Definitions For Real Estate Terminology
Abandonment occurs when a person with a right or interest in a property voluntarily gives up that right or interest, either by physically abandoning the property or by showing the intention to give up the right or interest.
A decrease or reduction in the price of a property (or in rent chargeable to a tenant). Usually occurs as a result of the discovery of a negative fact about the property which decreases its value from the price originally agreed upon by the parties.
Quite literally, being capable. A Purchaser is ready, willing and able to complete a transaction when she has funds and has signed the documents required to transfer title to a property. If the Vendor is not ready, willing and able to complete the transaction on the date set for completion, the Purchaser may tender upon the Vendor and sue as a result of the failure to complete the transaction.
An owner of a property who lives elsewhere, leaving tenants in control and occupation of the property.
Expressed as a percentage, the number of properties that can be bought or sold in a particular market. May be broken down as to types and sizes of properties.
ABSTRACT OF TITLE
A summary listing of the documents registered in the local land registry office and which affect title (ownership) of a particular property.
ABSTRACTION (EXTRACTION) METHOD
A method by which the value of land may be established. Uses comparable, improved properties and establishes a ratio of their original land value to their value after they have been developed.
Adjoin or share a common boundary, or share even a small portion of a boundary.
Depreciation is the reduction of the value of a property or chattel as a result of the passing of time (i.e. a new car may be worth $20,000.00, $18,000.00 after one year, $16,000.00 after two years etc.). Usually used for tax purposes, the depreciation in the value of a property may be used as a tax deduction. If a property or chattel loses its value quickly, this depreciation rate may be accelerated so that most of the value is lost in the first few years and then the depreciation rate decreases later in the propertys life span. Also known as Writing down the value of a property (or a chattel).
A clause in a mortgage or loan. If the borrower fails to live up to her obligations under the mortgage, the lender has the legal right to demand that the full principal of the mortgage may become due and payable immediately upon the failure.
A positive response to an offer or a counter-offer that creates a binding agreement between the parties. Acceptance may be conditional upon the occurrence of certain events.
The right to enter a property. Access may be restricted to certain times, to certain persons and to certain purposes (i.e. access for the purpose of inspection).
The ease with which one can reach a certain place, person or thing. A property may be inaccessible because it is located far back along a winding, mountainous road that is often blocked in winter. A property may also be said to have good accessibility to highways, shopping, schools etc.
A structure on a property that serves a specific purpose, complementing the home or main building. A garage or storage shed.
ACCREDITED ASSESSMENT EVALUATOR (AAE)
A professional designation. A property evaluator who has achieved the requirements of the International Association of Assessing Officers.
ACCREDITED LAND CONSULTANT (ALC)
A professional designation. A person who has met the requirements of the Realtors Land Institute to aid in the marketing of real property.
ACCREDITED RESIDENTIAL MANAGER (ARM)
A professional designation for a person trained to manage residential properties. A person who has earned the designation by fulfilling the requirements of the Institute of Real Estate Management (IREM), which is an affiliate of the National Association of Realtors.
The growth in size of a parcel of land as a result of the actions of such natural forces as wind or water.
An adjective describing something that has come into existence but has not yet been claimed by or distributed to its rightful owner.
From a tax standpoint, the amount of value of a property or chattel which has already accumulated (but has not been claimed) as a result of the decrease in the value of that property due to the passage of time and the use of the property or chattel.
Interest which has already been earned but has not yet been paid.
A statement by a person to the effect that they are aware of a certain fact. May also be a sworn document to the same effect, which further states that the person signing the document did so voluntarily.
The process of taking title to or ownership of something.
The cost to the purchaser of obtaining title to anything, including real property. Acquisition cost includes the cost of the transaction of obtaining title, including legal fees and expenses, interest charges on mortgages, land transfer tax, etc.
An imperial measure for land. Equals 43,560 square feet; 4,047 square meters; or 0.047 hectares.
ACT OF GOD
When used in insurance policies, an event caused by natural forces such as rain, lightning, floods or earthquakes which results in damage to property or chattels.
ACTION TO QUIET TITLE
A legal proceeding begun for the purpose of settling competing claims to property and establishing clear legal title in one party.
As opposed to effective age. The objective age in years of a building measured simply by the passage of time since it was constructed. Effective age is a subjective measurement of the condition of a building, influenced mostly by the maintenance and upkeep carried out on the building over the years.
With reference to an agent or representative. The limits of the power the agent or representative has to bind her principal to an agreement or to a statement.
ACTUAL CASH VALUE
An insurance term, the value of a building calculated by subtracting the decrease in value caused by age and wear and tear from the cost of replacing the building entirely.
An award of the court to compensate an injured party for losses incurred as a result of the actions or omissions of another party.
Wrongful removal of a tenant from possession of a premises, usually by a landlord, contrary to the terms of the lease.
As opposed to constructive possession. When the owner of a property occupies the property on a day-to-day basis. Constructive possession is when the owner takes actions to establish and maintain his ownership of a property without actually occupying it himself (i.e. leasing it to tenants, removing squatters, hiring a security firm).
Latin meaning according to value. Taxes that are said to be ad valorem are assessed according to the value of the property.
A loan that finances the three major phases of a land development project (i) acquisition, (ii) development and (iii) construction.
An addition to a document that forms part of it. Similar to a Schedule to an Agreement of Purchase and Sale. May be used to add specific and detailed information material to the contract or upon which contractual terms are based.
ADDITIONAL PRINCIPAL PAYMENT
A one-time or lump-sum payment made by a borrower in addition to the regular payments on a loan or mortgage which reduces the principal owing on the debt.
ADEQUATE PUBLIC FACILITIES ORDINANCE
An ordinance by the local level of government controlling development by requiring that infrastructure works (roads, sewers, hydro lines) be completed prior to or concurrent with the building of dwellings or commercial buildings in a new development.
An inexact term used to described any property which is situated near or abutting a certain piece of property. Note, an abutting property will always be adjacent but an adjacent property may not be abutting.
ADJUSTABLE RATE MORTGAGE (ARM)
Also known as a Variable Rate Mortgage, a loan secured against land which has an interest rate that changes according to some outside index -- such as the federal prime rate or the interest rate paid on government bonds -- over the term of the mortgage. The change in interest rate will result in a change in the periodic payments due under the mortgage.
ADJUSTED COST BASE
For the purposes of determining capital gains or losses. The acquisition cost of a property or chattel, plus the cost of any improvements to the property.
ADJUSTED SALES PRICE
The result of estimating the value of a property by comparison to comparable properties. Take the actual sale price of a property comparable to the subject property, then add the value of any extras which the subject property has but the comparable property did not, then subtract the value of any deficiencies in the subject property not shared by the comparable property.
Mortgage term usually preceded by the word Interest (i.e. Interest Adjustment Date). The date soon after the completion of a purchase and mortgage transaction on which the borrower must make a payment of accumulated interest only, usually used to place the periodic payment dates for the mortgage at the first day of the month (i.e. you borrow on March 18, your interest adjustment date is April 1 and your first regular monthly payment is May 1).
Also known as Adjustment Period. The period of time (i.e. week, month, year) between changes in the interest rate charged on a adjustable-rate mortgage.
In real estate sales, the changes made to the selling price to account for the advantages and disadvantages of the subject property, market conditions etc. When closing a real estate transaction, the changes to the purchase price made as a result of realty taxes over- or under-paid by the Vendor, fuel oil provided, tenants rental payments etc. (Contained on the Statement of Adjustments).
A person appointed by a Court to deal with the estate of a deceased person who died without leaving a will (who dies intestate). Note, an executor is a person who is named in a will to deal with the estate of a deceased person.
To deliver a portion of money borrowed under a mortgage or loan before the loan instrument requires the money to be delivered.
A method of acquiring or claiming title (ownership) to a piece of land owned by another by occupying it in defiance of the others title. Most jurisdictions have statutes that set out a certain period of time throughout which the person claiming adverse possession must occupy the land before title passes to that person by operation of law.
A subjective element in the overall market value of a property created by the physical presentation of the land or buildings.
One who swears an affidavit.
A sworn statement setting out facts which the affiant states are true. Sworn before a Commissioner for swearing Oaths, Notary Public or other public official.
AFFIDAVIT OF TITLE
A Vendors statement to the effect that title is good and marketable and subject to no defects other than those set out in the Agreement of Purchase and Sale or the Vendors Deed.
Instead of a sworn oath, a solemn and formal declaration regarding the truth of a statement of facts. Often used when a persons religious convictions preclude swearing an oath.
AFFIRMATIVE FAIR HOUSING MARKETING PLAN
In an initiative sponsored by the Department of Housing and Urban Development (HUD) to foster integration of races in new housing projects, such a Plan is required before a project becomes eligible for certain U.S. programs.
AFTER-TAX CASH FLOW
The net proceeds from an income-producing property, after all costs (taxes, mortgage interest, maintenance costs etc.) of owning and operating the property have been deducted.
AFTER-TAX PROCEEDS FROM RESALE
The net proceeds from the sale of a property. The sale price minus legal fees and expenses, realty commission, any taxes paid, mortgage payout etc.
The relationship between a person (the Principal) and another person (the Agent) who was appointed, selected, empowered, given authority by the Principal to represent the interests of the Principal in dealings with third parties and to bind the Principal to statements, warranties or contracts.
AGENCY BY ESTOPPEL (OSTENSIBLE AGENCY)
An agency relationship created by the actions, behavior or statements of the Principal and/or the Agent upon which a third party relies. Ostensible Agency may be found by a court where no agency relationship was intended by the Principal.
AGENCY BY NECESSITY
An agency relationship where the authority to represent is imputed to the Agent as a result of an emergency situation to protect the interests of the Principal.
AGENCY BY RATIFICATION
An agency relationship which is created after the fact when the Principal agrees to be bound by the actions of another person who was acting without authority.
A person empowered by a Principal to act on behalf of the Principal in dealings with third parties. The third party is entitled to rely upon the agreement, assurances or statements of the Agent as being binding on the Principal.
A legally binding contract between two or more people, representing a meeting of minds on one or more issues.
AGREEMENT OF SALE
Also known as Purchase Agreement, Agreement of Purchase and Sale, Land Agreement etc. A legal contract in which one party agrees to buy and another agrees to sell a property or chattel. Contains terms and conditions of the transaction and is signed by the parties.
Land zoned for agricultural or farming activities.
A saleable commodity, the right to occupy or use the air space above a specific property.
A term of a mortgage which allows the creditor to demand payment in full of principal and interest due upon the sale of the property.
ALLOCATION (ABSTRACTION) METHOD
Estimating the value of land only by deducting the value of the buildings etc. on the land from the actual market value of the property as a whole.
The system of ownership of property in the United States, meaning free from any claims or rights of a monarch or a feudal lord.
A change made to an executed contract which has not been approved by the parties to the contract. An alteration may constitute fraud if it has the impact of significantly affecting the rights of a party to the contract and was intentionally carried out by another party. If fraud is found, the innocent party may void the contract.
Positive features of a particular property (such as a pool, central air conditioning, etc.) or attractions located near a particular property (highways, school, shopping, etc.) which have the effect of enhancing the propertys value.
AMERICAN LAND TITLE ASSOCIATION (ALTA)
Trade association of American title insurance companies, with a view to standardizing the policies nationwide.
AMERICAN RURAL APPRAISER
A Professional Designation. Awarded by the American Society of Farm Managers and Rural Appraisers.
AMERICAN SOCIETY OF APPRAISERS
A Professional Society, for persons involved in the appraisal of both real and personal property.
AMERICAN SOCIETY OF HOME INSPECTORS, INC. (ASHI)
A Professional Trade Organization, for persons specializing in the inspection of the physical condition of homes.
AMERICAN SOCIETY OF REAL ESTATE COUNSELORS (ASREC)
A Professional Society, for persons specializing in helping people buy and sell homes.
The preparation of a payment plan for a loan which allows for equal payments to be made to the creditor at consistent intervals over the life of the loan (the amortization period). Each payment covers interest accrued over the interval period with the remainder of the payment being applied to reduce the principal owed. If every payment is made on time and in full over the amortization period, the loan will be completely repaid at the end of the amortization period.
The printed table of the payments to be made on an amortized loan showing the date and amount of each payment, the amount of each payment which will be applied to interest and to principal and the balance of principal still outstanding on the loan after the payment is made.
A specific kind of mortgage. Contains a clause that states that it secures all debts owed to the mortgagee by the mortgagor and applies to rules of the mortgage to all such debts. Clause is also known as a Mother Hubbard clause.
Description of a tenant in a shopping mall or center. A name store that will draw shoppers to the mall and, therefore, benefit the other mall stores. Usually receives a favourable lease.
ANNUAL DEBT SERVICE
The total amount required to service a loan in a given year.
ANNUAL LOAN CONSTANT
Ratio of Annual Debt Service to original principal of the loan. Also known as a mortgage constant.
ANNUAL MORTGAGOR STATEMENT
Document sent by the lender to the mortgagor each year which sets out amounts paid for principal, interest and taxes in the given year and the amount still owing on the principal of the mortgage at the end of the year.
ANNUAL PERCENTAGE RATE (A.P.R.)
A rate designed to allow for the comparison of one type of loan to another. The annual cost of borrowing under a given form of loan (includes in the calculation compounded interest, cost of borrowing etc.). Required to be disclosed by the lender under the American Truth in Lending Act, Regulation Z.
A form of periodic payment. Made to the recipient at consistent periodic intervals either for life or for a fixed period of time.
ANNUITY IN ADVANCE
A form of periodic payment. Payments are made at the beginning of each payment period rather than at the end of each period, as with a normal annuity.
ANTICIPATION, PRINCIPAL OF
An approach to assessing the future value of land based on possible contingencies (positive or negative).
Laws requiring competition and a free market, outlawing monopolies in certain businesses.
AO (ACCEPTED OFFER)
A short form used by agents to designate that an offer to purchase has been accepted by the offeree.
Where an agent compels, by actions, omissions or statements, a third party to believe the agent has the authority to bind a principal. The authority to bind is apparent due to the behavior of the agent but may not actually exist.
A form filled out in order to allow a lender to consider a person for a mortgage or loan. Will contain personal and financial and personal information on the applicant.
The fees the lender charges the applicant. May include costs of a property appraisal and a credit report on the applicant. May be payable by applicant even if loan is not approved.
Chattels or decorative touches that may affect the value of a property.
Also known as adjustment. The division of responsibility for certain costs between the parties to a transaction, such as realty taxes. In many U.S. jurisdictions, the vendor is responsible for the day of closing and all days prior to it.
A clause in a policy of insurance. Allows the payment of compensation for a loss to be divided between insurers holding different policies on the same property.
An estimation of the value of a property on a certain date given by a qualified person, usually after an inspection of the property.
Elements to be considered by an appraiser in appraising the value of a property, such as competition, supply and demand.
A standardized approach to appraising a property, to allow for accuracy and consistency.
Documentation to support an appraisal of a property. Varies in length but sets out elements considered, positive and negative aspects of property etc.
The estimated market value of a property on a given date, given by a qualified person as a result of an inspection of the property and a consideration of other market forces.
A professional who has been trained to assess the value of property.
The increase over time in the value of a property caused by many factors market conditions, inflation, changes to area around the property, etc.
APPROACHES TO VALUE
Different methods by which appraisers estimate the value of a property. Include (1) cost approach, (2) comparison approach, and (3) income approach.
A lawyer who meets the requirements of title insurance companies to be able to complete transactions involving title insurance and to render title opinions.
A right or entitlement which forms part of the ownership of a property and which passes to a new owner when title passes (i.e. an easement or right of way over another property).
An Alternative Dispute Resolution method. Allows an objective third party to settle disputes between parties without resorting to court. Binding arbitration involves the parties agreeing to be bound by the decision of the arbitrator.
ARMS LENGTH TRANSACTION
A colloquial description of a transaction where none of the parties are related to each other or have common interests -- they have each other at arms length. An arms-length transaction is generally at fair market value; in a non-arms-length transaction, the relationship between the parties may cause one or the other to accept less than they are entitled or pay more than fair market value.
Money which is not paid when due, under a payment plan or amortization schedule. Could lead to enforcement of loan agreement by lender
A main thorough fare or through road, one which is designed to carry traffic through an area where that area is not the destination of the traffic.
As opposed to a natural person. A corporation of other legal entity which has at least some of the legal rights of a human being.
Implied in most Agreements of Purchase and Sale, suggests the Purchaser is accepting the property in its current condition and releases the Vendor from any liability for problems found before or after closing.
A statement in the Agreement of Purchase and Sale that confirms that the Purchaser shall accept the property and all chattels included in the Purchase in the condition in which they are found at the time the Agreement is signed.
The price at which the Vendor advertises a property. When used in the advertisement, may suggest flexibility on the part of the Vendor regarding the price.
The value assigned to a given property by the municipality for the purpose of establishing realty taxes payable by the owner of the property.
Generally, the apportionment of liability of a general cost among individuals. The act of estimating the value of land for tax purposes or the method by which municipalities raise taxes (property tax assessment).
The total of the assessed values of all properties in a municipality.
Assessed value as compared to full market value for a particular property or for all properties as set by the municipality.
Public record of the assessed values of properties. Also includes Assessment Roll Number for each property, the number by which the property is identified in the municipal records.
A person who is employed by the municipality to estimate the value of properties for the purpose of taxes.
A thing of value.
To transfer interest in a property, contract, right etc..
The person to whom an interest is transferred. An assignee of an Agreement of Purchase and Sale may buy the property and enforce the contract in the same fashion as the original party.
The transfer of any right, claim or interest to another person or corporation. Often used to refer to the transfer of a mortgage from one lender to another. Also a noun describing the document which represents the assignment of the right etc.
ASSIGNMENT OF LEASE
Subject to the terms of the lease, a transfer of either the lessors or the lessees interest in a lease.
The person who assigns a right or interest to another person.
A qualified real estate broker who works with or for another broker.
A mortgage that can be taken over (assumed) by the buyer when a home is sold. If interest rates have risen, an assumable mortgage at a low rate may prove a selling point for the property.
The paragraph in the mortgage which sets out the borrowers right to have the mortgage assumed by a purchaser.
A charge levied by the lender (usually against the party assuming the mortgage) for the privilege of assuming a mortgage. May be a fixed amount or a percentage of outstanding principal on the mortgage at the time of the assumption.
ASSUMPTION OF MORTGAGE
The agreement of a purchaser to take on personal liability for a mortgage already registered on title to the property and to make payments under the mortgage. Purchaser takes the place of the vendor in the contract with the lender.
A limitation of the amount an investor can claim on his incomes taxes as a result of losses from real estate investments, under the Tax Reform Act of 1986.
Duplex, triplex, row housing, or townhouses. Two or more dwellings that are attached physically but are owned and/or occupied by different people.
The binding by a court of a piece of property (real or personal) as security for a debt.
A statement by a person who has witnessed another person signing a document to the effect that they did in fact witness the document. May include statements to the effect that the witness knew the person who signed personally, that the person who signed understood the contents of the document when he signed etc. Required in some states for deeds.
ATTORNEY AT LAW
A person who has met the requirements to practice law in a particular state of the United States.
ATTORNEY IN FACT
A person who holds a POWER OF ATTORNEY for another person, which gives the Attorney the power to act on behalf of that other person and bind that other person.
ATTORNEYS OPINION OF TITLE
A statement of a lawyers conclusions with regard to the state of the legal title of a property, issued after the lawyer has completed the appropriate investigations of title.
Attractive refers to the response of children to a feature of land (whether natural or man-made) which has the potential to be harmful (an uncovered well, a swimming pool, a swift moving stream).
The process of selling property to the highest bidder.
A professional (real estate broker or auctioneer, depending on local laws) who sells property at public auctions. Usually paid a percentage of the sale price.
The assets of a deceased person against which a surviving spouse may claim an interest. Can include property which the deceased person disposed of while still living if the disposal was in the form of a gift or was not for value.
The right of an agent, conferred by his principal, to bind the principal in dealings with third parties. See actual authority, implied authority, apparent authority, ostensible authority, inherent authority.
AUTHORIZATION TO SELL
A contract between an property owner and a real estate broker or agent which allows the broker to list the property for sale and which codifies the rights and obligations of the two parties.