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