Glossary of Manufactured Home Loan Real Estate Terms & loans

Mobile Home Loans

Glossary of Manufactured Industry Terms

Manufactured Home
A home built in a controlled, factory environment on a permanent chassis that is designed to be used with or without a permanent foundation when connected to the required utilities. Manufactured homes are built to the federal Manufactured Home Construction Safety Standards enforced by the U.S. Department of Housing and Urban Development. Manufactured homes are constructed in sections and are delivered to the home site in one, two, or occasionally, three sections; they may be placed on private property or in a manufactured home community.

HUD Code
A national building and safety code that regulates the home’s design and construction, strength and durability, transportability, fire resistance, energy efficiency and quality control. It also sets stringent performance standards for the heating, plumbing, air conditioning, thermal and electrical systems. The HUD Code specifically pre-empts local building codes as they relate to construction codes for manufactured homes.

Modular Home
Factory-built homes that begin as components and are designed, engineered and assembled in a controlled, factory environment. These components come together at the building site and the home is completed by a licensed builder under standards enforced by state and local agencies. Modular homes may be one- or two-story dwellings and are placed only on private property.

Manufactured Home Communities
Private land developed as home sites for manufactured homes. In Ohio, most sites are rented to the homeowner for a monthly fee. Sometimes referred to as a land-lease community.

Single-Section Home
A manufactured home delivered to home sites in one intact section, usually 14-feet-wide or 16-feet-wide by as much as 80 feet long. These homes offer 1,100 square feet or more of living area.

Multi-Section Home
A manufactured home delivered to home sites in two or three sections that are built and transported separately to the site and then joined together to make one living unit. Typical models have 24 feet by 60 feet of living area (1,440 square feet), and may have a site-built garage attached after the home is installed.

Sales Center or Retailer
A place where model homes are displayed, giving homebuyers the opportunity to walk through multiple floor plans and view the different options available. Professional home consultants are on hand to assist with the home buying process.

Professional Home Consultant
Professional, knowledgeable seller of manufactured homes. Helps to pair homebuyers with a home that best suits their needs and tastes. Assists in arranging financing, and has the home installed on the home site and prepared for move-in.

Site-Built Housing
Housing constructed entirely at the home site.

What is a manufactured home?
Manufactured homes are built in factories, transported to a site location and installed. HUD Code federally regulates manufactured homes. HUD Code provides the design and construction requirements for the complete production of the entire home in the factory. Some modifications are allowed on-site for setup.

What is a modular home?
Modular homes are also built in factories, transported to a site location and installed. Modular homes are governed the building code enforced in the jurisdiction where the home is to be located. These codes can be BOCA National Building Code, the ICBO Uniform Building Code, the Southern Standard Building Code or the ICC One and Two Family Dwelling Code.

What is a panelized home?
Panelized homes are flat factory-built panels that are transported to the site location they are assembled. Panelized homes are governed the building code enforced in the jurisdiction where the home is to be located. These codes can be BOCA National Building Code, the ICBO Uniform Building Code, the Southern Standard Building Code or the ICC One and Two Family Dwelling Code.

Which do I own - a mobile home or a manufactured home?
The HUD Code defines manufactured homes. A factory-built home built after June 15, 1976, is commonly called a manufactured home. A factory-built home built before June 15, 1976 is commonly called a mobile home.

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

ABSORPTION RATE Back to top
The ratio of the number of properties in an area that have been sold against the number available. Used to show the volatility of a market.

ABSTRACTION METHOD Back to top
This method of estimating the value of property uses similar properties available in the same market to extract the value of a parcel of land.

ACCELERATION CLAUSE Back to top
A provision in a mortgage that gives the lender the right to demand immediate payment of the outstanding loan balance under certain circumstances. Usually when the borrower defaults on the loan.

ACCESSORY BUILDING Back to top
A building separate from the main structure on a property. Often used for a specific purpose, such as a workshop, storage shed or garage.

ACCRETION Back to top
The natural growth of a piece of land resulting from forces of nature

ACRE Back to top
43,560 square feet. A measurement of area.

ACTUAL AGE Back to top
The amount of time that has passed since a building or other structure was built. See also: EFFECTIVE AGE

ADJUSTMENT DATE Back to top
The date the interest rate changes on an adjustable rate mortgage.

AD VAL OREM TAX Back to top
Taxes assessed based on the value of the land and improvements

ADDENDUM Back to top
A supplement to any document that contains additional information pertinent to the subject. Appraisers use an addendum to further explain items for which there was inadequate space on the standard appraisal form.

ADJUSTABLE-RATE MORTGAGE (ARM) Back to top
A type of mortgage where the interest rate varies based on a particular index, normally the prime lending rate.

ADJUSTED BASIS Back to top
The value of an asset (property or otherwise) that includes the original price plus the value of any improvement, and less any applicable depreciation.

ADJUSTED SALES PRICE Back to top
An opinion of a property's sales price, after adjustments have been made to account for differences between it and another comparable property.

AESTHETIC VALUE Back to top
The additional value a property enjoys based on subjective criteria such as look or appeal.

AFFIRMATION Back to top
A declaration that a certain set of facts are truthful.

AFFORDABILITY ANALYSIS Back to top
A calculation used to determine an individual's likelihood of being able to meet the obligations of a mortgage for a particular property. Takes into account the down payment, closing costs and on-going mortgage payments.

AGENT Back to top
A person who has been appointed to act on behalf of another for a particular transaction.

AMENITY Back to top
Any feature of a property that increases its value or desirability. These might include natural amenities such as location or proximity to mountains, or man-made amenities like swimming pools, parks or other recreation.

AMERICAN SOCIETY OF APPRAISERS Back to top
An organization of appraisal professionals and others interested in the appraisal profession.

AMORTIZATION Back to top
The repayment of a loan through regular periodic payment.

AMORTIZATION SCHEDULE Back to top
The breakdown of individual payments throughout the life of an amortized loan, showing both principal contribution and debt service (interest) fees.

AMORTIZATION TERM Back to top
The length of time over which an amortized loan is repaid. Mortgages are commonly amortized over 15 or 30 years.

AMPERAGE Back to top
A measure of electric current describing the magnitude.

ANNUAL PERCENTAGE RATE (APR) Back to top
The rate of annual interest charged on a loan.

ANNUITY Back to top
A sum of money paid at regular intervals, often annually.

APPLICATION Back to top
A form used to apply for a mortgage loan that details a potential borrower's income, debt, savings and other information used to determine credit worthiness.

APPRAISAL Back to top
A ''defensible'' and carefully documented opinion of value. Most commonly derived using recent sales of comparable properties by a licensed, professional appraiser.

APPRAISAL FOUNDATION Back to top
A not-for-profit educational organization established by the appraisal profession in the United States in 1987. It is dedicated to the advancement of professional valuation and responsible for establishing, improving, and promoting the Uniform Standards of Professional Appraisal Practice (USPAP).

APPRAISAL INSTITUTE Back to top
A world-wide organization dedicated to real estate appraisal education, publication and advocacy.

APPRAISAL PRINCIPLES Back to top
The basic building blocks of the property valuation process, including property inspection, market analysis and basic economics.

APPRAISAL REPORT Back to top
The end result of the appraisal process usually consists of one major standardized form such as, the Uniform Residential Appraisal Report form 1004, as well as all supporting documentation and additional detail information. The purpose of the report is to convey the opinion of value of the subject property and support that opinion with corroborating information.

APPRAISAL STANDARDS BOARD (ASB) Back to top
An independent board of the APPRAISAL FOUNDATION, which writes, amends, and interprets USPAP. The ASB is composed of up to seven appraisers appointed by the Foundation's Board of Trustees. The ASB holds public meetings throughout the year to interpret and amend USPAP.

APPRAISED VALUE Back to top
An opinion of the fair market value of a property as developed by a licensed, certified appraiser following accepted appraisal principals.

APPRAISER Back to top
An educated, certified professional with extensive knowledge of real estate markets, values and practices. The appraiser is often the only independent voice in any real estate transaction with no vested interest in the ultimate value or sales price of the property.

APPRECIATION Back to top
The natural rise in property value due to market forces.

ARMS LENGTH TRANSACTION Back to top
Any transaction in which the two parties are unconnected and have no overt common interests. Such a transaction most often reflects the true market value of a property.

ASSESSED VALUE Back to top
The value of a property according to jurisdictional tax assessment.

ASSESSMENT Back to top
The function of assigning a value to a property for the purpose of levying taxes.

ASSESSMENT RATIO Back to top
The comparative relationship of a property's assessed value to its market value.

ASSESSOR Back to top
The jurisdictional official who performs the assessment and assigns the value of a property.

ASSET Back to top
Any item of value which a person owns.

ASSIGNMENT Back to top
Transfer of ownership of a mortgage usually when the loan is sold to another company.

ASSUMABLE MORTGAGE Back to top
A mortgage that can be taken over by the buyer when a home is sold.

ASSUMPTION Back to top
When a buyer takes over, or "assumes" the sellers mortgage.

ATTACHED HOUSING Back to top
Any number of houses or other dwellings which are physically attached to one another, but are occupied by a number of different people. The individual houses may or may not be owned by separate people as well.

BACKFILL Back to top
The slope of the ground around a house.

BALL COCK VALVE Back to top
The valve inside a toilet tank that controls the filling of the tank.

BALLOON MORTGAGE Back to top
A mortgage loan in which the monthly payments are not large enough to repay the loan by the end of the term. So at the end of the term, the remaining balance comes due in a single large payment.

BALLOON PAYMENT Back to top
The final large payment at the end of a balloon mortgage term.

BANKRUPTCY Back to top
When a person or business is unable to pay their debts and seeks protection of the state against creditors. Bankruptcies remain on credit records for up to ten years and can prevent a person from being able to get a loan.

BEAM Back to top
A structural supporting member.

BILL OF SALE Back to top
A physical receipt indicating the sale of property.

BIWEEKLY MORTGAGE Back to top
A mortgage where you make "half payments" every two weeks, rather than one payment per month. This results in making the equivalent of 13 monthly payments per year, rather than 12, significantly reducing the time it takes to pay off a thirty year mortgage.

BLIGHTED AREA Back to top
Any region of a city or town that has fallen into disrepair or otherwise has become undesirable.

BONA FIDE Back to top
Any genuine offer, made without intent to defraud or deceive.

BRIDGE FINANCING Back to top
An interim loan made to facilitate the purchase of a new home before the buyer's current residence sells and its equity is available to fund the new purchase.

BRIDGING Back to top
Structural members used between beams to strengthen the structure.

BROKER Back to top
An individual who facilitates the purchase of property by bringing together a buyer and a seller.

BTU Back to top
British Thermal Unit. A unit of measurement used to describe heating or cooling capacity.

BUFFER ZONE Back to top
A segment of land between two disparate municipal zones which acts as a shield to keep one zone from encroaching upon the other. Often used to separate residential districts from commercial areas.

BUILDING CODE Back to top
Regulations that ensure the safety and material compliance of new construction within a municipality. Building codes are localized to ensure they are adequate to meet the risk of common hazards.

BUILDING LINE OR SETBACK Back to top
The statutory distance between buildings and the property line, imposed by municipalities, home associations, or other agreements.

BUILT-INS Back to top
Specific items of personal property which are installed in a real estate improvement such that they become part of the building. Built-in microwave ovens and dishwashers are common examples.

BUNGALOW Back to top
A one-story, home-style dating from the early twentieth century. Often characterized by a low-pitched roof.

BUY DOWN Back to top
Extra money paid in a lump sum to reduce the interest rate of a fixed rate mortgage for a period of time. The extra money may be paid by the borrower, in order to have a lower payment at the beginning of the mortgage. Or paid by the seller, or lender, as incentive to buy the property or take on the mortgage.

BX CABLE Back to top
Electrical cable shrouded in a galvanized steel outer cover.

CALL OPTION Back to top
A clause in a mortgage which allows the lender to demand payment of the outstanding balance at a specific time.

CAP Back to top
Associated with Adjustable Rate Mortgages. A limit on how high monthly payments or how much interest rates may change within a certain time period or the life of the mortgage.

CAPE COD COLONIAL Back to top
A single-story house style made popular in New England. Often characterized by a steep roof with gables.

CAPITAL Back to top
Accumulated goods and money which is most often used to generate additional income.

CAPITAL EXPENDITURE Back to top
An outlay of funds designed to improve the income-producing capabilities of an asset or to extend its economic life.

CASH-OUT REFINANCE Back to top
Refinancing a mortgage at a higher amount than the current balance in order to transform a portion of the equity into cash.

CAULKING Back to top
A pliable material used to seal cracks or openings such as around windows.

CAVEAT EMPTOR Back to top
Literally translated: ''Let the buyer beware.'' A common business tenet whereby the buyer is responsible for verifying any and all claims by the seller of property.

CERTIFICATE OF DEPOSIT Back to top
A document showing that the bearer has a certain amount of money, at a particular amount interest, on deposit with a financial institution.

CERTIFICATE OF DEPOSIT INDEX Back to top
An index based on the interest rate of six month CD's. Used to set interest rates on some Adjustable Rate Mortgages.

CERTIFICATE OF ELIGIBILITY Back to top
A document issued by the Veterans Administration that certifies eligibility for a VA loan.

CERTIFICATE OF OCCUPANCY Back to top
Issued by an appropriate jurisdictional entity, this document certifies that a building complies with all building codes and is safe for use or habitation.

CERTIFICATE OF REASONABLE VALUE (CRV) Back to top
Usually based on an independent appraisal, a CRV for a particular property establishes the maximum amount which can be secured by a VA mortgage.

CERTIFICATE OF TITLE Back to top
A document designating the legal owner of a parcel of real estate. Usually provided by a title or abstract company.

CERTIFIED GENERAL APPRAISER Back to top
Generally, any professional who has met the local or state requirements, and passed the appropriate certification exam, and is capable of appraising any type of property.

CERTIFIED RESIDENTIAL APPRAISER Back to top
A sub-classification of appraiser who is only licensed to appraise residential property, usually up to four units.

CHAIN OF TITLE Back to top
The complete history of ownership of a piece of property.

CHATTEL Back to top
Any personal property which is not attached to or an integral part of a property. Chattel is not commonly taken into consideration when appraising the value of real property.

CIRCUIT BREAKERS Back to top
Electrical devices which automatically open electrical circuits if they are overloaded.

CLEAR TITLE Back to top
Ownership of property that is not encumbered by any counter-claim or lien.

CLOSING Back to top
A torturous process designed to induce cramping in a home buyer's hands by requiring signature on countless pieces of documentation that nobody has ever read. Or, the process whereby the sale of a property is consummated with the buyer completing all applicable documentation, including signing the mortgage obligation and paying all appropriate costs associated with the sale (CLOSING COSTS).

CLOSING COSTS Back to top
All appropriate costs generated by the sale of property which the parties must pay to complete the transaction. Costs may include appraisal fees, origination fees, title insurance, taxes and any points negotiated in the deal.

CLOSING STATEMENT Back to top
The document detailing the final financial arrangement between a buyer and seller and the costs paid by each.

CO-BORROWER Back to top
A second person sharing obligation on the loan and title on the property.

COLLATERAL Back to top
An asset which is placed at risk to secure the repayment of a loan.

COLLECTION Back to top
The process a lender takes to pursue a borrower who is delinquent on his payments in order to bring the mortgage current again. Includes documentation that may be used in foreclosure.

CO-MAKER Back to top
A second party who signs a loan, along with the borrower, and becomes liable for the debt should the borrower default.

COMMON LAW Back to top
As opposed to statute law. Laws that have been established by custom, usage and courts over many years.

COMMISSION Back to top
A percentage of the sales price or a fixed fee negotiated by an agent to compensate for the effort expended to sell or purchase property.

COMMON AREA ASSESSMENTS Back to top
Fees which are charged to the tenets or owners of properties to cover the costs of maintaining areas shared with other tenets or owners. Commonly found in condominium, PUD or office spaces.

COMMON AREAS Back to top
Any areas, such as entryways, foyers, pools, recreational facilities or the like, which are shared by the tenets or owners of property near by. Commonly found in condominium, PUD or office spaces.

COMMUNITY PROPERTY Back to top
In many jurisdictions, any property which has been acquired by a married couple. The ownership of the property is considered equal unless stipulated otherwise by both parties.

COMPARABLES Back to top
An abbreviated term used by appraisers to describe properties which are similar in size, condition, location and amenities to a subject property whose value is being determined. The Uniform Standards of Professional Appraisal Practice (USPAP) establish clear guidelines for determining a comparable property.

COMPOUND INTEREST Back to top
Interest paid on the principal amount, as well as any accumulated interest.

CONCESSIONS Back to top
Additional value granted by a buyer or seller to entice another party to complete a deal.

CONDEMNATION Back to top
The official process by which a property is deemed to be uninhabitable or unusable due to internal damage or other external conditions.

CONDENSATION Back to top
The transition of water vapor to liquid. Typically forms in areas of high humidity.

CONDOMINIUM Back to top
A development where individual units are owned, but common areas and amenities are shared equally by all owners.

CONDOMINIUM CONVERSION Back to top
Commonly, the conversion of a rental property such as an apartment complex into a CONDOMINIUM-style complex where each unit is owned rather than leased.

CONDUIT Back to top
The pipe through which electric wiring is run.

CONSTRUCTION LOAN Back to top
A loan made to a builder or home owner that finances the initial construction of a property, but is replaced by a traditional mortgage one the property is completed.

CONTIGUOUS Back to top
Connected to or touching along an unbroken boundary.

CONTINGENCY Back to top
Something that must occur before something else happens. Often used in real estate sales when a buyer must sell a current home before purchasing a new one. Or, when a buyer makes an offer that requires a complete home inspection before it becomes official.

CONTRACT Back to top
A legally binding agreement, oral or written, between two parties.

CONVENTIONAL MORTGAGE Back to top
A traditional, real estate financing mechanism that is not backed by any government or other agency (FHA, VA, etc.).

CONVERTIBLE ARM Back to top
A mortgage that begins as and adjustable, that allows the borrower to convert the loan to a fixed rate within a specific timeframe.

COOPERATIVE (CO-OP) Back to top
A form of ownership where each resident of a multiunit property owns a share in a cooperative corporation that owns the building. With each resident having rights to a specific unit within the building.

CORPORATE RELOCATION Back to top
A situation where a person's employer pays all or some of the expenses associated with moving from one location to another, usually over a substantial distance. Relocation expenses often include the amounts, such as brokerage fees, incurred in the selling and buying of the employee's primary residence.

COST OF FUNDS INDEX (COFI) Back to top
An index of financial institutions costs used to set interest rates for some Adjustable Rate Mortgages.

COVENANT Back to top
A stipulation in any mortgage that, if not met, can be cause for the lender to foreclose.

CREDIT Back to top
A loan of money for the purchase of property, real or personal. Credit is either secured by an asset, such as a home, or unsecured.

CREDIT HISTORY Back to top
A record of debt payments, past and present. Used by mortgage lenders in determining credit worthiness of individuals.

CREDITOR Back to top
A person to whom money is owed.

CREDIT REPORT Back to top
A detailed report of an individuals credit, employment and residence history prepared by a credit bureau. Used by lenders to determine credit worthiness of individuals.

CREDIT REPOSITORY Back to top
Large companies that gather and store financial and credit information about individuals who apply for credit.

CUL-DE-SAC Back to top
A dead-end street. One with only one entrance/exit.

DATE OF APPRAISAL Back to top
The specific point in time as of which an appraiser designates the value of a home. Often stipulated as the date of inspection.

DEBT Back to top
An obligation to repay some amount owed. This may or may not be monetary.

DEBT EQUITY RATIO Back to top
The ratio of the amount a mortgagor still owes on a property to the amount of equity they have in the home. Equity is calculated at the fair-market value of the home, less any outstanding mortgage debt.

DEED Back to top
A document indicating the ownership of a property.

DEED-IN-LIEU (OF FORECLOSURE) Back to top
A document given by a borrower to a lender, transferring title of the property. Often used to avoid credit-damaging foreclosure procedures.

DEED OF TRUST Back to top
A document which transfers title in a property to a trustee, whose obligations and powers are stipulated. Often used in mortgage transactions.

DEED OF RECONVEYANCE Back to top
A document which transfers ownership of a property from a Trustee back to a borrower who has fulfilled the obligations of a mortgage.

DEED OF RELEASE Back to top
A document which dismisses a lien or other claim on a property.

DEED OF SURRENDER Back to top
A document used to surrender any claim a person has to a property.

DEFAULT Back to top
The condition in which a borrower has failed to meet the obligations of a loan or mortgage.

DELINQUENCY Back to top
The state in which a borrow has failed to meet payment obligations on time.

DEPOSIT Back to top
Cash given along with an offer to purchase property, Also called EARNEST MONEY.

DEPRECIATION Back to top
The natural decline in property value due to market forces or depletion of resources.

DETACHED SINGLE-FAMILY HOME Back to top
A single building improvement intended to serve as a home for one family.

DISCOUNT POINTS Back to top
Points paid in addition to the loan origination fee to get a lower interest rate. One point is equal to one percent of the loan amount.

DISTRESSED PROPERTY Back to top
A mortgaged property which has been foreclosed on.

DOWNSPOUT Back to top
The pipe that water moves through to reach the ground from the rain gutter.

DUE-ON-SALE PROVISION Back to top
A clause in a mortgage giving the lender the right to demand payment of the full balance when the borrower sells the property.

DUPLEX Back to top
A single-building improvement which is divided and provides two units which serve as homes to two families.

DWELLING Back to top
A house or other building which serves as a home.

DOWN PAYMENT Back to top
An amount paid in cash for a property, with the intent to mortgage the remaining amount due.

EARNEST MONEY DEPOSIT Back to top
A cash deposit made to a home seller to secure an offer to buy the property. This amount is often forfeited if the buyer decides to withdraw his offer.

EASEMENT Back to top
The right of a non-owner of property to exert control over a portion or all of the property. For example, power companies often own an easement over residential properties for access to their power lines.

EAVE Back to top
The part of the roof that extends beyond the exterior wall.

ECONOMIC DEPRECIATION Back to top
The decline in property value caused by external forces, such as neighborhood blight or adverse development.

ECONOMIC LIFE Back to top
The amount of time which any income-producing property is able to provide benefits to its owner.

EFFECTIVE AGE Back to top
The subjective, estimated age of a property based on its condition, rather than the actual time since it was built. Excessive wear and tear can cause a property's effective age to be greater than its actual age.

EMINENT DOMAIN Back to top
The legal process whereby a government can take ownership of a piece of property in order to convert it to public use. Often, the property owner is paid fair-market value for the property.

ENCROACHMENT Back to top
A building or other improvement on one property which invades another property or restricts its usage.

ENCUMBRANCE Back to top
A claim against a property. Examples are mortgages, liens and easements.

ENERGY EFFICIENCY RATIO Back to top
An efficiency rating system for air conditioning units that corresponds to the number of BTU's output per watt of electricity used.

EQUAL CREDIT OPPORTUNITY ACT (ECOA) Back to top
U.S. federal law requiring that lenders afford people equal chance of getting credit without discrimination based on race, religion, age, sex etc

EQUITY Back to top
The difference between the fair market value of a property and that amount an owner owes on any mortgages or loans secured by the property.

EQUITY BUILDUP Back to top
The natural increase in the amount of equity an owner has in a property, accumulated through market appreciation and debt repayment.

ERRORS AND OMISSIONS INSURANCE Back to top
An insurance policy taken out by appraisers to cover their liability for any mistakes made during the appraisal process.

ESCROW Back to top
An amount retained by a third party in a trust to meet a future obligation. Often used in the payment of annual taxes or insurance for real property.

ESCROW ACCOUNT Back to top
An account setup by a mortgage servicing company to hold funds with which to pay expenses such as homeowners insurance and property taxes. An extra amount is paid with regular principal and interest payments that go into the escrow account each month.

ESCROW ANALYSIS Back to top
An analysis performed by the lender usually once each year to see that the amount of money going into the escrow account each month is correct for the forecasted expenses.

ESCROW DISBURSEMENTS Back to top
The payout of funds from an escrow account to pay property expenses such as taxes and insurance.

ESTATE Back to top
The total of all property and assets owned by an individual.

EXAMINATION OF TITLE Back to top
The report on the title of a property from the public records or an abstract of the title.

EXCLUSIVE LISTING Back to top
An agreement between the owner of a property and a real estate agent giving the agent exclusive right to sell the property.

EXECUTOR Back to top
The person named in a will to administer the estate.

FACADE Back to top
The front exposure of any building. Often used to describe an artificial or false front which is not consistent with the construction of the rest of the building.

FAIR CREDIT REPORTING ACT Back to top
A federal law regulating the way credit agencies disclose consumer credit reports and the remedies available to consumers for disputing and correcting mistakes on their credit history.

FAIR MARKET VALUE Back to top
The price at which two unrelated parties, under no duress, are willing to transact business.

FANNIE MAE Back to top
A private, shareholder-owned company that works to make sure mortgage money is available for people to purchase homes. Created by Congress in 1938, Fannie Mae is the nation's largest source of financing for home mortgages.

FASCIA Back to top
The boards that enclose the eaves.

FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) Back to top
The U.S. Government agency created in 1933 which maintains the stability of and public confidence in the nation's financial system by insuring deposits and promoting safe and sound banking practices.

FEDERAL HOUSING ADMINISTRATION (FHA) Back to top
A sub-agency of the U.S. Department of Housing and Urban Development created in the 1930's to facilitate the purchase of homes by low-income, first-time home buyers. It currently provides federally-subsidized mortgage insurance for private lenders.

FEE APPRAISER Back to top
A certified, professional appraiser who forms an opinion of the fair market value of property and receives a set fee in exchange.

FEE SIMPLE Back to top
A complete, unencumbered ownership right in a piece of property.

FEE SIMPLE ESTATE Back to top
A form or ownership, or holding title to real estate. It is the most complete form of title, having an unconditional and unlimited interest of perpetual duration.

FHA MORTGAGE Back to top
A mortgage that is insured by the Federal Housing Administration (FHA).

FINAL VALUE ESTIMATE Back to top
The opinion of value of a piece of property resulting from an appraisal following the USPAP guidelines.

FIRST MORTGAGE Back to top
The primary loan or mortgage secured by a piece of property.

FIXED-RATE MORTGAGE (FRM) Back to top
A mortgage which has a fixed rate of interest over the life of the loan.

FIXTURE Back to top
Any piece of personal property which becomes permanently affixed to a piece of real property.

FLASHING Back to top
The metal used around the base of roof mounted equipment, or at the junction of angles used to prevent leaking.

FLOOD INSURANCE Back to top
Supplemental insurance which covers a home owner for any loss due to water damage from a flood. Often required by lenders for homes located in FEMA-designated flood zones.

FLOOR PLAN Back to top
The representation of a building which shows the basic outline of the structure, as well as detailed information about the positioning of rooms, hallways, doors, stairs and other features. Often includes detailed information about other fixtures and amenities.

FLUE Back to top
The furnace exhaust pipe, usually going through the roof.

FLUSH VALVE Back to top
The valve between the toilet bowl and the tank.

FOOTING Back to top
The partially buried support for a vertical structural member such as a post.

FORECLOSURE Back to top
The process whereby a lender can claim the property used by a borrower to secure a mortgage and sell the property to meet the obligations of the loan.

FORFEITURE Back to top
The loss of property or money due to the failure to meet the obligations of a mortgage or loan secured by that property.

FOUNDATION Back to top
The solid structural element upon which a structure is built.

FRONTAGE Back to top
The segment of a property that runs along a point of access, such as a street or water front.

FUNCTIONAL OBSOLESCENCE Back to top
A decrease in the value of property due to a feature or lack thereof which renders the property undesirable. Functional obsolescence can also occur when the surrounding area changes, rendering the property unusable for its originally intended purpose.

GABLE ROOF Back to top
A steeply angled, triangular roof.

GALVANIZED PIPE Back to top
Iron pipe with a galvanized (zinc) coating.

GAMBREL ROOF Back to top
A ''barn-like'' roof, where the upper portion of the roof is less-steeply angled than the lower part.

GENERAL LIEN Back to top
A broad-based claim against several properties owned by a defaulting party.

GEORGIAN Back to top
A classic, English-style hose characterized by simple rectangular shape and multiple stories.

GFI Back to top
Ground Fault Interrupter. A type of circuit breaker required in areas where water is present.

GINNIE MAE Back to top
A wholly owned corporation created in 1968 within the U.S. Department of Housing and Urban Development to serve low-to moderate-income homebuyers.

GIRDER Back to top
A main supporting beam.

GOVERNMENT MORTGAGE Back to top
Any mortgage insured by a government agency, such as the FHA or VA.

GRADE Back to top
The slope of land around a building. Also ground level.

GRANTEE Back to top
Any person who is given ownership of a piece of property.

GRANTOR Back to top
Any person who gives away ownership of a piece of property.

GROSS AREA Back to top
The sum total of all floor space, including areas such as stairways and closet space. Often measured based on external wall lengths.

GROUTING Back to top
Material used around ceramic tile.

GUTTER Back to top
The trough around the edge of the roof that catches and diverts rain.

HALF-SECTION Back to top
320 acres.

HAZARD INSURANCE Back to top
Insurance covering damage to a property caused by hazards such as fire, wind and accident.

HEADER Back to top
The framing elements above an opening such as a window or door.

HEARTH Back to top
The floor of a fireplace or the area immediately in front of it.

HEIGHT ZONING Back to top
A municipal restriction on the maximum height of any building or other structure.

HIDDEN AMENITIES Back to top
Assets of a property which contribute to its value, but are not readily apparent. Examples might include upgraded or premium building materials.

HIGHEST AND BEST USE Back to top
The most profitable and likely use of a property. Selected from reasonably probable and legal alternative uses, which are found to be physically possible, appropriately supported and financially feasible to result in the highest possible land value.

HOME EQUITY CONVERSION MORTGAGE (HECM) Back to top
Also known as a reverse annuity mortgage. It allows home owners (usually older) to convert equity in the home into cash. Normally paid by the lender in monthly payments. HECM's typically do not have to be repaid until the borrower is no longer occupying the home.

HOME EQUITY LINE OF CREDIT Back to top
A type of mortgage loan that allows the borrower to draw cash against the equity in his home.

HOME INSPECTION Back to top
A complete examination of a building to determine its structural integrity and uncover any defects in materials or workmanship which may adversely affect the property or decrease its value.

HOME INSPECTOR Back to top
A person who performs professional home inspections. Usually, with an extensive knowledge of house construction methods, common house problems, how to identify those problems and how to correct them.

HOMEOWNER'S ASSOCIATION Back to top
An organization of home owners in a particular neighborhood or development formed to facilitate the maintenance of common areas and to enforce any building restrictions or covenants.

HOMEOWNER'S INSURANCE Back to top
A policy which covers a home owner for any loss of property due to accident, intrusion or hazard.

HOMEOWNER'S WARRANTY Back to top
An insurance policy covering the repair of systems and appliances within the home for the coverage period.

HUD MEDIAN INCOME Back to top
Median family income for a particular county or metropolitan statistical area (MSA), as estimated by the Department of Housing and Urban Development (HUD).

HUD-1 STATEMENT Back to top
A standardized, itemized list, published by the U.S. Department of Housing and Urban Development (HUD), of all anticipated CLOSING COSTS connected with a particular property purchase.

IMPROVED LAND Back to top
Any parcel of land which has been changed from its natural state through the creation of roads, buildings or other structures.

IMPROVEMENTS Back to top
Any item added to vacant land with the intent of increasing its value or usability.

IMPROVEMENT RATIO Back to top
The comparative value of an improved piece of land to its natural, unaltered state.

INCOME APPROACH Back to top
The process of estimating the value of property by considering the present value of a stream of income generated by the property.

INCOME PROPERTY Back to top
A piece of property whose highest and best use is the generation of income through rents or other sources.

INDEPENDENT APPRAISAL Back to top
An estimation of value created by a professional, certified appraiser with no vested interest in the value of the property.

INSPECTION Back to top
The examination of a piece of property, its buildings or other amenities.

INSURABLE TITLE Back to top
The title to property which has been sufficiently reviewed by a title insurance company, such that they are willing to insure it as free and clear.

INTEREST RATE Back to top
A percentage of a loan or mortgage value that is paid to the lender as compensation for loaning funds.

INVESTMENT PROPERTY Back to top
Any piece of property that is expected to generate a financial return. This may come as the result of periodic rents or through appreciation of the property value over time.

JAMB Back to top
The side of a door frame.

JOINT TENANCY Back to top
A situation where two or more parties own a piece of property together. Each of the owners has an equal share, and may not dispose of or alter that share without the consent of the other owners.

JOISTS Back to top
Horizontal beams laid on edge to support flooring or a ceiling.

JUDGMENT Back to top
An official court decision. If the judgment requires payment from one party to another, the court may put a lien against the payee's property as collateral.

JUDICIAL FORECLOSURE Back to top
A type of foreclosure conducted as a civil suit in a court of law.

JUMBO LOAN Back to top
A mortgage loan for an amount greater than the limits set by Fannie Mae and Freddie Mac. Often called non-conforming loans.

LALLY COLUMN Back to top
A concrete filled steel pipe used to support beams.

LATE CHARGE Back to top
An extra charge, or penalty added to a regular mortgage payment when the payment is made late by an amount of time specified in the original loan document.

LATENT DEFECTS Back to top
Any defect in a piece of property which is not readily apparent, but which has an impact of the value. Structural damage or termite infestation would be examples of latent defects.

LEASE Back to top
A contract between a property owner and a tenant specifying the payment amount, terms and conditions, as well as the length of time the contract will be in force.

LEASEHOLD ESTATE Back to top
A type of property ''ownership'' where the buyer actually has a long-term lease on the property.

LEASE OPTION Back to top
A lease agreement that gives the tenant an option to buy the property. Usually, a portion of the regular monthly rent payment will be applied towards the down payment.

LEGAL DESCRIPTION Back to top
The description of a piece of property, identifying its specific location in terms established by the municipality or other jurisdiction in which the property resides. Often related in specific distances from a known landmark or intersection.

LENDER Back to top
The person or entity who loans funds to a buyer. In return, the lender will receive periodic payments, including principal and interest amounts.

LIABILITIES Back to top
A person's outstanding debt obligations.

LIABILITY INSURANCE Back to top
Insurance that covers against potential lawsuit brought against a property owner for alleged negligence resulting in damage to another party.

LIEN Back to top
Any claim against a piece of property resulting from a debt or other obligation.

LIFE CAP Back to top
A limit on how far the interest rate can move for an Adjustable Rate Mortgage.

LIKE-KIND PROPERTY Back to top
Any property which is substantially similar to another property.

LINE OF CREDIT Back to top
An extension of credit for a certain amount for a specific amount of time. To be used by the borrower at his discretion.

LIQUID ASSET Back to top
Any asset which can be quickly converted into cash at little or no cost, or cash itself.

LOAN Back to top
Money borrowed, to be repaid with interest, according to the specific terms and conditions of the loan.

LOAN OFFICER Back to top
A person that "sells" loans, representing the lender to the borrower, and the borrower to the lender.

LOAN ORIGINATION Back to top
How a lender refers to the process of writing new loans.

LOAN SERVICING Back to top
The processing of payments, mailing of monthly statements, management and disbursement of escrow funds etc Typically carried out by the company you make payments to.

LOAN-TO-VALUE RATIO (LTV) Back to top
The comparison of the amount owed on a mortgaged property to its fair market value.

LOCK-IN Back to top
An agreement between a lender and a borrower, guaranteeing an interest rate for a loan if the loan is closed within a certain amount of time.

LOCK-IN PERIOD Back to top
The amount of time the lender has guaranteed an interest rate to a borrower.

MAJOR DEFICIENCY Back to top
A deficiency that strongly impacts the usability and habitability of a house. Or a deficiency that may be very expensive to repair.

MANUFACTURED HOUSING Back to top
Once known as ''mobile homes,'' manufactured housing is any building which has been constructed off site, then moved onto a piece of real property.

MARGIN Back to top
The difference between the interest rate and the index on an adjustable rate mortgage.

MARGINAL LAND Back to top
Land whose value has been diminished due to some internal defect or external condition. In most cases, the cost to correct the flaw or condition is as much or more than the expected return from the property.

MASTER ASSOCIATION Back to top
An umbrella organization that is made up of multiple, smaller home owner's associations. Often found in very large developments or condominium projects.

MATURITY Back to top
The date on which the principal balance of a financial instrument becomes due and payable.

MERGED CREDIT REPORT Back to top
A credit report derived from data obtained from multiple credit agencies.

METES AND BOUNDS Back to top
A traditional way of describing property, generally expressed in terms of distance from a known landmark or intersection, and then following the boundaries of the property back to its origin.

METROPOLITAN AREA Back to top
The accumulated land in and around a city or other municipality which falls under the political and economic influence of that entity.

MINERAL RIGHTS Back to top
The legal right to exploit and enjoy the benefits of any minerals located below the surface of a parcel of land.

MISREPRESENTATION Back to top
A statement by one party in a transaction that is incorrect or misleading. Most misrepresentations are deemed to be intentional and thus may constitute fraud. Others, however, some are rendered through simple mistakes, oversights or negligence.

MORTGAGE Back to top
A financial arrangement wherein an individual borrows money to purchase real property and secures the loan with the property as collateral.

MORTGAGE BANKER Back to top
A financial institution that provides primary and secondary mortgages to home buyers.

MORTGAGE BROKER Back to top
A person or organization that serves as a middleman to facilitate the mortgage process. Brokers often represent multiple mortgage bankers and offer the most appropriate deal to each buyer.

MORTGAGEE Back to top
The entity that lends money in a real estate transaction.

MORTGAGE INSURANCE Back to top
A policy that fulfills those obligations of a mortgage when the policy holder defaults or is no longer able to make payments.

MORTGAGE INSURANCE PREMIUM (MIP) Back to top
A fee that is often included in mortgage payments that pays for mortgage insurance coverage.

MORTGAGE LIFE INSURANCE Back to top
A policy that fulfills the obligations of a mortgage when the policy holder dies.

MORTGAGOR Back to top
The entity that borrows money in a real estate transaction.

MULTI-FAMILY PROPERTIES Back to top
Any collection of buildings that are designed and built to support the habitation of more than four families.

NATIONAL ASSOCIATION OF MASTER APPRAISERS (NAMA) Back to top
A non profit professional association organized in 1982, dedicated to the advancement of professionalism in real estate appraisal.

NATIONAL SOCIETY OF REAL ESTATE APPRAISERS Back to top
An organization founded in 1956 which promotes standards of professionalism in its members.

NATURAL VACANCY RATE Back to top
The percentage of vacant properties in a given area that is the result of natural turnover and market forces.

NEGATIVE AMORTIZATION Back to top
When the balance of a loan increases instead of decreases. Usually due to a borrower making a minimum payment on an Adjustable Rate Mortgage during a period when the rate fluctuates to a high enough point that the minimum payment does not cover all of the interest.

NEIGHBORHOOD LIFE-CYCLE Back to top
The evolution of neighborhood use and demographics over time. Economic fluctuations, municipal zoning changes and population shifts can effect the life cycle.

NEIGHBORHOOD Back to top
A subsection of a municipality that has been designated by a developer, economic forces or physical formations.

NET LEASABLE AREA Back to top
The space in a development, outside of the common areas, that can be rented to tenants.

NEW ENGLAND COLONIAL Back to top
An architectural style dating from early American history typified by a two-story building with clapboard siding.

NO-COST LOAN Back to top
Many lenders offer loans that you can obtain at "no cost." You should inquire whether this means there are no "lender" costs associated with the loan, or if it also covers the other costs you would normally have in a purchase or refinance transactions, such as title insurance, escrow fees, settlement fees, appraisal, recording fees, notary fees, and others. These are fees and costs which may be associated with buying a home or obtaining a loan, but not charged directly by the lender. Keep in mind that, like a "no-point" loan, the interest rate will be higher than if you obtain a loan that has costs associated with it.

NO-POINT LOAN Back to top
A loan with no "points". The interest rate on such a loan will be higher than a loan with points paid. Also sometimes refers to a refinance loan where closing costs are included in the loan.

NON-CONFORMING USE Back to top
The use of land for purposes contrary to the applicable municipal zoning specifications. Often occurs when zoning changes after a property is in use.

NONLIQUID ASSET Back to top
Any asset which can not be quickly converted into cash at little or no cost.

NOTE Back to top
A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.

NOTE RATE Back to top
The interest rate stated on a mortgage note.

NOTICE OF DEFAULT Back to top
Formal written notice from a lender to a borrower that default has occurred.

OBSOLESCENCE Back to top
The process of an assets value diminishing due to the development of more desirable alternatives or because of the degradation of its capabilities.

OCCUPANCY Back to top
A physical presence within and control of a property.

OCCUPANCY RATE Back to top
The percentage of properties in a given area that are occupied.

OCTOPUS RECEPTACLE Back to top
An outlet with too many devices plugged into it, using a power strip or other device to multiply the outlets.

OFF-SITE IMPROVEMENTS Back to top
Buildings, structures or other amenities which are not located on a piece of property, but are necessary to maximize the use of the property or in some way contribute to the value of the property.

OFF-STREET PARKING Back to top
Designated parking spaces associated with a particular building or other structure which are not located on public streets.

OLD TERMITE ACTIVITY Back to top
Where no termites are currently active, but indications of past activity can be seen.

ON-SITE IMPROVEMENTS Back to top
Buildings, structures or other amenities that are erected on a piece of property and contribute to its value.

OPEN SPACE Back to top
Any land which has not had any significant buildings or structures erected on it. Most often used to describe desirable neighborhood features like parks.

OPEN SPLICE Back to top
An uncovered electrical connection.

ORIGINAL EQUITY Back to top
The amount of cash a home buyer initially invests in the home.

ORIGINAL PRINCIPAL BALANCE Back to top
The total amount of principal owed on a mortgage loan at the time of closing.

ORIGINATION FEE Back to top
Refers to the total number of points paid by a borrower at closing.

OWNER FINANCING Back to top
A transaction where the property owner provides all or part of the financing.

OWNER OCCUPIED Back to top
The state of property wherein the owner occupies at least some portion of the property.

PARGING Back to top
The cement coat applied to block foundations.

PARTIAL INTEREST Back to top
A shared ownership in a piece of property. May be divided among two or more parties.

PARTIAL PAYMENT Back to top
A payment of less than the regular monthly amount. Usually, a lender will not accept partial payments.

PERIODIC PAYMENT CAP Back to top
The limit on how much regular monthly payments on an Adjustable Rate Mortgage can change during one adjustment period.

PERIODIC RATE CAP Back to top
The limit on how much the interest rate on an Adjustable Rate Mortgage can change during any one adjustment period.

PERSONAL PROPERTY Back to top
Owned items which are not permanently affixed to the land.

PERSONAL RESIDENCE Back to top
The primary domicile of a person or family.

PLANNED UNIT DEVELOPMENT (PUD) Back to top
A coordinated, real estate development where common areas are shared and maintained by an owner's association or other entity.

PLAT Back to top
A plan or chart of a piece of land which lays out existing or planned streets, lots or other improvements.

POINT Back to top
A percentage of a mortgage amount (one point = 1 percent).

PRE-APPROVAL Back to top
The process of applying for a mortgage loan and becoming approved for a certain amount at a certain interest rate before a property has been chosen. Pre-approval allows the borrower greater freedom in negotiations with sellers.

PREFABRICATED Back to top
Any building or portion thereof which is manufactured and assembled off site, then erected on a property.

PREPAYMENT Back to top
Payment made that reduces the principal balance of a loan before the due date and before the loan has become fully amortized.

PREPAYMENT PENALTY Back to top
A fee that may be charged to a borrower who pays off a loan before it is due.

PRE-QUALIFICATION Back to top
Less formal that pre-approval, pre-qualification usually means a written statement from a loan officer indicating his or her opinion that the borrower will be able to become approved for a mortgage loan.

PRIME RATE Back to top
The interest rate that banks and other lending institutions charge other banks or preferred customers.

PRINCIPAL Back to top
The amount owed on a mortgage which does not include interest or other fees.

PRINCIPAL BALANCE Back to top
The outstanding balance of principal on a mortgage. Does not included interest due.

PRINCIPAL, INTEREST, TAXES, AND INSURANCE (PITI) Back to top
The most common constituents of a monthly mortgage payment.

PRIVATE MORTGAGE INSURANCE (PMI) Back to top
A form of mortgage insurance provided by private, non-government entities. Normally required when the LOAN TO VALUE RATIO is less that 20%.

PROPERTY Back to top
Any item which is owned or possessed.

PURCHASE AGREEMENT Back to top
A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

QUADRAPLEX Back to top
Any building designed to accommodate four families.

QUALIFYING RATIOS Back to top
Two ratios used in determining credit worthiness for a mortgage loan. One is the ratio of a borrower's monthly housing costs to monthly income. The other is a ratio of all monthly debt to monthly income.

QUITCLAIM DEED Back to top
A legal document which transfers any ownership an individual has in a piece of property. Often used when the amount of ownership is not known or is unclear.

RAFTER Back to top
A structural element of the roof, sloping from the peak to the outer walls.

RANCH HOUSE Back to top
An architectural style typified by a single-story, low-roof construction. Popular in the western U.S.

RATE LOCK Back to top
A guarantee from a lender of a specific interest rate for a period of time.

RAW LAND Back to top
Any land which has not been developed.

REAL ESTATE Back to top
A piece of land and any improvements or fixtures located on that land.

REAL ESTATE AGENT Back to top
A licensed professional who facilitates the buying and selling of real estate.

REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA) Back to top
A federal law requiring lenders to give full disclosure of closing costs to borrowers.

REAL PROPERTY Back to top
Land, improvements and appurtenances, and the interest and benefits thereof.

REALTOR Back to top
A real estate agent or broker who is a member of the NATIONAL ASSOCIATION of REALTORS

RECEPTACLE Back to top
An electrical outlet to plug into.

RECORDER Back to top
A local government employee whose role it is to keep records of all real estate transactions within the jurisdiction.

RECORDING Back to top
The filing of a real estate transaction with the appropriate government agent (normally the RECORDER). A real estate transaction is considered final when it is recorded.

REFINANCE TRANSACTION Back to top
A new loan to pay off an existing loan. Typically to gain a lower interest rate or convert equity into cash.

RELOCATION SERVICE Back to top
Any company or agency that assists corporate employees in relocating from one place to another. Services may include hiring and coordinating real estate agents, moving companies, utilizes and the like.

REMAINING BALANCE Back to top
The amount of principal, interest and other costs that has not yet been repaid.

REMAINING TERM Back to top
The amount of time remaining on the original amortization schedule.

REMODEL Back to top
An activity designed to improve the value or desirability of a property through rebuilding, refurbishing, redecorating or adding on to it.

REPAYMENT PLAN Back to top
A plan to repay delinquent payments, agreed upon between a lender and borrower, in an effort to avoid foreclosure.

REPLACEMENT RESERVE FUND Back to top
An account, or fund, setup for the replacement of short life items, such as carpeting, in the common areas of a cooperative property.

RESIDENTIAL PROPERTY Back to top
A piece of property whose highest and best use is the maintenance of a residence.

REVOLVING DEBT Back to top
A type of credit that allows the borrower/customer to make charges against a predetermined line of credit. The customer then pays monthly installments on the amount borrowed, plus interest.

RIDGE BOARD Back to top
The structural member of a roof where the rafters join at the top.

RIGHT OF FIRST REFUSAL Back to top
An agreement giving a person the first opportunity to buy or lease a property before the owner offers it for sale to others.

ROOF PITCH Back to top
The degree of slope in a roof.

RURAL Back to top
An area outside of an established urban area or metropolitan district.

SALE PRICE Back to top
The actual price a property sells for, exclusive of any special financing concessions.

SALES COMPARISON APPROACH Back to top
An appraisal practice which estimates the value of a property by comparing it to comparable properties which have sold recently.

SCARCITY Back to top
An economic principal that dictates the price of a good or service through the interaction of supply and demand. When an item is scarce, its price tends to rise, given a constant demand. Real Estate is a classic example of scarcity.

SECOND MORTGAGE Back to top
A loan secured by the equity in a home, when a primary mortgage already exists.

SECONDARY MORTGAGE MARKET Back to top
An economic marketplace where mortgage bankers buy and sell existing mortgages.

SECURED LOAN Back to top
A loan that is backed by collateral. In the case of a mortgage loan, the collateral is the house.

SECURITY Back to top
The property used as collateral for a loan.

SEMIDETACHED HOUSING Back to top
Two residences which share a common wall.

SERVICER Back to top
A financial institution which collects mortgage payments from borrowers and applies the appropriate portions to principal, interest and any escrow accounts.

SERVICING Back to top
The processing of payments, mailing of monthly statements, management and disbursement of escrow funds etc Typically carried out by the company you make payments to.

SHEATHING Back to top
The covering on outside walls beneath the siding or exterior finish such as stucco.

SHEETROCK Back to top
Also called drywall, the gypsum board commonly used on interior walls.

SILL PLATE Back to top
The lumber used around the foundation to support exterior wall framing.

SILL COCK Back to top
Garden hose pipe connection.

SINGLE-FAMILY PROPERTY Back to top
A property designed and built to support the habitation of one family.

SOFFIT Back to top
The underside of a cornice at the eaves.

STUCCO Back to top
A textured plaster exterior (and occasionally interior) wall finish.

STUD Back to top
A vertical framing piece in a wall, generally 2x4 lumber in interior walls.

SUBDIVISION Back to top
A residential development that is created from a piece of land which has been subdivided into individual lots.

SUBJECT PROPERTY Back to top
A term which indicates a property which is being appraised.

SUMP Back to top
A basin into which water drains and from which the water is pumped out.

SURVEY Back to top
A specific map of a piece of property which includes the legal boundaries and any improvements or features of the land. Surveys also depict any rights-of-way, encroachments or easements.

SWEAT EQUITY Back to top
The method whereby a home owner develops equity in a property, either during the purchase or throughout its life, by personally constructing improvements rather than paying to have them built.

TAX-EXEMPT PROPERTY Back to top
Any property which is not taxed.

TENANCY Back to top
The right to occupy a building or unit.

TENANCY IN COMMON Back to top
A form of holding title, whereby there are two or more people on title to a property, ownership does not pass on to the others upon the death of one individual.

THIRD PARTY ORIGINATION Back to top
When a lender uses a third party to originate and package loans for sale to the secondary market (Fannie Mae, Freddie Mac).

TITLE Back to top
A specific document which serves as proof of ownership.

TITLE COMPANY Back to top
An organization which researches and certifies ownership of real estate before it is bought or sold. Title companies also act at the facilitator ensures all parties are paid during the real estate transaction.

TITLE INSURANCE Back to top
A policy which insures a property owner should a prior claim arise against the property after the purchase has been completed. This also covers a lender should a question of ownership arise.

TITLE SEARCH Back to top
The process whereby the TITLE COMPANY researches a properties title history and ensures that no outstanding claims exist.

TRANSFER OF OWNERSHIP Back to top
Any means by which the ownership of a property changes hands.

TRANSFER OF TAX Back to top
Taxes payable when title passes from one owner to another.

TRAP Back to top
A bend in water pipe.

TRUSTEE Back to top
A fiduciary that holds or controls property for the benefit of another.

TRUTH IN LENDING Back to top
A federal law requiring full disclosure by lenders to borrowers of all terms, conditions and costs of a mortgage.

TUDOR Back to top
A style of architecture typified by exposed stone, wood and brick construction. Similar in style to English manor homes.

UNDER IMPROVED LAND Back to top
A piece of land which has been improved, but not to the full extent of its potential.

UNENCUMBERED PROPERTY Back to top
Any property which has no outstanding claims or liens against it.

UNIFORM STANDARDS OF PROFESSIONAL APPRAISAL PRACTICE (USPAP) Back to top
Developed in 1986 by the Ad Hoc Committee on Uniform Standards and copyrighted in 1987 by The Appraisal Foundation, USPAP forms the guidelines followed by every licensed and certified real estate appraiser in the United States. The purpose of these Standards is to establish requirements for professional appraisal practice, which includes appraisal, appraisal review, and appraisal consulting. The intent of these Standards is to promote and maintain a high level of public trust in professional appraisal practice.

USEFUL LIFE Back to top
The span of time over which a property can be used or can provide benefits to its owner.

VACANCY RATE Back to top
The current percentage of vacant properties in a given area, regardless of why they are vacant.

VA MORTGAGE Back to top
A mortgage that is guaranteed by the Department of Veterans Affairs (VA).

VARIANCE Back to top
An exception to municipal zoning regulations granted for a specific time period to allow for non-conforming use of the land.

VENT PIPE Back to top
A pipe allowing gas to escape.

VESTED Back to top
Having the right to use a portion of a fund such as an IRA. Typically vesting occurs over time. If you are 100% vested, you have a right to 100% of the fund.

VETERANS AFFAIRS, DEPARTMENT OF (VA) Back to top
The successor to the Veteran's Administration, this government agency is responsible for ensuring the rights and welfare of our nation's veterans and their dependents. Among other duties, the VA insures home loans made to veterans.

VOLTAGE Back to top
An expression of electric force, or pressure. One volt being the force needed to move one amp against one ohm resistance.

WALK-THROUGH INSPECTION Back to top
A process whereby an appraiser examines a property in preparation for estimating its value. Also, the process of inspecting a property for any damage prior to that property being bought or sold.

WARRANTY Back to top
An affidavit given to stipulate the condition of a property. The person giving the warranty assumes liability if the condition turns out to be untrue.

WATT Back to top
An expression of amount of electrical power. Volt times amps equals watts.

WEAR AND TEAR Back to top
A term used to indicate the normal damage inflicted on a property through every-day use.

WEATHER STRIPPING Back to top
Material used around windows and doors to prevent drafts.

WEEP HOLE Back to top
Drainage hole that allows water to escape.

ZERO LOT LINE Back to top
A municipal zoning category wherein a building or other fixture may abut the property line.

ZONE Back to top
A specific area within a municipality or other jurisdiction which conforms to certain guidelines regarding the use of property in the zone. Typical zones include single-family, multi-family, industrial, commercial and mixed-use.

The Complete List

A
Abandonment: The voluntary relinquishment of rights of ownership or other interest (such as an easement) by failure to use the property, coupled with an intent to abandon (give up the interest).
Abatement: A reduction or decrease. Usually applies to a decrease of assessed valuation of ad valorem taxes after the assessment and levy.
Abstract: A summary, an abridgement. Before the use of photo static copying, public records were kept by abstracts of recorded documents.
Abstracter's Certificate: A certificate contained in an abstract which shows the time period and scope of the search of public records done by the abstracter.
Abstract Of Judgment: A summary of the essential provisions of a court judgment, which when recorded in the county recorder's office, creates a lien upon the property of the defendant in that county, both presently owned or after acquired.
Abstract Of Title: A compilation of the recorded documents relating to a parcel of land, from which an attorney may give an opinion as to the condition of title. Still in use in some states, but giving way to the use of title insurance.
Acceleration Clause: Clause used in an installment note and mortgage (or deed of trust), which gives the lender the right to demand payment in full upon the happening of a certain event, such as failure to pay an installment by a certain date, change of ownership without the lender's consent, destruction of the property, or other event which endangers the security of the loan.
Accessibility: The location of a site in terms of how easily it may be reached by customers. employees, carriers, and others necessary to the intended use of the property
Accord: An agreement by which one accepts something different (usually less) from what is owed as full satisfaction The amount owed may be in dispute or simply accepted as full satisfaction by the creditor or claimant. The agreement and acceptance is called "Accord and Satisfaction."
Accretion: The gradual addition to the shore or bank of a waterway. The land generally becomes the property of the owner of the shore or bank, except where statutes specify otherwise.
Accrued Depreciation: (1) The amount reserved each year in the accounting system for replacement of a building or other asset. (2) The useful life of a property at any given time.
Acknowledgement: A written declaration by a person executing an instrument, given before an officer authorized to give an oath (usually a notary public), stating that the execution is of his own volition.
Acquisition Costs: Costs of acquiring property other than purchase price: escrow fees, title insurance, lenders fees, etc.
Act Of God: Damage caused by nature (floods. winds. etc.) rather than destruction by man.
Add on Interest: A method of charging interest usually used in the financing of automobiles, but not generally used in real estate financing. Interest is computed on the total amount borrowed and added on to the principal. Each payment is then deducted from this total amount. Interest on real estate loans is usually figured based on the balance owing after each payment is made (declining balance).
Adjusted Gross Income: Gross income of a building it fully rented, less an allowance for estimated vacancies.
Adjustable Rate Mortgages (arm's): Mortgage loans under which the interest rate is periodically adjusted to more closely coincide with current rates. The amounts and times of adjustment are agreed to at the inception of the loan. Also called: Adjustable Rate Loans, Adjustable Mortgage Loans (AML'S), Flexible Rate Loans, Variable Rate Loans.
Ad Valorem: "According to value." A method of taxation using the value of the thing taxed to determine the amount of tax. Taxes can be either "Ad Valorem" or "Specific." Example: A tax of $5.00 per $1000.00 of value per house is "Ad Valorom," A tax of S5.00 per house (irrespective of value) is "Specific."
Advance Fee: A fee charged by a broker to a seller to cover all ora portion of the broker's costs of promoting the property. The fee is generally credited against commissions but is not refunded if no commissions are received. Most frequently used in connection with large offerings which require a substantial outlay of funds for promotion.
Agency: A relationship created when one person (the principal) delegates to another (the agent) the fight to act on his or her behalf in business transactions.
All inclusive Trust Deed (wrap-around mortgage): A financing technique which involves the creation of a new trust deed which includes the balance due on the existing note plus any new funds advanced.
American Land Title Association (ALTA): A national association of title insurance companies, abstractors, and agents. The association adopts standard title policy forms.
Amortization: Payment of a debt in equal installments of principal and interest, rather than interest only payments.
Annual Percentage Rate (a.p.r.): The yearly interest percentage of a loan, as expressed by the actual rate of interest paid. For example: 6% add-on interest would be much more than 6% simple interest, even though both would say 6%. The A.P.R. is disclosed as a requirement of federal truth in lending statutes and should include all finance charges.
Appel Loan (Accelerating Payoff Progressive Equity Loan): A residential property loan which calls for a payment increase over the first 6 years. Level payments are made for the remaining years and the loan paid off during the 15th year. There is no prepayment penalty and P.M.I. is required.
Appraisal: An opinion of value based upon a factual analysis. Legally, an estimation of value by two disinterested persons of suitable qualifications.
Appraisal Methods: Generally, three major methods of appraisal: Cost Approach, Income Approach, Market Value (comparables) Approach.
Arrears: (1) Payment made after it is due is in arrears. (2) Interest is said to be paid in arrears since it is paid to the date of payment rather than in advance, as is rent. Example: A rental payment made July 1 pays the rent to August 1. An interest payment made July 1 Pays the interest to July 1.
Assumable: A mortgage loan which can be transferred to another person without a change in the terms of the loan. VA and FHA loans are assumable, FHLMC and FNMA are not.
Assumption of Note: Agreement by a buyer to assume the liability under an existing note secured by a mortgage or deed of trust. The lender usually must approve the new debtor in order to release the existing debtor (usually the seller) from liability.
Avigation Easement: An easement over private property abut-ting an airport runway, which limits the height of crops, trees, structures. etc., in the aircraft's take off and landing path.
B
Balloon Note: A note calling for periodic payments which are insufficient to fully amortize the face amount of the note prior to maturity, so that a principal sum known as a "balloon" is due at maturity.
Balloon Payment: The unpaid principal amount of a loan due on a specific date in the future. Usually the amount that must be paid in a lump sum at the end of the term.
Bankrupt: One who is adjudicated a bankrupt by a court having proper jurisdiction. The bankruptcy may be voluntary (petitioned by the bankrupt) or involuntary (petitioned by the creditors of the bankrupt).
Bankruptcy: Proceedings under federal bankruptcy statutes to relieve a debtor (bankrupt) from insurmountable debt. The bankrupt's property is distributed by the court to the creditors as full satisfactions of the debts, in accordance with certain priorities and exemptions. Voluntary bankruptcy is petitioned by the debtor for, involuntary by the creditors.
Before And After Method: An appraisal method used in both condemnation and modernization. In condemnation the method is used in a partial taking. The value of the total land owned by A, for example, is $1.00 per sq. ft. After a partial taking, the remaining land of A is worth $.75 per sq. ft. A should receive $1.00 per sq. ft. for the property taken plus $.25 per sq. ft. for the remaining parcel. In the event the remaining property is worth $1.25 after the taking (increased value), the payment to A could be less than the value of the property taken. In modernization, an appraiser may take the value of property before and after remodeling to determine if the value increased more than modernization costs.
Beneficiary: The Person who is entitled to receive funds of property under the terms and provisions of a will, trust, insurance policy or security instrument. In connection with a mortgage loan the beneficiary is the lender.
Bill Of Sale: An instrument by which title to personal property is transferred or conveyed.
Biweekly: Also known as accelerated mortgages. Biweeklies reduce interest expense and build home equity faster than monthly payments.
Blanket Mortgage: (1) A mortgage covering more than one property of the mortgagor, such as a mortgage covering all the lots of a builder in a subdivision. (2) A mortgage covering all real property of the mortgagor, both present and future. When used in this meaning it is also called a "general mortgage".
Bona Fide Purchaser: A purchaser in good faith. for valuable consideration, without notice or knowledge of adverse claims of others. Sometimes abbreviated B.F.P.
Book Depreciation: Depreciation reserved (on the books) by an owner for future replacement or retirement of an asset.
Borough: A part of a city, having authority over certain local matters. The best known boroughs are the five boroughs of New York City.
Breach Of Warranty: In real property, the failure of the seller to pass title as either expressed or implied (by law) in the conveyancing document.
Breast Height: The height at which the diameter of a tree is measured. A height of 4 1/2 feet above the ground level. The abbreviation D.B.H. (diameter-breast-height) is usually used.
Broker, Real Estate: One who is licensed by the state to carry on the business of dealing in real estate. A broker may receive a commission for his or her part in bringing together a buyer and seller, landlord and tenant, or parties to an exchange.
Building And Loan Association: An organization for the purpose of accumulating a fund by subscription and savings of its members, to assist them with loans for building or purchasing real estate.
Buydown: A payment to the lender from the seller, buyer, third party, or some combination of these, causing the lender to reduce the interest rate during the early years of a loan. The buydown is usually for the first 1 to 5 years of the loan.
Buy-Sell Offer: An offer by one owner of a business or real estate to buy out the interest of another owner of the same business or real estate (a partner or other shareholder), or to sell the offerer's interest at the same price or proportionate price if unequal ownership. Example: A and B each own a 112 interest in lot 1. A offers to buy B's interest for $10,000 or to sell A's interest to B for $10,000. Theoretically very fair, since B has the option to buy or sell. However, B's interest may be worth $12,000, but B is financially unable to buy A's interest (also worth $12,000).
C
Califomia Land Title Association (CLTA): A statewide association of tide insurers and underwritten title companies. The association adopts standard title policy forms.
Call: In a metes and bounds description, the angle and distance of a given line or arc. Each call is usually preceeded by the word then or thence. Example: N 220 E 100' (lst. call), thence N 800 E 1W (2nd. call).
Cancellation Clause: A clause in a lease or other contract, setting forth the conditions under which each party may cancel or terminate the agreement. The conditions may be as simple as giving notice or complex and require payment by the party desiring to cancel.
Cap: The maximum which an adjustable rate mortgage may increase, regardless of index changes.
Capital Assets: Assets of a permanent nature used to produce income, such as machinery, buildings, equipment, land, etc. Must be distinguished from inventory. A machine which makes pencils, for example, would be a capital asset to a pencil manufacturer, but inventory to the company whose business is to sell such machines.
Capital Gains: Gains realized from the sale of capital assets. Generally, the difference between cost and selling price, less certain deductible expenses. Used mainly for income tax purposes.
Caravan: An inspection of newly listed properties, either by the entire sales staff of an office or by sales personnel from more than one office in conjunction with a multiple listing group. Generally conducted on a regular basis.
Carrying Charges: The costs involved in keeping a property which is intended to produce income (either by sale or rent) but has not yet done so.
Caveat Emptor: "Let the buyer beware." Legal maxim stating that the buyer takes the risk regarding quality or condition of the item purchased, unless protected by warranty or there is misrepresentation. Modernly, consumer protection laws have placed more responsibility for disclosure on the seller and broker.
CC and Rs (Covenants, Conditions and Restrictions): Limitations placed on the use and enjoyment of real property. These are found most often in condominiums and planned unit developments.
Certificate Of Title: In areas where attorneys examine abstractor chains of title, a written opinion, executed by the examining attorney, stating that title is vested as stated in the abstract.
Chain of Title: A chronological list of recorded instruments tracing title to land, from the original owner to the present owner.
Chains And Links: Measurements. In real estate measurements (surveying) a chain is 66' long or 100 links, each link being 7.92." The measurement may change when used in fields other than surveying.
Classified Property Tax: Property tax which varies in rate depending on the use (zoning classification) of the property.
Clear Title: Title to property which is free from liens, defects or other encumbrances.
Closing: (1) In real estate sales, the final procedure in which documents are executed and/or recorded, and the sale (or loan) is completed. (2) A selling term meaning the point at which the client or customer is asked to agree to the sale or purchase and sign the contract. (3) The final call in a metes and bounds legal description which "closes" the boundaries of the property.
Closing Costs: Expenses, beyond the selling price, such as loan fees, title fees, etc. Paid when documents are executed and/or recorded and the sale is complete.
Closing Statement: A summary, in the form of a balance sheet, showing the amounts of debits and credits to which each party to a real estate transaction is entitled upon closing.
Cloud On Title: An invalid encumbrance on real property, which, if valid, would affect the rights of the owner. For example: A sells lot 1, tract 1. to B. The deed is mistakenly drawn to read lot 2 by the recording of the erroneous deed. The cloud may be removed by quitclaim deed, or, it necessary, by court action.
Coinsurance: A sharing of the risk of an insurance policy by more than one insurer. Usually one insurer is liable up to a certain amount, the other liable over that amount.
Commercial Property: Property which is zoned "commercial" (for business use). Property such as stores, restaurants, etc., falling between residential and industrial.
Commingling: To mix funds held in trust with other funds. For example: A broker or builder mixes deposits (should be in a trust account) with his funds by putting the deposits in his general account. Although commingling is in itself a violation for which a broker may lose his license, it does not mean that, by commingling, the broker or builder intended to misappropriate the funds.
Commission: Compensation due a real estate broker for acting on behalf of the principal.
Community Property: Property acquired during a marriage by either a husband or wife, or both, which is not separate property.
Comparables (Comps): An abbreviation for comparable properties used for comparative purposes in the appraisal process.
Conditional Sales Contract: A sale in which the title to property or goods remains with the seller until the purchaser has fulfilled the terms of the contract, usually payment in full.
Condominium: A structure of two or more units, the interior space of which are individually owned: the balance of the property (both land and building) is owned in common by the owners of the individual units. The size of each unit is measured from the interior surfaces (exclusive of paint or other finishes) of the exterior walls, floors, and ceiling. The balance of the property is called the common area.
Consideration: A required element in all contracts by which some-thing of value, including a promise, is exchanged for the act or promise of another.
Contingency: Action conditioned upon a certain event. Acceptance of the terms of a contract based on something else happening or certain conditions being met.
Conveyance: The transfer of title or an interest in real property by means of a written instrument such as a deed of trust.
D
Declaration Of Trust: A written acknowledgement by one holding legal title to property that the property is held in trust for the benefit of another.
Declining Balance Method Of Depreciation: Depreciation by a fixed annual percentage of the balance after deducting each yearly depreciation amount.
Deed: Actually, any one of many conveyancing or financing instruments, but generally a conveyancing instrument, given to pass fee title to property upon sale.
Deed Of Trust: An instrument used in many states in place of a mortgage. Property is transferred to a trustee by the borrower (trustor) in favor of the lender (beneficiary), and reconveyed upon payment in full.
Defeasible Title: Title which is not absolute but possibly may be annulled or voided at a later date. For example: Title conveyed to A with condition that if A marries before age 30, title will go to B. A's title may be good (doesn't marry) or may be defeated (marries before 30).
Deficiency Judgment: Commonly the amount for which the borrower is personally liable on a note and mortgage if the foreclosure sale does not bring enough to cover the debt. Actually the judgment is for the total amount and not for the deficiency, the recovery from the foreclosure sale being deducted from this amount.
Delivery: In conveyancing, the placing of the property in the actual or constructive possession of the grantee. Usually accomplished by delivery of a deed to the buyer, or by recording said deed.
Demand: The lender's statement of the amount due to pay of a loan.
Demand Note: A note having no date for repayment, but due on demand of the lender.
Deposit: (1) Money given by the buyer with an offer to purchase. Shows good faith. Also called earnest money. (2) A natural accumulation of resources (oil, gold, etc.) which may be commercially recovered and marketed.
Depreciation: (1) Decrease in value to real property improve-ments caused by deterioration or obsolescence. (2) A loss in value as an accounting procedure to use as a deduction for income tax purposes.
Direct Reduction Mortgage: An amortized mortgage. One on which principal and interest payments are paid at the same time (usually monthly) with interest being computed on the remaining balance.
Discount Points: The fee associated with the note rate for your loan, the more discount points you pay the lower the rate you can buy, the fewer you pay, the higher your rate. If the rate is high enough, the loan is priced above par and these premium points are available to pay closing costs creating a no or low fee loan.
Disposition of Real Estate Statement: A statement that the buyer will occupy the property being purchased even though the buyer owns other property. The buyer states that the other property will be sold or rented. Particulars must be given as to any loan on the property and the equity or rent to payment amounts.
Documentary Transfer Tax: The tax, based on sales price, less loans which are being assumed, which is charged by the city and/or county on the transfer of real property.
Double Declining Balance Method Of Depreciation: A use of the declining balance method, but with double the depreciation allowable by straight line. An accelerated method.
Double Escrow: Two concurrent escrows on the same property, having the same party as buyer and seller of the property. Example: Escrow 1 -A buys from B. Escrow 2 -A sells the same property to C. A is using C's money to buy B's property. The process is illegal in many states unless full disclosure is made.
Dual Agency: The representation of opposing principals (buyer and seller) at the same time. In brokerage many states get around this by saying that the agent aids the buyer but is the agent of the seller only. A problem arises if both buyer and seller pay the broker, Then full disclosure must be made. An escrow agent is the agent of buyer and seller and usually paid by both. This is why an escrow agent must be neutral.
Due on-Sale-Clause: A clause in a mortgage loan which gives the lender the right to demand payment in full when the property changes ownership. Not applicable to FHA or VA loans.
E
Easement: A right created by grant, reservation, agreement, prescription, or necessary implication, which one has in the land of another. It is either for the benefit of land (appurtenant), such as right to cross A to get to B. or "in gross," such as a public utility easement.
Easement of Necessity: An easement granted by a court when itis determined that said easement is absolutely necessary for the use and enjoyment of the land. Commonly given to landlocked parcels.
Egress: A term concerning a right to come and go across the land (public or private) of another. Usually part of the term ingress and egress.
Eleemosynary Corporation: A corporation created for charitable purposes. There are tax advantages accorded to such corporations. The corporation may operate the same as a profit making corporation. Commonly called a nonprofit corporation.
Encumbrance, Incumbrance: A claim, lien, charge, or liability attached to and binding real property. Any right to, or interest in, land which may exist in one other than the owner, but which will not prevent the transfer of fee title.
Equitable Conversion: A legal fiction applied to a land contract which treats the vendee's (buyer's) interest as a real property interest even though the seller holds legal title, and the seller's interest as a security interest (personal property). This enables the buyer to act as the "owner" of the property without having "legal" title.
Equitable Mortgage: (1) A lien against real property (mortgage)which is enforceable in a court of equity, but does not legally constitute a mortgage. (2) A deed given as security for a debt will be held to be a mortgage rather than a transfer of title. Also called a constructive mortgage.
Equity: The value of a person's interest in real property after all liens and charges have been deducted.
Equity Line Of Credit: A combination of a line of credit and equity loan. A maximum loan amount is established based on credit and equity. A mortgage (deed of trust) is recorded against the potential borrower's property for said maximum loan amount. The potential borrower has the right to borrow, as needed, up to the amount of the mortgage.
Escalation Clause: A clause in a lease providing for an increased rental at a future time. May be accomplished by several types of clauses, such as (1) Fixed increase - A clause which calls for a definite, periodic rental increase. (2) Cost of living - A clause which ties the rent to a government cost of living index, with periodic adjustments as the index changes. (3) Direct expense - The rent is adjusted according to changes in the expenses of the property paid by the lessor, such as tax increases. increased maintenance costs, etc.
Escrow: Delivery of a deed by a grantor to a third party for delivery to the grantee upon the happening of a contingent event, Modernly, in some states, all instruments necessary to the sale (including funds) are delivered to a third (neutral) party, with instructions as to their use.
Excess Condemnation: Taking by right of eminent domain, more property than actually necessary for the intended purpose. This happens frequently, the excess property being sold at auction after completion of the project.
Exception: A provision in a title insurance binder or policy excludes liability for a specified title defect or an outstanding encumbrance.
Exclusive Listing: A written contract between a property ownerand a real estate broker, whereby the owner promises to pay a fee or commission to the broker it certain real property of the owner is sold during a stated period, regardless of whether the broker is or is not the cause of the sale. The broker promises to put forth his or her best efforts to sell the property, and may make specific promises as to advertising or other promotion in certain instances.
Exemplary Damages: Damages to punish (make an example of) the offender. This is done when the wrong is deliberate or grossly negligent and compensatory damages do not appear to be sufficient.
Expert Testimony: Testimony by one acknowledged to have special training and knowledge in a particular subject. Only testimony on the subject in which the witness is "expert" is considered expert testimony.
Exposure: (1) The degree to which a property for sale, lease, etc., is made noticeable (exposed) to potential buyers, tenants, etc., through advertising, multiple listing groups, etc. (2) The direction in which a property faces. For example: Does a store depending on walk-in trade face the sun in the morning when people walk in the sun to get warm (eastern exposure), or face the sun in the afternoon when people walk in the shade to keep cool (western exposure).
F
Fair Market Value: An appraisal term for the price which a property would bring in a competitive market given a willing seller and willing buyer, each of whom has a reasonable knowledge of all pertinent facts, with neither being under any compulsion to buy or sell.
Fee Simple: An estate under which the owner owns a contract interest in the property and is entitled to the unrestricted enjoyment of the property, including the right to dispose property.
Federal Deposit Insurance Corporation (f.d.i.c): The federal corporation which insures against loss of deposits in banks, up to a maximum amount.
Federal Home Loan Banks: Banks created under the Federal Home Loan Bank Act of 1932, in order to keep a permanent supply of money available for home financing. The banks are controlled by the Federal Home Loan Bank Board. Savings and loans, insurance companies, and other similar companies making long term mortgage loans may become members of the Federal Home Loan Bank System, and thus may borrow from one of the regional banks throughout the country.
Federal National Mortgage Association: (Fannie Mae): A tax paying corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by FHA or guaranteed by VA as conventional home mortgages.
Fee: (1) Modernly, and not in strict legal terms, synonymous with fee simple or "ownership." (2) A charge made by a landlord to a tenant, which is not refundable. For example: A cleaning deposit would be refunded if the tenant left the rented property reasonably clean. A cleaning fee would be a charge by the landlord for cleaning the rented property and would not be refunded regardless of the condition of the property.
FHA (Federal Housing Admininistration): A federal agency which insures first mortgages, enabling lenders to loan a very high percentage of the sale price.
FHLMC (Freddie Mac): Federal Home Loan Mortgage Corporation - A federal agency purchasing first mortgages, both conventional and federally insured, from members of the Federal Reserve System, and the Federal Home Loan Bank System.
Finance Charge: A total of all costs imposed directly or indirectly by the creditor and payable either directly or indirectly by the customer, as defined by the federal Truth-In-Lending laws.
Financial Statement: An accounting statement showing assets and liabilities of a person or company. Used generally for large loans or other instances when the credit report (history of payment of debts) in itself is not sufficient.
Finder's Fee: A fee paid to someone who finds a buyer or property for a broker, buyer, etc. The term is sometimes used to attempt to pay a commission to an unlicensed person. Generally, a finder's fee is considered a commission and may only be paid to one who holds a real estate license.
First Mortgage: A mortgage on property that is superior in position to any other mortgage.
First Refusal Right: A right, usually given by an owner to a lessee, which gives the lessee a first chance to buy the property if the owner decides to sell. The owner must have a legitimate offer which the lessee can match or refuse. It the lessee refuses, the property can then be sold to the offeror.
First User: A tax term signifying the one who builds or buys property and is the first one to put the buildings to use. Certain tax (depreciation) advantages are given to a first user. The term concerns only depreciable property (improvements) and prior use of the land only (farming) would not be considered.
Fixed Rate Loan: A loan on which the same rate of interest is charged for the life of the loan.
Fixture: Personal property which is permanently attached to the property, and, as such, becomes part of the real property.
FNMA Buydown: FNMA (Federal National Mortgage Association) accepts loans containing a buy down provision on single family residential, owner occupied properties. A prepayment (points) will buy a lower rate of interest during the first one to five years of the loan. Restrictions apply as to the amount of the buydown and rise in payment amount as the loan progresses.
Forfiture: The taking of an individual's properly by a government, because the individual has committed a crime. In the United States, private property cannot be taken, except by eminent domain upon payment of just compensation, or for nonpayment of taxes.
Franchise: (1) A statutory right which could not be exercised in the absence of the statute, such as the statutes enabling persons to form a corporation. Since a corporation is created by the statute, it could not be formed except by the grant of the legislature. (2) A combination of individual ownership and central control. One may own a fast food restaurant, hotel, hardware store, etc., yet use the name of a national company. Each individual owner pays for the name use, advertising, and may be required to make certain purchases (napkins, buns, etc.) from the national company. The real estate brokerage business was slow to use the franchise method, but now has many companies operating in this manner.
Front Foot Cost: A determination of the value of real property based on a value per foot as measured along the frontage of a parcel. Usually used with commercial property or waterfront.
Full Disclosure: In real estate, revealing all the known facts which may affect the decision of a buyer or tenant. A broker must disclose known defects in the property for sale or lease. A builder must give to a potential buyer the facts of his new development (are there adequate school facilities?" sewer facilities? (an airport nearby?, etc.). A broker cannot charge a commission to buyer and seller unless both know (disclosure) and agree.
Future Acquired Property: Property acquired after a loan or sale. For example: A loan agreement may state that the loan is a lien on all property presently owned or which the borrower may acquire in the future.
Future Interest: A present interest, but only a future right to possession and enjoyment of the land, such as a remainder interest, reversionary interest, etc.
G
Garnishment: A legal proceeding under which a person's money in control of another (such as salary) is taken for payment of a debt. The amount which may be taken is set by statute (usually as a percentage), and, in most states, a judgment is necessary before garnishment.
General Lien: (1) A lien such as a tax lien or judgment lien which attaches to all property of the debtor rather than the lien of, for example, a trust deed, which attaches only to specific property. (2) The right of a creditor to hold personal property of a debtor for payment of a debt not associated with the property being held. Must be done under an agreement since against general precepts of law.
General Membership: A partnership made up of general partners, without special (limited) partners.
Georgian Architecture: A colonial style of architecture dating back to the eighteenth century. Characterized by first floor windows extending to the ground, its exterior placements (windows, doors. etc.) are simple and well balanced yet formal in appearance.
Gerrymander: To divide an area into districts, against the obvious natural divisions, in order to accomplish an unlawful purpose. For example: To divide a school district to keep out certain people for reasons of race or religion, to divide a political voting district so as to give power to a political party.
Gnma (government National Mortgage Association) Options: A method of purchasing GNMA securities through "puts" and calls." A GNMA Call Option is the right to buy GNMA securities at a specific yield for a specified time, A Put Option is the right to sell GNMA securities at a specific yield for a specified time. The buyer pays for the option and may exercise it, not exercise it, or sell it.
Graduated Payment Mortgage: A mortgage or deed or trust calling for increasingly higher payments over the term of the loan. This allows the buyer low beginning payments. The payments then increase as (theoretically) the buyer's earnings increase.
Grantee: One to whom a grant is made. The purchaser of real property.
Grantor: One who has made a grant. The seller of real property.
Grantor Grantee Index: The record of the passing of title to all the properties in a county as kept by the county recorder's office. Property is checked by tracing the names of the sellers and buyers (chain of title). Title companies usually have more efficient methods by keeping records according to property description, rather than peoples names.
Gross Income: The scheduled (total) income, either actual or estimated, derived from a business or property.
Gross Income Multiplier: A figure which, when multiplied by the annual gross income, will theoretically determine the market value. A general rule of thumb which varies with specific properties and areas.
Gross Lease: A lease which obligates the lessor to pay all or part of the expenses of the leased property, such as taxes, insurance, maintenance. utilities, etc.
Grout: (1) Thin mortar used in masonry work to fill joints between bricks, blocks, tiles. etc. (2) A variety of plaster used to finish ceilings of superior quality.
Growing Equity Mortgage (g.e.m.): A fixed rate, graduated payment loan allowing low beginning payments and a shorter term because of higher payments as the loan progress. Based on the theory of increasing income by the buyer and, therefore. ability to make higher future payments. When state law applies, usury laws in some states may not presently allow such loans when less than interest only payments create interest on interest.
Guaranty: Agreement to pay the debt or perform the obligation of another in the event the debt is not paid or obligation not performed. Differs from a surety agreement in that there must be a failure to pay or perform before the guaranty can be in effect.
H
Hard Money Mortgage: A mortgage given in return for cash, rather than to secure a portion of the purchase price, as with a purchase money mortgage.
Heir: One who by law, rather than by will, receives the estate of a deceased person.
Hereditaments: (1) Anything which could be considered real property. (2) Anything which may be inherited.
Hidden Defect: An encumbrance on a title that is not apparent in the public records; for example, unknown heirs, secret marriages and forged instruments.
Holdback: Portion of a loan held back by the lender until a contingency is met. In the sale of a home insured by V.A. or F.H.A., funds may be held back to make necessary improvements to bring the property to V.A. or F.H.A. standards. The money to make "these" repairs may not be available until closing. One and one halt to double the estimated amount necessary is held back. If repairs are not made in the time allowed. these funds are used to make the repairs. In construction financing, funds are held back until, for example, a certain percentage of a subdivision has been sold, or a certain portion of a building has been constructed.
Holder In Due Course: A holder of a check or note who takes, for value and in good faith, the note before it is overdue or the check without knowledge that it has bounced, if, in fact it has.
Holding Period: The time period used by the IRS to determine along or short term capital gain. The period during which the taxpayer owns the capital asset.
Homestead: The dwelling (house and contiguous land) of the head of a family. Some states grant statutory exemptions, protecting homestead property (usually to a set maximum amount) against the rights of creditors. Property tax exemptions (for all or part of the tax) are also available in some states. Statutory requirements to establish a homestead may include a formal declaration to be recorded.
Home Warranty Insurance: Private insurance insuring a buyer against defects (usually in plumbing, heating, and electrical) in the home he has purchased. The period of insurance varies and both new and used homes may be insured.
Housing Starts: Number of houses on which construction has begun. The figures are used to determine the availability of housing, need for real estate loans, need for labor and materials, etc.
Hypothecate: To mortgage or pledge without delivery of the security to the lender.
I
Impound Account: Account held by a lender for payment of taxes, insurance, or other periodic debts against real property. The mortgagor or trustor pays a portion of, for example, the yearly taxes, with each monthly payment. The lender pays the tax bill from the accumulated funds.
Improvements: Generally, buildings, but may include any permanent structure or other development. such as a street, utilities. etc.
Inchoate Instrument: An unrecorded instrument (such as a deed) which is valid only between the parties and those having actual notice: but not against "the world" as it would be after recording.
Income Averaging: A method of figuring income tax by paying tax on the average income per year for the past five years. For example: A, a real estate salesperson, earns $10,000 taxable income for 4 years. In the fifth year, A sells a shopping center and earns $100,000 taxable income. A-could take the total income for 5 years ($140,000), divide by 5 ($28,000), and pay tax on $28,000 for the past 5 years, less what A has already paid.
Increasing And Diminishing Returns: An economic theory that an increase in capital or manpower will not increase production proportionately (five workers may do less than five times the work of one worker; and two workers may do more than twice the work of one worker). When the increase in production is proportionately greater than the addition, there is an increasing return, when production is proportionately less than the addition. the return diminishes.
Industrial Tax Exemption: An exemption from local property taxes granted to encourage industries to come into an area. Has been used successfully in the South. Usually granted for a definite period.
Inheritance Tax: A tax on the transfer of property from a deceased person: based on the right to acquire the property rather than the property itself.
Installment Contract: A method of purchasing by installment (usually monthly) payments. When referring to real property, it is usually called a land contract.
Institutional Lenders: Banks, savings and loan associations and other businesses which make loans to the public in the ordinary course of business, rather than individuals, or companies which may make loans to employees.
Insured Mortgage: A mortgage insured against loss to the mortgagee in the event of default and a failure of the mortgaged property to satisfy the balance owing plus costs of foreclosure. May be insured by F.H.A., V.A., or by private mortgage insurance companies.
Interest Cap: The maximum interest rate increase of an Adjustable Mortgage Loan. For example: a 120% loan with a 5% interest rate cap would have maximum interest for the life of the loan which would not exceed 17%.
Interpleader: A court action which may be filed in an existing case to be the initial action. One holding funds which are in dispute, but not having an interest in the funds, would file an inter- pleader. For example: An escrow agent is holding a deposit of a buyer which funds both buyer and seller claim to be entitled. Escrow is willing to give the funds to either buyer or seller but does not want to be liable for giving the funds to the wrong party. The interpleader filed by the escrow agent asks the court to determine to whom the funds should be awarded.
Interstate Land Sales: Sales of land to a buyer in another state. Because the buyer is usually totally dependent on the seller for information regarding the property, federal disclosure laws have been passed to aid the buyer. The buyer also has a period (now 3 days) after singing a purchase agreement, in which to rescind. The laws were passed because of the large promotional land sales of the 50's and early 60's, some of which sold worthless desert and swamp land.
Involuntary Conversion: Conversion of real property to personal property (money) without the voluntary act of the owner. This occurs when property is taken by eminent domain (condemnation). The owner is allowed to convert back to real property (buy another property) without paying tax on the gain from the condemnation. This must be done within a set time (3 years) and the prices of the old and new property are considered to form a new tax base.
IRA (individual Retirement Account): Savings programs available to individuals. The plans allow for a certain amount to be deposited each year. This money is not subject to income tax for that year or following years as long as it is not withdrawn. The money is taxed as withdrawn upon retirement, usually when the depositor is in a lower tax bracket. During the life of the account, the money may be put into various interest bearing investments. Securities dealers as well as banking institutions now offer IRA'S.
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Jetty: (1) A pier or other structure (usually of stones), built out into a body of water to hinder the currents and so protect a harbor. (2) A part of a building which projects out beyond the exterior walls, such as an overhanging second story, a balcony, etc.
Joint Appraisal: An appraisal by more than one appraiser, but one which states common conclusions of all.
Joint Tenancy: An undivided interest in property, taken by two or more joint tenants. The interests must be equal, accruing under the same conveyance, and beginning at the same time. Upon the death of a joint tenant, the interest passes to the surviving joint tenants, rather than to the heirs of the deceased.
Judgment (judgement): The decision of a court of law. Money judgments, when recorded, become a lien on real property of the defendant.
Judgment Lien: A lien against the property of a judgment debtor. An involuntary lien.
Judgment Proof: One against whom a judgment creditor cannot collect (no assets). If one can show he was defrauded by a "judgment proof" real estate licensee, he may recover from the state fund in states having such a fund,
Jumbo Va Loan: A loan for an amount greater than the allowable100% financed amount. It is determined by subtracting the maximum allowable 100% financed amount from the purchase price and financing 75% of the difference. Example: maximum allowable VA Loan-$110,000. Sale price-$130.000. Difference $20,000: 75% of the difference is $15,000. Total jumbo loan-$110,000 plus $15.000 = $125,000. Required down payment-$5,000.
Just Compensation: In condemnation the amount paid to the property owner. The theory is that in order to be "just," the property owner should be no richer or poorer than before the taking.
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Keene's Cement: An unusually tough and durable gypsum plaster to which alum has been added. Used primarily for walls of commercial buildings.
Keogh Plan: A retirement plan whereby a self-employed person may set aside a certain portion of income (tax deferred) into a retirement account. The money is taxable upon withdrawal at retirement when the person's tax bracket is often lower.
Keyman Insurance: Insurance through loss (through death or disability) of a "key" (important) person in a company. The liability is the estimated cost of the loss (in business lost, and replacement of the individual). Some lenders require this insurance before lending to small companies which rely on one or a few "key" people.
Knock Down: Any parts of a building which can be easily assembled, installed, or removed, such as certain types of window frames, partitions, etc.
Knot: (1)The hard, irregular shaped defects in boards, caused by cutting at the point where the branch of the tree meets the trunk. (2) A measure of speed, equal to one nautical mile (approximately 6,076 ft.) per hour.
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Laches: An unreasonable delay by a party making a claim or bringing an action, so that the rights of said party are waived. Laches are not controlled by a statute of limitations.
Landowner's Royalty: In oil and gas leases, the portion of the value of each barrel of oil which goes to the property owner.
Land Residual Technique: An appraisal technique by which land value is determined by first determining the net return attributable to the building only, and deducting it from the total return to the property (may be estimated), the residual amount is capitalized to find the land value. The building value may be determined by construction costs (new building), depreciated construction costs (it only a few years old), or estimated present construction costs (if an older building).
Late Charge: A penalty for failure to pay an installment payment on time. Usually not allowed as interest for tax deductions. May or may not be included as usury. If not, the amount of late charge is either set by statute or must be "reasonable."
Lateral Support: The right of a landowner to the natural support of his land by adjoining land. The adjoining owner has the duty not to change his land (such as lowering it) so as to cause this support to be weakened or removed.
Lease With Option To Purchase: A lease under which the lessee has the right to purchase the property. The price and terms of the purchase must be set forth for the option to be valid. The option may run for the length of the lease or only for a portion of the lease period. Legal Description: A description by which property can be definitely located by reference to surveys or recorded maps. Sometimes referred to simply as the legal.
Legal Owner: The term has come to be used as a technical difference from the equitable owner, and not as opposed to an illegal owner. The legal owner has title to the property, although the title may actually carry no rights to the property other than a lien.
Lessee's Interest: In appraising the value of a lessees interest to determine the value of a potential sublease of assignment (sale) of the lease, the value is the market value of the property, less the interest of the lessor. The lessor's interest would be largely determined by the ratio of the return on the lease to the market value without the lease. Lien: A recorded document which claims an interest in real property as security for a debt owed. Such liability may be created by contract, such as a deed of trust, or by a court judgment.
Lien Waiver (waiver Of Liens): For our purposes, a waiver of mechanic's lien rights, signed by subcontractors so that the owner or general contractor can receive a draw on a construction loan.
Liquidated Damages: A definite amount of damages, set forth in a contract, to be paid by the party breaching the contract. A predetermined estimate of actual damages from a breach.
Lis Pendens: Legal notice that a lawsuit is pending. Also called a notice of action.
Loan Constant: The yearly percentage of interest which remains the same over the life of an amortized loan, based on the monthly payment in relation to the principal originally loaned. For example: A $1000 loan at 9% interest for 20 years can be amortized at $9.00 per month. The constant interest rate is figured by finding one year's payments ($9.00 x 12 months = $108,00), and expressing this amount as a percentage of the principal originally borrowed (10.8% of $1000).
Loan Policy: A title insurance policy insuring a mortgagee, or beneficiary under a deed of trust, against loss caused by invalid title in the borrower, or loss caused by invalid title in the borrower, or loss of priority of the mortgage or deed of trust.
Loan Ratio: The ratio, expressed as a percentage, of the amount of a loan to the value or selling price of real property. Usually, the higher the percentage, the greater the interest charged. Maximum percentages for banks, savings and loans, or government insured loans, is set by statute.
Loan toValue Ratio: The ratio of the mortgage loan's principal to the property's appraised value or its sales price, whichever is lower.
Long Term Capital Gain: Gain on the sale of a capital asset which has been held for a specified time or longer. Long term capital gain is taxed at a special rate and not as ordinary income.
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Made Land: Artificially formed land, either by filling or dredging.
Marketable Title: Title which can be readily marketed (sold) to a reasonably prudent purchaser aware of the facts and their legal meaning concerning liens and encumbrances.
Market Value: The highest price a willing buyer would pay and a willing seller accept, both being fully informed, and the property exposed for a reasonable period of time. The market value may be different from the price a property can actually be sold for at a given time (market price),
Market Value Approach: Appraising the value of a property by comparing the price of similar properties (comparables) recently sold. The degree of simiality of the properties and circumstances of the sale are the important characteristics to consider,
Maturity: (1) Termination period of a note. For example: A 30 year mortgage has maturity of 30 years. (2) In sales law, the date a note becomes due.
Mechanic's Lien: A lien created by statute for the purpose ofsecuring priority of payment for the price or value of work performed and materials furnished in construction or repair of improvements to land, and which attaches to the land as well as the improvements.
Merger Of Title: A lesser interest in real property being merged (absorbed) into a greater interest. For example: A lessee purchases the property being leased. The interest as a lessee is merged into the interest as an owner, thus ending the leasehold interest.
Metes and Bounds: A form of land description in which boundaries are described by courses, directions, distances and monuments.
Mile: A linear measurement equal to 5280 feet on land and 6076 feet across water (nautical mile).
Money Market Mutual: Funds which invest in the "Money Market," a variety of interest bearing securities such as treasury bills and bank certificates of deposit. None is invested directly into real property or real property securities.
Month To Month Tenancy: A tenancy where no written lease is involved, rent being paid monthly. Some obligations as to notice of moving or eviction may exist by statute.
Mortgage: (1) To hypothecate as security, real property for the payment of a debt. The borrower (mortgagor) retains possession and use of the property. (2) The instrument by which real estate is hypothecated as security for the repayment of a loan.
Mortgage Banker: A company providing mortgage financing with its own funds rather than simply bringing together lender and borrower, as does a mortgage broker. Although the mortgage banker used its own funds, these funds are generally borrowed and the financing is either short term or, it long term, the mortgages are sold to investors (many times insurance companies) within a short time.
Mortgage Bonds: Bonds issued by corporations, which offer first mortgages on real property of the corporation as security for the payment of the bonds.
Mortgage Broker: One who, for a fee, brings together a borrower and lender, and handles the necessary applications for the borrower to obtain a loan against real property by giving a mortgage or deed of trust as security. Also called a loan broker.
Mortgage Company: A company authorized to service real estate loans, charging a fee for this service.
Mortgagee: The party lending the money and receiving the mortgage. Some states treat the mortgagee as the "legal" owner, entitled to rents from the property. Other states treat the mortgagee as a secured creditor, the mortgagor being the owner. The latter is the more modern and accepted view.
Mortgage Insurance: Insurance written by a private mortgage insurance company (referred to as an 'PIC') protecting the mortgage lender against loss incurred by a mortgage default, thus enabling the lender to lend a higher percentage of the sale price. The Federal Government writes this form of insurance through the FHA and the VA.
Mortgage Life Insurance: A term life insurance policy for theamount of the declining balance of a loan secured by a mortgage or deed of trust. The beneficiary under the policy is the mortgagee. In the event of death (some policies also cover disability) of the insured (mortgagor), the mortgage is paid in full.
Mortgage Servicing: Controlling the necessary duties of a mortgagee, such as collecting payments, releasing the lien upon payment in full, foreclosing if in default, and making sure the taxes are paid, insurance is in force, etc. Servicing may be done by the lender or a company acting for the lender, for a servicing fee.
Mutual Savings Bank: An institution owned by its depositors, as evidenced by certificates of deposit rather than stock. These institutions are active in long term real estate financing, as opposed to commercial banks, which concentrates more on short term loans.
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Negative Amortization: A condition created when a loan payment is less than interest alone. Even though payments are made on time, the amount owing increases.
Negotiable Instrument: According to the Uniform Negotiable Instruments Act, an instrument is negotiable when it is in writing and signed, containing an unconditional promise or order to pay a certain amount of money, on demand, or at a definite future date, to the bearer, to order, or to a named or certain drawee.
Net Lease: A lease requiring the tenant to pay, in addition to a fixed rental, the expenses of the property leased, such as taxes, insurance, maintenance, etc. In some states the terms net net, net net net, triple net, and other such repetitions are used.
Net Worth: The difference between total assets and liabilities of an individual, corporations, etc.
No Bonus Clause: A clause under the eminent domain section of a lease, giving the lessee the right to recover only the value of his physical improvements in the event of a taking, and not the value of the leasehold interest (the difference between the fixed rent of the lease and current market rental value). Not applicable in all states.
Nonbearing Wall: A wall used only to separate areas, and which carries only its own weight
Nonexclusive Listing: A listing under which the real estate broker has an exclusive listing as opposed to other agents, but the owner may sell the property without using an agent, and not be liable to pay a commission. Also called an agency agreement.
Nonrecourse Loan: A loan not allowing for a deficiency judgment. The lender's only recourse in the event of default is the security (property) and the borrower is not personally liable.
Notarization: The certification by a Notary Public that a person signing a document has been properly identified. Notarization does not certify the content of a document, only validity of signature.
Notice Of Cessation: A notice stating that work has stopped on a construction project. Done to accelerate the period for filing a mechanic's lien.
Notorious Possession: A requirement for adverse possession. Possession so open (notorious) that the owner is presumed to have notice of it and its extent.
Nuncupative Will: An oral will, usually in a deathbed situation, before witnesses who later testify to its authenticity.
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Oath: An attestation by a person which binds him or her legally and morally. Usually attesting to the truth of something, as an affidavit, or the validity of one's signature. A promise to tell the truth. Also, a promise to carry out a duty with high morality (oath of office), An oath has religious connotations and usually involves the word "swear," and may contain the phrase "so help me God," or require the one taking the oath to put his or her hand on a bible. An affirmation (see which) is still legally binding.
Office: A zoning designation allowing businesses to carry on their paperwork rather than manufacturing of sale of inventory to the public on the site. Some businesses may be conducted entirely out of such space, when only paperwork is involved, such as insurance companies, law firms, accounting firms, etc.
Offset Statement: (1) A statement given to a buyer of rental property by a tenant, setting forth the amount of rent and terms of the rental agreement. (2) A statement by an owner or lien-holder to a buyer, setting forth the balance due on existing liens against the property being purchased.
"Once in a Lifetime" Tax Exclusion: A forgiveness of a portion of the tax due on the sale of a residence by a senior citizen. As the term denotes, the exclusion can be taken only once.
"One, Two, Three" Financing: A method of creative financing by which the buyer (1) assumes an existing loan, (2) secures a second loan from a third party lender, (3) takes a third loan from the seller.
Open End Mortgage: A mortgage permitting the mortgagor to borrow additional money under the same mortgage, with certain conditions, usually as to the assets of the mortgage.
Origination Fee: The fee that the lender charges to originate the loan, this fee is typically 1 point.
Override: A rental amount paid due to sales of the tenant. For example: A lease for a service station may contain a provision for a certain addition to the rent for every gallon of gasoline over a certain amount sold each month. The amount over is called the override, such as two cents per gallon for every gallon over fifty thousand sold each month.
Ownership: Rights to the use, enjoyment, and alienation of property, to the exclusion of others. Concerning real property, absolute rights are rare, being restricted by zoning laws, restrictions, liens, etc.
Owner Will Carry Mortgage: A term used to indicate that the seller is willing to take back a purchase money mortgage.
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Partial Release: A release of a portion of property covered by a mortgage. A subdivider will obtain a partial release as each lot is sold, upon payment of an agreed upon amount. In areas where the subdivider is not usually the builder, it may be necessary to sell groups of lots to obtain a partial release. In areas where deeds of trust are used instead of mortgages, a "partial reconveyance" is the document used.
Participation Certificates: Mortgage securities, rather than mortgages. The advantage of the certificate is that it is readily marketable or pledgeable.
Partition: (1) Any division of real or personal property between co-owners, resulting in individual ownership of the interests of each. (2) A wall, sometimes moveable, and not load-bearing, used to divide a room or building.
Patent Defect: A defect plainly visible or as would be discovered by the exercise of ordinary care. A patent defect in a legal description is one which cannot be corrected on its face, and a new description must be used.
Payment Cap: A maximum amount for a payment under an Adjustable Mortgage Loan, regardless of the increase in the interest rate. If the payment is less than the interest alone, negative amortization is created.
Payoff: The payment in full of an existing loan or other lien.
Payoff Escrow: An escrow, specifically for the purpose of paying off an existing lien. Usually part of an existing escrow, and called a sub escrow.
Perfecting Title: Process involving the elimination of any adverse claims against a title.
Personal Property Loan: A loan which is secured by both real and personal property. The minimum ratio of personal to real property is set by law. The credit of the borrower is a major consideration in making the loan.
PITI: Refers to principal, interest, taxes and insurance, the four major components of a usual monthly mortgage payment.
PITI Ratio: The principal, interest, tax and insurance payment to income ratio. Used in mortgage lending decisions.
Plaintiff: The party bringing a civil action against a defendant.
Planned (unit) Development (PUD): A subdivision of five or more individually owned lots with one or more other parcels owned in common or with reciprocal rights in one or more other parcels. The lots are generally small, being the exact size of the improvements, or slightly larger.
Point: One percent. When referring to mortgages or deeds of trust, the term is used to describe the percentage of discount rather than interest (for which the word "percent" is used). The points are paid by the seller in F.H.A. and V.A. insured loans, and by either buyer or seller (or both) in conventional loans.
Points: A fee charged by the lender to fund a loan, in addition to and separate from other fees charged. One Point equals one percent of the amount of the loan. Discount points are charged or are received based on the note rate the borrower selects. Additionally a one point origination fee is typically charged by a lender to underwrite a residential loan.
Possibility of Reverter: The term shows no estate (interest) in property, but only the chance that an estate will exist at a future time. If a property were sold on the condition that it be used for a park, and, it not used for a park, would revert back to the seller, the seller would have a possibility of reverter.
Power of Attorney: An authority by which one person (principal) enables another (attorney in fact) to act for him. (1) General power - Authorizes sale, mortgaging, etc. of all property of the principal. Invalid in some jurisdictions. (2) Special power - Specifies property, buyers, price and terms. How specific it must be varies in each state.
Prescriptive Easement: The granting of an easement by a court, based on the presumption that a written easement was given (although none existed), after a period of open and continuous use of land.
Principal: The sum of money outstanding upon which interest is payable. Also refers to one who is served by an agent. Private Mortgage Insurance (PMI): Insurance written by a private mortgage insurance company protecting the mortgage lender against loss occasioned by a mortgage default and foreclosure.
Private Mortgage Insurance: Insurance against a loss by a lender in the event of default by a borrower (mortgagor). The insurance is similar to insurance by a governmental agency such as FHA, except that it is issued by a private insurance company. The premium is paid by the borrower and is included in the mortgage payment.
Property Management: The branch of the real estate business dealing with the management of property. The property may be a rented house or a large office or industrial complex. The duties may range from merely collecting rents to complete management of all maintenance and may also include being leasing agent or sales agent.
Proration: The method used in dividing charges into that portion which applies only to a party's ownership up to particular date.
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Quadrant: (1) A quarter section of a circle. (2) One of the quarters created by two intersecting roads or streets.
Qualification: The process of reviewing a prospective borrower's credit and payment capacity prior to approving a loan.
Quantity Survey Method: Also called "price take-off" method. A process of arriving at an estimate of new construction costs by a detailed estimate of quantities of necessary building materials plus labor costs.
Quarter Section: One quarter of a section. A quarter section (commonly called a quarter) contains 160 acres.
Question Of Law: Given the facts, what laws, it any, are applicable - decided by a judge, even in a jury trial.
Quietus: Final disposition of a claim or debt.
Quitclaim Deed: A deed operating as a release, intended to pass any title, interest, or claim which the grantor may have in the property, but not containing any warranty of a valid interest or title in the grantor.
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Rate Index: An index used to adjust the interest rate of an adjustable mortgage loan. For example: the change in U.S. Treasury securities (T-Bills) with a 1 year maturity. The weekly average yield on said securities, adjusted to a constant maturity of one year, which is the result of weekly sales, may be obtained weekly from the Federal Reserve Statistical Release H.15 (519). This change in interest rates is the "index" for the change in the specific Adjustable Mortgage Loan.
Rate Of Return: The annual percentage of return on investment on income property.
Ratification: Affirming a prior act which was not legally binding; the affirmation gives the act legal effect. Occurs when an unauthorized agent acts, and the principal later affirms the action, giving authority retroactively.
Real Estate: (1) Land and anything permanently affixed to the land. such as buildings, fences, and those things attached to the buildings, such as light fixtures, plumbing and heating fixtures, or other such items which would be personal property it not attached. The term is generally synonymous with real property, although in some states a fine distinction may be made. (2) May refer to rights in real property as well as the property itself.
Real Estate Settlement Procedures Act (RESPA): A federal statute requiring disclosure of certain costs in the sale of residential, improved property which is to be financed by a federally insured lender.
Rebate: A discount or reduction in price of a product or interest, not given in advance, but handed back because of prompt payment or other reason. Many states regulate gifts and educational aids given to real estate brokers by supporting companies such as title companies, calling these in effect, a price discount (rebate).
Recapture Of Depreciation: Taxing as ordinary income, upon the sale of property, the amount of depreciation taken above straight line depreciation.
Reconveyance: The conveyance to the landowner of the title, held by a trustee under a deed of trust, when the performance of the debt is satisfied.
Recordation: Involves filing for record in the office of the county recorder for the purpose of giving constructive notice of title, claim or interest in real property.
Record Owner: The owner of property as shown by an examination of the public record.
Redemption: The process of canceling a defeasable title to land, such as is created by a mortgage foreclosure or tax sale.
Redemption Period: A time period during which a mortgage, landcontract, deed of trust, etc., can be redeemed. Usually set by statute, and after judicial foreclosure.
Refinance: (1) The renewing of an existing loan with the same borrower and lender. (2) A loan on the same property by either the same lender or borrower. (3) The selling of loans by the original lender.
Reinstatement: (1) Payment of a note, mortgage, deed of trust, etc., to bring it from default to good standing. (2) Restoring the previously used entitlement of a veteran to enable the veteran to purchase property under a VA program. (Also called Restoration of Eligibility).
Reinsurance: The transferring of a portion of the liability to other insurers. Example: Insurer A insures for $200,000, A insures for $100,000 and reinsures the "second" $100,000 through B insurer, The "first" $100,000 is called "primary liability."
Renegotiable Rate Mortgage: A real property loan calling for an adjustment in the interest rate at a given time. Example: A loan with a 15 year amortization is adjusted to current interest rates after 2 years. The lender agrees to make the adjusted loan at the new rate as long as the old loan is not in default. The Federal Reserve Board allows the original loan to be treated either as a balloon payment loan or a variable rate loan. However, points must be figured into the A.P.R. based on the time or renegotiation (2 years rather than 15).
Reservation: (1) A right created and retained by a grantor. The reservation may be temporary (such as a life estate) or permanent (such as an easement running with the land). (2) Public land reserved for a special purpose, such as an Indian reservation.
Restraint of Alienation: Restrictions placed against the transfer (vesting) or sale of property. Certain restrictions are allowed but must conform to the rule against perpetuities and free right of an owner to sell. For example: Selling on the condition that the grantee could resell only to members of a certain family would be too restrictive and not valid.
Right Of Way: A strip of land which is used as a roadbed, either for a street or railway. The land is set aside as an easement or in fee, either by agreement or condemnation. May also be used to describe the right itself to pass over the land of another.
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Safety Clause: A clause in a listing protecting the broker from having buyer and seller wait until the listing expires to make a deal, thereby avoiding the payment of commission. The clause states that if the property is sold during a specified period after the expiration of the listing (or any extension thereof) to a buyer provided during the listing period by the broker, the commission shall be paid.
Savings And Loan Association: Originally an association chartered to hold savings and make real estate loans. Federally insured and regulated. Active in long term financing rather than construction loans. Recent changes in federal controls have enabled these associations to offer checking accounts, consumer loans, and other services traditionally offered by banks.
Secondary Financing: A loan secured by a mortgage or trust deed, which lien is junior (secondary) to another mortgage or trust deed.
Secondary Mortgage Market: The buying and selling of first mortgages of trust deeds by banks, insurance companies, government agencies, and other mortgagees. This enables lenders to keep an adequate supply of money for new loans. The mortgages may be sold at full value (par) or above, but are usually sold at discount. The secondary mortgage market should not be confused with second mortgage.
Second Mortgage: A mortgage which ranks after a first mortgage in priority. Properties may have two, three, or more Mortgages, deeds of trust, or land contracts, as liens at the same time. Legal priority would determine whether they are called a first, second, third, etc. lien.
Sequestration, Writ Of: The taking custody of one's property (real or personal) to force compliance with a court order.
Shared Appreciation: The gaining or retaining of equity in a property by someone other than the buyer. For example: the seller retains a 25% interest in the property. This makes the buyer responsible for only 75% of the purchase price and, therefore, lowers the necessary financing by 25%. This obviously makes the property more affordable. By agreement, expenses are shared as well as any increase in value when the property is sold. Statement of Information (SI): A confidential information statement completed by the buyer, seller and borrower in every transaction where a policy or policies of title insurance are requested. Allows the title company to competently search documents affecting the property to be insured, documents which may not refer to said property. Allows title companies to differentiate between parties with similar names when searching matters such as liens and court decrees.
"Subject To" Clause: A clause in a deed, stating that the grantee takes title "subject to" an existing mortgage. The original mortgagor is alone responsible for any deficiency, should there be foreclosure of the mortgage. Differs from an "assumption" clause, whereby the grantee "assumes" and agrees to pay the existing mortgage.
Surface Rights: The rights (easements) to use the surface of land, including the right to drill or mine through the surface when subsurface rights are involved.
Sweat Equity: A program which allows a purchaser to do work on the property in place of all or part of the down payment and other costs of purchase.
Subordination Agreement: An agreement under which a prior or superior lien is made inferior or subject to an otherwise junior lien.
Survey: The measurement of the boundaries of a parcel of land, its area, and sometimes its topography.
Syndicate: An association of individuals, formed for the purpose of carrying on some particular business venture in which the members are mutually interested.
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Tacking: (1) Annexing a lien to one superior to it in order to gain the priority of the superior lien and defeat an intermediate lien. Generally not allowed. (2) Annexing periods of possession to add up to enough time for successful adverse possession. For example; A begins adverse possession, A dies and A's son takes up possession, adding A's time to his own. Not always allowed.
Take Out Commitment: Agreement by a lender to place a long term (take out) loan on real property after completion of construction.
Tax Base: The assessed valuation of real property, which is multiplied by the tax rate to determine the amount of tax due.
Tax Deed: (1) Deed from tax collector to governmental body after a period of non-payment of taxes according to statute. (2) Deed to a purchaser at a public sale of land taken for delinquent taxes. The purchaser receives only such title as the former owners had and strict procedures must be followed to prevent attachment of prior liens.
Tax Lien: A statutory lien imposed against real property for nonpayment of taxes.
Tenancy In Common: An undivided ownership in real estate by two or more persons. The interests need not be equal. and, in the event of the death of one of the owners, no right of survivorship in the other owners exists.
Tenant At Will: One who holds possession of premises by permission of the owner or landlord, but without agreement for a fixed term of possession.
Terra Cotta Lumber: Very porous earthenware which can hold a nail and be cut without breaking or shattering.
Title Plant: The information warehouse of a fide company in which it has accumulated and is constantly updating the records of properties in its area which it can use to search title to real property.
Time Sharing: A concept of ownership increasing in popularity as real estate prices rise. The purchase of an undivided interest (usually in a resort area condominium) for a fixed or variable time period. For example: Fifty-two different purchasers buy one condominium: each agrees to possession for one week per year. Costs (taxes, insurance, maintenance, etc.) are shared equally. Possession may be fixed, or by reservation, by lease, license, etc. Some developers provide several projects in different parts of the world, so that a person owning one week in a project in Hawaii could elect to spend that week in a connected project in France or other area.
Ton: (1) A measure of weight; two thousand pounds. (2) A measure of capacity of an air conditioner. One ton equally twelve thousand British thermal units (B.T.U.'s).
Townhouse: Originally a house in a city as opposed to a country estate. More recently the term is applied to certain types of row houses, whether planned unit developments or condominiums.
Transfer Tax: State tax on the transfer of real property. Based on purchase price or money changing hands. Check statutes for each state. Also called documentary transfer tax.
Treasury Bills: Interest bearing U.S. Government obligations sold at a weekly sale. The change in interest rates paid on these obligations is frequently used as the Rate Index of Adjustable Mortgage Loans.
Trustee: A person who holds title in trust for the benefit of another. In a deed of trust, the trustee is the person named to hold title in trust for the benefit of the lender until the loan is paid off.
Trustee In Bankruptcy: One appointed by a bankruptcy court, and in whom the property of the bankrupt vests. The trustee holds the property in trust, not for the bankrupt, but for the creditors.
Trustor: The borrower under a deed of trust. One who deeds their property to a trustee as security for repayment of a loan.
U
Unavoidable Cause: A cause which reasonable prudence and care could not have prevented, such as death, illness, papers lost in the mail, etc.
Underlying Financing: A mortgage, deed of trust, etc., prior to (underlying) a land contract, mortgage, etc , on the same property.
Undisclosed Principal: A principal whose identity is not revealed by an agent.
Uniform Laws: Laws approved by the National Conference of Commissioners on Uniform State Laws. Many have been adopted in one or more states. Among these are the Uniform Commercial Code, Uniform Negotiable Instruments Act, Uniform Partnership Act, Uniform Residential Landlord and Tenant Act, etc.
Uniform Settlement Statement: The Standard HUD Form 1 required to be given to the borrower, lender and seller at, or prior to, settlement.
Unilateral Contract: A contract under which one party expressly makes a promise, the other party, although making no reciprocal promise, may be obligated by law or may have already given consideration.
Unity Of Possession: In joint tenancy, the joint tenants must have equal rights to posesion.
Unmarketable Title: Title which contains defects that would allow a purchaser to be released from his obligation to purchase.
Unrecorded Instrument: A deed, mortgage, etc., which is not recorded in the county recorder's office and, therefore, not protected under recording statutes. Valid between the parties involved, but not against innocent third parties.
Useful Life: (1) In appraisal for sale purposes, the true economic value of a building in terms of years of use to the owner. (2) For tax purposes, the life set for depreciation. At any time during that period, a new life could begin for a new owner.
V
Vacancy Factor: The estimated percentage of vacancies in a rental project. May be based on past records of the property, or a professional guess if a new project. Surrounding area buildings, it similar, may be used for comparison.
Variable Interest Rate: An interest rate which fluctuates as the prevailing rate moves up or down. In mortgages there are usually maximums as to the frequency and amount of fluctuation. Also called "flexible interest rate."
Veneered Construction: The placing of a facing material over the external surface of a structure.
Venue: (1) The county (or other geographical division) in which an action or prosecution is brought for trial and which is to furnish the panel of jurors. (2) The county in which an acknowledgement (notorization) is made.
Vesting: Denotes the manner in which title is held. Examples of common vestings are: Community Property, Joint Tenancy and Tenancy in Common.
Vital Statistics: Data regarding births, deaths, marriages, health records, etc., and usually kept by a governmental bureau. Federally, the Bureau of Vital Statistics.
Volt: A term in electronics, being the force necessary to cause one ampere to flow through a conductor with a resistance of one ohm. Common household current is 110 volts, with a 220 volt circuit used for some heavy appliances. Industrial uses may require higher voltage.
Voluntary Lein: A lien placed against real property by the voluntary act of the owner. Most commonly, a mortgage or deed of trust
W
Waive: To knowingly abandon, relinquish, or surrender a right, benefit, or claim.
Wall Bearing Construction: Weight of roofs and floors supported entirely by the exterior walls, with no load-bearing partitions. Posts and pillars are used at points where the span is too wide for exterior wall support.
Warranty: A legal, binding, promise, given at the time of a sale, whereby the seller gives the buyer certain assurances as to the condition of the property being sold. Warranties as to real property have taken on a lessor role with the increase of the use of title insurance.
Warranty Deed: A deed used in many states to convey fee title to real property. Until the wide spread use of title insurance, the warranties by the grantor were very important to the grantee. When title insurance is purchased, the warranties become less important as a practical means of recovery by the grantee for defective title.
Wasting Assets: Assets which, by use or lapse of time, are consumed or reduced in book value, irrespective of market fluctuation. Includes oil, minerals, patent rights, franchises for a fixed term, etc. Also called "diminishing assets", "wasting property."
Watt Hour: The basis used to determine electric bills. Example: A 100 watt light bulb means if the bulb burns for one hour, it will use 100 watts of electricity.
Weep Holes: Small holes in a retaining wall or other wall where it may be necessary to drain off excess water to avoid pressure build-up.
Wild Interest: An interest of record which cannot be traced in the chain of title. Frequently occurs when an incorrect legal description appears on a document. An apparent wild interest may occur if a woman who changes her name through marriage after acquiring property, sells the property using her married name only.
Without Recourse: A finance term. A mortgage or deed of trust securing a note without recourse allows the lender to look only to the security (property) for repayment in the event of default, and not personally to the borrower.
Working Drawing: Drawing used by workman in construction.Shows all structural detail such as electric, plumbing, partitions, etc.
Wrap-Around Mortgage: A second or junior mortgage with a face value of both the amount it secures and the balance due under the first mortgage. The mortgagee under the wrap-around collects a payment based on its face value and then pays the first mortgagee. It is most effective when the first has a lower interest rate than the second, since the mortgagee under the wrap-around gains the difference between the interest rates, or the mortgagor under the wrap-around may obtain a lower rate then if refinancing.
Wrought Iron: An easily molded form of iron used for decorative railings, gates, furniture, etc. The term is loosely used to describe steel or aluminum used in the same manner.
Y
Yacht Basin: A system of docks and channels used for the keeping of yachts and similar boats.
Yard: (1) A measure of 36". (2) The area between the building and property line of a residential property (back yard, side yard, front yard). (3) An enclosure, in or out of a building, used for a business purpose (lumber yard, etc.)
Yard Lumber: Lumber generally found in a lumber yard, that is, lumber graded for general building purposes.
Yield: Ratio of income from an investment to the total cost of the investment over a given period of time.
Z
Zero Lot Line: The consruction of a building on any of the boundary lines of a lot. Usually built on the front line such as a store built to the sidewalk.
Zero Side Yard: The building of a subdivision with each house built on a side boundary line. This gives more usable yard space on narrow lots. An easement for maintenance is given over a portion of the lot adjoining each house.
Zone: (1) An area of a county or city in which the use of the land is restricted by law (zoning ordinance). (2) An area designated by a number for the delivery of mail. Zip codes incorporate the zones.