value of the
one large lot is often greater than the total single
values of each of the smaller lots.
ASSESSED VALUE
The worth or value of a piece of property as determined
by the taxing authority for the purpose of levying an
ad valorem (property) tax. The assessed value of property
is normally based on some percentage of market value.
Property may be assessed at full market value or, as
is more commonly the case, assessed at something less.
ASSESSMENT
(1) A determination of the value of a parcel for the
purpose of levying a property tax on that parcel. (2)
The term also is used to denote the means by which local
governments raise the money to pay for certain improvements
which directly benefit property owners adjoining or
adjacent to the improvements. For example, the cost
of paving a previously unpaved road could be assessed
to the land on each side of the road. The actual cost
to a particular landowner would be based on his or her
front footage as a percentage of the total footage being
improved. (3) Joint forms of ownership such as condominiums
and cooperatives allocate the expenses incurred for
the maintenance and upkeep of the common areas and limited
common areas and assess each unit owner for his or her
proportionate share.
ASSESSMENT RATIO
The ratio of assessed value to full market value as
set by a taxing authority.
ASSESSMENT ROLL
A list of all taxable property showing the assessed
value of each parcel. Such information is public and
is normally available in the tax assessor's office or
in the local land records.
ASSESSOR
A public official either appointed or elected to appraise
property and place an assessed value on that property
for the purpose of levying a property (ad valorem) tax.
ASSETS An
accounting term used to denote the real and personal
property one possesses, as distinguished from debts
and obligations which are known as liabilities. Assets
minus liabilities equals net worth.
ASSIGN To
transfer to another.
ASSIGNEE
The person to whom a claim, benefit, or right in property
is made.
ASSIGNMENT
The transfer of a claim, benefit or right in property
belonging to one person (the assignor) to another person
(the assignee). Real estate instruments in which assignments
occur include sales contracts, mortgages, options, and
leases. Rights under contracts are valuable property
rights which can ordinarily be assigned to third persons.
The legal effect of an assignment is to substitute the
assignee for the assignor in the contractual relationship
with the other original contracting party.
ASSIGNMENT OF LEASE
A transfer by the tenant (lessee) of his or her interest
in the lease to a third person. Both the lessor and
lessee may transfer their respective interests in a
lease to a third person, unless prohibited by the terms
of the lease.
ASSOCIATE BROKER
A person who has met the qualifications necessary for
a real estate broker's license but who works jointly
with and is employed by another broker.
ASSOCIATED GENERAL
CONTRACTORS OF AMERICA (AGCA) AGCA serves as
a leading spokesman for the construction industry. Four
classifications of construction contractors are represented:
buildings, heavy industrial, municipal utility construction,
and highway. The association's address is 1957 E Street,
N.W., Washington, D.C. 20006; (202) 393-2040.
ASSUMPTION FEE
A charge levied by a lender to a purchaser who takes
title to property by assuming an existing mortgage.
The charge can be a fixed amount; for example, $100,
or perhaps a percentage of the outstanding balance,
for example, one percent. The assumption fee is paid
to the lender at the time of settlement or closing.
ASSUMPTION OF MORTGAGE
Taking title to property which has an existing mortgage
and agreeing to be personally liable for the payment
of the existing mortgage debt. A distinction exists
between "assuming" a mortgage and taking title
'subject to' a mortgage. If the purchaser agrees to
assume the mortgage, he or she becomes personally liable
on any deficiencies, such as not making payments, occurring
in a foreclosure sale. When a purchaser takes title
subject to the mortgage, no personal liability is undertaken
to the lender; thus, the purchaser could walk away from
the mortgage and lose nothing but the equity already
invested. In both situations the original borrower is
liable to the lender unless specifically released in
a novation. A mortgage may obtain a non-assumption clause
or due on sale clause which prohibits an assumption
without consent of the lender. Such consent is normally
given for a fee and a possible jump in the interest
rate if the contract rate is below the prevailing market
rate.
AT-RISK RULE
A part of the Tax Reform Act of 1986 which limits the
amount that an investor can claim as a loss suffered
from a real estate investment.
ATTACHED HOUSING
Two or more units that are physically attached but intended
and designed for occupancy as individual housing units.
Such units may be in the form of a duplex, triplex or
fourplex as well as row houses which may extend for
a complete city block. In contrast, most residential
units are in the form of detached units.
ATTACHMENT
The act of taking a person's property into the legal
custody of a court for the purpose of serving as security
for satisfaction of a judgment which has been filed.
The action itself is often called a writ of attachment
and serves to create a lien against the property. As
a result the property may not be sold free of the attachment
unless the attachment has either been satisfied or released.
ATTESTATION
The act of witnessing a person's signing of a written
instrument. Some states require that a deed be witnessed
by at least two witnesses one of whom may need to be
an official witness such as a notary. Without the attestation
the deed is void in those states that have this requirement.
Some deeds may require a witnessing in cases involving
grantors who have not learned to write or are paralyzed.
Such a grantor would be required to make a mark or at
least a thumbprint which manifests intent to sign. Both
the marking and the statement or declaration of intent
by the grantor would need to be witnessed.
ATTORNEY AT LAW
A person authorized to practice law in his or her respective
state and thus permitted to give legal advice, draft
legal instruments, and represent clients in courts of
law.
ATTORNEY IN FACT
A person authorized to act on behalf of another by virtue
of a power of attorneys. Anyone of legal capacity may
be an attorney in fact, and depending on the desire
of the person creating the relationship, the attorney
in fact's authority could be that of a universal, general,
or specific agent.
ATTORNEY'S OPINION
OF TITLE A statement issued by an attorney
as to the quality of title after examining an abstract
of title. Commonly referred to as "opinion of title."
ATTRACTIVE NUISANCE
A potentially hazardous object, such as a swimming pool,
or a condition, such as an open pit on a parcel of land,
that is inviting and potentially dangerous to young
children.
AUCTION
The selling of real or personal property to the highest
bidder by a person licensed and authorized to sell the
property. The auctioneer is employed by the owner or
seller of the property as an agent and normally receives
a percentage of the sales price as his or her commission.
AUCTIONEER
A person licensed or authorized to sell real or personal
property belonging to someone else at public auction.
In some states an auctioneer selling real property must
be licensed as a real estate broker, whereas in others
he or she is licensed as an auctioneer.
AUTHORITY
The power of an agent to affect the principal in legal
relations with third persons for lawful purposes. Authority
may be classified into: (1) actual authority, (2) implied
authority, (3) apparent or ostensible authority, (4)
inherent authority, and (5) other authority which may
be implied from particular circumstances. Generally,
the authority of an agent is strictly construed by the
courts.
AUTHORIZATION TO
SELL A listing agreement entered into by the
owner of property and a broker determining the rights
and responsibilities of both parties in the selling
of the property.
AVERAGE RATE OF RETURN
A technique used to estimate a rate of return. To compute
this rate, investment outflows are subtracted from total
investment inflows. The result is divided by the number
of years the investment was held, and that result is
divided by the total investment to arrive at the average
annual rate of return.
AVULSION
A sudden loss or gain of land as the result of action
of water or a shift in a bed of a river which has been
used as a boundary by property owners. If land is lost
as a result of avulsion the riparian owner does not
lose title to the land that has been lost; the boundary
lines remain the same. This is not true when land is
lost by erosion.
AXIAL THEORY
OF GROWTH A pattern of land growth and development
which takes the form of a star and occurs along the
main transportation routes outward from a city. The
city or central business district remains the center
of the "star."
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