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GLOSSARY OF TERMS
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ABSORPTION
RATE
The ratio of the number of properties in an area that have been sold
against the number available. Used to show the volatility of a
market.
ABSTRACTION
METHOD
This method of estimating the value of property uses similar
properties available in the same market to extract the value of a
parcel of land.
ACCESSORY BUILDING
A building separate from the main structure on a property. Often
used for a specific purpose, such as a workshop, storage shed or
garage.
ACCRETION
The natural growth of a piece of land resulting from forces of
nature
ACRE
43,560 square feet. A measurement of area.
ACTUAL AGE
The amount of time that has passed since a building or other
structure was built. See also: EFFECTIVE AGE
AD VALOREM TAX
Taxes assessed based on the value of the land and improvements
ADDENDUM
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)
A type of mortgage where the interest rate varies based on a
particular index, normally the prime lending rate.
ADJUSTED BASIS
The value of an asset (property or otherwise) that includes the
original price plus the value of any improvement, and less any
applicable depreciation.
ADJUSTED SALES PRICE
An estimate of a property's sales price, after adjustments have been
made to account for differences between it and another comparable
property.
AESTHETIC VALUE
The additional value a property enjoys based on subjective criteria
such as look or appeal.
AFFIRMATION
A declaration that a certain set of facts are truthful.
AFFORDABILITY ANALYSIS
A calculation used to determine an individual's likelihood of being
able to meet the obligations of a mortgage for a particular
property. Takes into account the down payment, closing costs and
on-going mortgage payments.
AGENT
A person who has been appointed to act on behalf of another for a
particular transaction.
AMENITY
Any feature of a property that increases its value or desirability.
These might include natural amenities such as location or proximity
to mountains, or man-made amenities like swimming pools, parks or
other recreation.
AMERICAN SOCIETY OF APPRAISERS
An organization of appraisal professionals and others interested in
the appraisal profession.
AMORTIZATION
The repayment of a loan through regular periodic payment.
AMORTIZATION SCHEDULE
The breakdown of individual payments throughout the life of an
amortized loan, showing both principal contribution and debt service
(interest) fees.
AMORTIZATION TERM
The length of time over which an amortized loan is repaid. Mortgages
are commonly amortized over 15 or 30 years.
ANNUAL PERCENTAGE RATE (APR)
The rate of annual interest charged on a loan.
ANNUITY
A sum of money paid at regular intervals, often annually.
APPRAISAL
A ''defensible'' and carefully documented opinion of value. Most
commonly derived using recent sales of comparable properties by a
licensed, professional appraiser.
APPRAISAL FOUNDATION
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
A world-wide organization dedicated to real estate appraisal
education, publication and advocacy.
APPRAISAL PRINCIPLES
The basic building blocks of the property valuation process,
including property inspection, market analysis and basic economics.
APPRAISAL REPORT
The end result of the appraisal process, usually consists of one
major, standardized form such as the Uniform Residential Appraisal
Report form 1004, as well as all supporting documentation and
additional detail information. The purpose of the report is to
convey the estimated value of the subject property and support that
estimate with corroborating information.
APPRAISAL STANDARDS BOARD (ASB)
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
The estimated fair market value of a property as developed by a
licensed, certified appraiser following accepted appraisal
principals.
APPRAISER
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
The natural rise in property value due to market forces.
ARMS LENGTH TRANSACTION
Any transaction in which the two parties are unconnected and have no
overt common interests. Such a transaction most often reflects the
true market value of a property.
ASSESSED VALUE
The value of a property according to jurisdictional tax assessment.
ASSESSMENT
The function of assigning a value to a property for the purpose of
levying taxes.
ASSESSMENT RATIO
The comparative relationship of a property's assessed value to its
market value.
ASSESSOR
The jurisdictional official who performs the assessment and assigns
the value of a property.
ASSET
Any item of value which a person owns.
ATTACHED HOUSING
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.
BILL OF SALE
A physical receipt indicating the sale of property.
BLIGHTED AREA
Any region of a city or town that has fallen into disrepair or
otherwise has become undesirable.
BONA FIDE
Made or carried out in good faith; sincere.
BRIDGE FINANCING
An interim loan made to facilitate the purchase of a new home before
the buyer's current residence sells and its equity is available to
fund the new purchase.
BROKER
An individual who facilitates the purchase of property by bringing
together a buyer and a seller.
BUFFER ZONE
A segment of land between two disparate municipal zones which acts
as a shield to keep one zone from encroaching upon the other. Often
used to separate residential districts from commercial areas.
BUILDING CODE
Regulations that ensure the safety and material compliance of new
construction within a municipality. Building codes are localized to
ensure they are adequate to meet the risk of common hazards.
BUILDING LINE OR SETBACK
The statutory distance between buildings and the property line,
imposed by municipalities, home associations, or other agreements.
BUILT-INS
Specific items of personal property which are installed in a real
estate improvement such that they become part of the building.
Built-in microwave ovens and dishwashers are common examples.
BUNGALOW
A one-story, home-style dating from the early twentieth century.
Often characterized by a low-pitched roof.
CAPE COD COLONIAL
A single-story house style made popular in New England. Often
characterized by a steep roof with gables.
CAPITAL
Accumulated goods and money which is most often used to generate
additional income.
CAPITAL EXPENDITURE
An outlay of funds designed to improve the income-producing
capabilities of an asset or to extend its economic life.
CAVEAT EMPTOR
Literally translated: ''Let the buyer beware.'' A common business
tenet whereby the buyer is responsible for verifying any and all
claims by the seller of property.
CERTIFICATE OF OCCUPANCY
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)
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
A document designating the legal owner of a parcel of real estate.
Usually provided by a title or abstract company.
CERTIFIED GENERAL APPRAISER
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
A sub-classification of appraiser who is only licensed to appraise
residential property, usually up to four units.
CHAIN OF TITLE
The complete history of ownership of a piece of property.
CHATTEL
Any personal property which is not attached to or an integral part
of a property. Chattel is not commonly taken into consideration when
appraising the value of real property.
CLEAR TITLE
Ownership of property that is not encumbered by any counter-claim or
lien.
CLOSING
A torturous process designed to induce cramping in a home buyer's
hands by requiring signature on countless pieces of documentation
that nobody has ever read. Or, the process whereby the sale of a
property is consummated with the buyer completing all applicable
documentation, including signing the mortgage obligation and paying
all appropriate costs associated with the sale (CLOSING COSTS).
CLOSING COSTS
All appropriate costs generated by the sale of property which the
parties must pay to complete the transaction. Costs may include
appraisal fees, origination fees, title insurance, taxes and any
points negotiated in the deal.
COLLATERAL
An asset which is placed at risk to secure the repayment of a loan.
CO-MAKER
A second party who signs a loan, along with the borrower, and
becomes liable for the debt should the borrower default.
COMMISSION
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
Fees which are charged to the tenets or owners of properties to
cover the costs of maintaining areas shared with other tenets or
owners. Commonly found in condominium, PUD or office spaces.
COMMON AREAS
Any areas, such as entryways, foyers, pools, recreational facilities
or the like, which are shared by the tenets or owners of property
near by. Commonly found in condominium, PUD or office spaces.
COMMUNITY PROPERTY
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
An abbreviated term used by appraisers to describe properties which
are similar in size, condition, location and amenities to a subject
property who's value is being determined. The Uniform Standards of
Professional Appraisal Practice (USPAP) establish clear guidelines
for determining a comparable property.
COMPOUND INTEREST
Interest paid on the principal amount, as well as any accumulated
interest.
CONCESSIONS
Additional value granted by a buyer or seller to entice another
party to complete a deal.
CONDEMNATION
The official process by which a property is deemed to be
uninhabitable or unusable due to internal damage or other external
conditions.
CONDOMINIUM
A development where individual units are owned, but common areas and
amenities are shared equally by all owners.
CONDOMINIUM CONVERSION
Commonly, the conversion of a rental property such as an apartment
complex into a CONDOMINIUM-style complex where each unit is owned
rather than leased.
CONSTRUCTION LOAN
A loan made to a builder or home owner that finances the initial
construction of a property, but is replaced by a traditional
mortgage one the property is completed.
CONTIGUOUS
Connected to or touching along an unbroken boundary.
CONTINGENCY
Something that must occur before something else happens. Often used
in real estate sales when a buyer must sell a current home before
purchasing a new one. Or, when a buyer makes an offer the requires a
complete home inspection before it becomes official.
CONVENTIONAL MORTGAGE
A traditional, real estate financing mechanism that is not backed by
any government or other agency (FHA, VA, etc.).
CORPORATE RELOCATION
A situation where a person's employer pays all or some of the
expenses associated with moving from one location to another,
usually over a substantial distance. Relocation expenses often
include the amounts, such as brokerage fees, incurred in the selling
and buying of the employee's primary residence.
COVENANT
A stipulation in any mortgage that, if not met, can be cause for the
lender to foreclose.
CREDIT
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.
CUL-DE-SAC
A dead-end street. One with only one entrance/exit.
DATE OF APPRAISAL
The specific point in time as of which an appraiser designates the
value of a home. Often stipulated as the date of inspection.
DEBT
An obligation to repay some amount owed. This may or may not be
monetary.
DEBT EQUITY RATIO
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
A document indicating the ownership of a property.
DEED-IN-LIEU (OF FORECLOSURE)
A document given by a borrower to a lender, transferring title of
the property. Often used to avoid credit-damaging foreclosure
procedures.
DEED OF TRUST
A document which transfers title in a property to a trustee, who's
obligations and powers are stipulated. Often used in mortgage
transactions.
DEED OF RECONVEYANCE
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
A document which dismisses a lien or other claim on a property.
DEED OF SURRENDER
A document used to surrender any claim a person has to a property.
DEFAULT
The condition in which a borrower has failed to meet the obligations
of a loan or mortgage.
DELINQUENCY
The state in which a borrow has failed to meet payment obligations
on time.
DEPOSIT
Cash given along with an offer to purchase property, Also called
EARNEST MONEY.
DEPRECIATION
The natural decline in property value due to market forces or
depletion of resources.
DETACHED SINGLE-FAMILY HOME
A single building improvement intended to serve as a home for one
family.
DISTRESSED PROPERTY
A mortgaged property which has been foreclosed on.
DUPLEX
A single-building improvement which is divided and provides two
units which serve as homes to two families.
DWELLING
A house or other building which serves as a home.
DOWN PAYMENT
An amount paid in cash for a property, with the intent to mortgage
the remaining amount due.
EARNEST MONEY DEPOSIT
A cash deposit made to a home seller to secure an offer to buy the
property. This amount is often forfeited if the buyer decides to
withdraw his offer.
EASEMENT
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.
ECONOMIC DEPRECIATION
The decline in property value caused by external forces, such as
neighborhood blight or adverse development.
ECONOMIC LIFE
The amount of time which any income-producing property is able to
provide benefits to its owner.
EFFECTIVE AGE
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
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
A building or other improvement on one property which invades
another property or restricts its usage.
ENCUMBRANCE
A claim against a property. Examples are mortgages, liens and
easements
EQUITY
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
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
An insurance policy taken out by appraisers to cover their liability
for any mistakes made during the appraisal process.
ESCROW
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.
ESTATE
The total of all property and assets owned by an individual.
FACADE
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 MARKET VALUE
The price at which two unrelated parties, under no duress, are
willing to transact business.
FANNIE MAE
A private, shareholder-owned company that works to make sure
mortgage money is available for people to purchase homes. Created by
Congress in 1938, Fannie Mae is the nation's largest source of
financing for home mortgages.
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC)
The U.S. Government agency created in 1933 which maintains the
stability of and public confidence in the nation's financial system
by insuring deposits and promoting safe and sound banking practices.
FEDERAL HOUSING ADMINISTRATION (FHA)
A sub-agency of the U.S. Department of Housing and Urban Development
created in the 1930's to facilitate the purchase of homes by
low-income, first-time home buyers. It currently provides
federally-subsidized mortgage insurance for private lenders.
FEE APPRAISER
A certified, professional appraiser who estimates the fair market
value of property and receives a set fee in exchange.
FEE SIMPLE
A complete, unencumbered ownership right in a piece of property.
FINAL VALUE ESTIMATE
The estimated value of a piece of property resulting from an
appraisal following the USPAP guidelines.
FIRST MORTGAGE
The primary loan or mortgage secured by a piece of property.
FIXED-RATE MORTGAGE (FRM)
A mortgage which has a fixed rate of interest over the life of the
loan.
FIXTURE
Any piece of personal property which becomes permanently affixed to
a piece of real property.
FLOOD INSURANCE
Supplemental insurance which covers a home owner for any loss due to
water damage from a flood. Often required by lenders for homes
located in FEMA-designated flood zones.
FLOOR PLAN
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.
FORECLOSURE
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
The loss of property or money due to the failure to meet the
obligations of a mortgage or loan secured by that property.
FRONTAGE
The segment of a property that runs along a point of access, such as
a street or water front.
FUNCTIONAL OBSOLESCENCE
A decrease in the value of property due to a feature or lack thereof
which renders the property undesirable. Functional obsolescence can
also occur when the surrounding area changes, rendering the property
unusable for its originally intended purpose.
GABLE ROOF
A steeply angled, triangular roof.
GAMBREL ROOF
A ''barn-like'' roof, where the upper portion of the roof is
less-steeply angled than the lower part.
GENERAL LIEN
A broad-based claim against several properties owned by a defaulting
party.
GEORGIAN
A classic, English-style hose characterized by simple rectangular
shape and multiple stories.
GINNIE MAE
A wholly owned corporation created in 1968 within the U.S.
Department of Housing and Urban Development to serve low-to
moderate-income homebuyers.
GOVERNMENT MORTGAGE
Any mortgage insured by a government agency, such as the FHA or VA.
GRADE
The slope of land around a building.
GRANTEE
Any person who is given ownership of a piece of property.
GRANTOR
Any person who gives away ownership of a piece of property.
GROSS AREA
The sum total of all floor space, including areas such as stairways
and closet space. Often measured based on external wall lengths.
HALF-SECTION
320 acres.
HEIGHT ZONING
A municipal restriction on the maximum height of any building or
other structure.
HIDDEN AMENITIES
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
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 INSPECTION
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.
HOMEOWNER'S ASSOCIATION
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
A policy which covers a home owner for any loss of property due to
accident, intrusion or hazard.
HUD-1 STATEMENT
A standardized, itemized list, published by the U.S. Department of
Housing and Urban Development (HUD), of all anticipated CLOSING
COSTS connected with a particular property purchase.
IMPROVED LAND
Any parcel of land which has been changed from its natural state
through the creation of roads, buildings or other structures.
IMPROVEMENTS
Any item added to vacant land with the intent of increasing its
value or usability.
IMPROVEMENT RATIO
The comparative value of a improved piece of land to its natural,
unaltered state.
INCOME APPROACH
The process of estimating the value of property by considering the
present value of a stream of income generated by the property.
INCOME PROPERTY
A piece of property whose highest and best use is the generation of
income through rents or other sources.
INDEPENDENT APPRAISAL
An estimation of value created by a professional, certified
appraiser with no vested interest in the value of the property.
INSPECTION
The examination of a piece of property, its buildings or other
amenities.
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