GLOSSARY OF TERMS

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
The method of establishing an opinion of value for property uses of 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
 

Actual Notice Back to top

Express information or fact; that which is known; actual knowledge…This is also a type of notice called inquiry notice, where circumstances, appearances or rumors are such that one has a duty to inquire further in order to determine whether property ownership exits with a person other then the one claiming that ownership

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

AD VALOREM 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.
 

Age-Life Method – (Method of Calculating Incurable Physical Depreciation)

Back to top

A method of estimating depreciation in which the ratio between the effective age of a building and its total economic life is applied to the current cost of the improvements to obtain a lump-sum deduction; also known as the economic age-life method.  See also modified age-life method.

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.

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 borrowers income, debt, savings and other information used to determine credit worthiness.

APPRAISAL Back to top
The act or process of developing an opinion of value; an opinion of value. A ''defensible'' and carefully documented opinion of value. (Adjective) of or pertaining to appraising and related functions—e.g., appraisal practice and/or appraisal services. Most commonly performed a licensed or certified professional appraiser.

Appraisal Assignment Back to top

A valuation service provided as a consequence of an agreement between an appraiser and a client.

Appraisal Assumption Back to top

That which is taken to be true.

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 Practice Back to top

The work or services performed by appraisers, defined by three terms in the USPAP standards: appraisal, review, and consulting.

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, or a narrative-style report, as well as all supporting documentation and additional detail information. The purpose of the report is to convey an 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
The opinion of value of a property as developed by a licensed or certified appraiser following accepted appraisal principles.

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.

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.
 

BARGAIN AND SALE DEED Back to top

A bargain and sale deed is, in United States real property law, a deed "conveying real property without covenants." This is a deed "for which the grantor implies to have or have had an interest in the property but offers no warranties of title to the grantee. This type of deed is typically used in many states to transfer title." Under common law, this type of deed technically created a use (law) in the buyer who then gets title. Under the Statute of Uses, modern real property law disregards this subtle distinction. A bargain and sale deed is especially used by local governments, fiduciaries such as executors, and in foreclosure sales by sheriffs and referees. The fact that it comes without any warranties from the government means that the new owner may not have good title. However, if the city did not have good title, then the new landowner may seek a remedy against the local government. Some states require a specific form to be used. Some states also allow a grantor (or seller) to add warranties. In such case, it may be called a bargain and sale with covenants deed.

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.

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

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.

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.

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 CDs. 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 and limited types of non-residential properties.

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

CHATTEL Back to top
In law, any property other than a freehold or fee estate in site; treated as personal property, although divisible into chattels real and chattels personal. In appraising, 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.
 

Chattels Real Back to top

Intangible personal property rights that may be created by leases.

Chattels Personal Back to top

Tangible and movable items that generally constitute personal property.

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

Client Back to top

The party or parties who engage an appraiser (by employment or contract) in a specific assignment. (Comment: this is the party or parties which form the appraiser-client relationship per USPAP, Ethics Rule - Confidentiality, Advisory Opinion 10 and Statements 5 and 9).

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.

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

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

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 who's 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.

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.

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.
 

Constructive Notice Back to top

The accessibility of public records; notice is assumed by the existence of the records. The law presumes that an individual has the same knowledge of all instruments properly recorded as if he or she were actually acquainted with them. Notice of certain facts that may be discovered by due diligence or inquiry into a public record; a legal presumption that a person is responsible for knowing these facts. The proper recording of a document gives constructive notice to the world of the document’s existence and contents. Possession of property also imparts constructive notice of the rights of the party in possession. Examples of rights of parties in possession are rights under an unrecorded deed, contract for deed, lease-option and rights of adverse possession. Constructive notice is also referred to as legal notice and is contrast to actual notice, which is express or direct knowledge acquired in the course of a transaction.

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 the requires a complete home inspection before it becomes official.
 

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

Contract Rent Back to top

The actual rental payment specified in a lease. Contract rent may be greater than, less than or equal to economic rent and /or market rent.

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.
 

Credible Back to top

Worthy of belief. In appraisal, credible is also defined as “credible assignment results” which requires support, by relevant evidence and logic, to the degree necessary for the intended use.

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.
 

Curable Functional Obsolescence Back to top

An element of depreciation; a curable defect caused by a flaw in the structure, materials, or design.

Curable Physical Deterioration Back to top

Items of deferred maintenance or in need of repair in which the cost of repair is reasonable and economically feasible, measured as the cost to restore the item to new or reasonably new condition. An element of accrued depreciation.

DATE OF APPRAISAL Back to top
The specific point in time as of which an appraiser designates the value of a property. Often stipulated as the date of inspection. Also known as the "effective date of an appraisal."

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 property. Equity is calculated at the market value of the property, 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, who's 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.

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.
 

Easement By Agreement Back to top

A simple easement, usually not recorded, whereby one property owner gives another the right to use their property for some specific purpose, such as fishing in a pond.

Easement in Gross Back to top

A limited right for one person to use another's property, which is not attached to any particular estate or land, nor is it transferred through the conveyance of title. Examples would include an easement for the installation of pipelines and telephone lines.

Easement by Implication Back to top

This type of easement is created by traditional usage, and necessity, but not recorded in the deeds of the properties involved when the subordinate property is later sold to a third party. The easement by implication continues. Also called "easement by necessity."

Easement by Prescription Back to top

A right acquired by an adverse user to use the site of another. As with acquiring title through adverse possession, the use that results in an easement by prescription must be adverse, hostile, open, notorious and continuous for the statutory period. An easement by prescription cannot usually be acquired on public site or on property registered under Torrens. Unlike easements by express or implied grant, an easement by prescription may be extinguished by nonuse for the prescriptive period without evidence of actual abandonment.

ECONOMIC DEPRECIATION (External Obsolescence)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.

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 goes 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.
 

Excess Land Back to top

 In regard to an improved site, the land not needed to serve or support the existing improvement. In regard to a vacant site or a site considered as though vacant, the land not needed to accommodate the site's primary highest and best use. Such land may be separated from the larger site and have its own highest and best use, or it may allow for future expansion of the existing or anticipated improvement. See also surplus land.

Exposure Time Back to top

1. The time a property remains on the market.

2. The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based on an analysis of past events assuming a competitive and open market. Exposure time is always presumed to occur prior to the effective date of the appraisal. The overall concept of reasonable exposure encompasses not only adequate, sufficient and reasonable time but also adequate, sufficient and reasonable effort. Exposure time is different for various types of real estate and value ranges and under various market conditions. (Appraisal Standards Board of The Appraisal Foundation, Statement on Appraisal Standards No. 6(SMT–6), "Reasonable Exposure Time in Real Property and Personal Property Market Value Opinions")

Market value opinions imply that an adequate marketing effort and reasonable time for exposure occurred prior to the effective date of the appraisal. In the case of disposition value, the time frame allowed for marketing the property rights is somewhat limited, but the marketing effort is orderly and adequate. With liquidation value, the time frame for marketing the property rights is so severely limited that an adequate marketing program cannot be implemented. (The Report of the Appraisal Institute Special Task Force on Value Definitions qualifies exposure time in terms of the three above-mentioned values.) See also marketing time.

Extraordinary Assumption Back to top

An assumption, directly related to a specific assignment, which, if found to be false, could alter the appraiser's opinions or conclusions. Extraordinary assumptions presume as fact otherwise uncertain information about physical, legal, or economic characteristics of the subject property; or about conditions external to the property such as market conditions or trends; or about the integrity of data used in an analysis. An extraordinary assumption may be used in an assignment only if:

·         It is required to properly develop credible opinions and conclusions;

·         The appraiser has a reasonable basis for the extraordinary assumption;

·         Use of the extraordinary assumption results in a credible analysis; and

·         The appraiser complies with the disclosure requirements set forth in USPAP for extraordinary assumptions.

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.

Fact and Opinion Back to top

A fact is a statement that can be proven by direct experience or objective verification. This evidence may be in the form of the testimony of witnesses, agreed-upon observations, the written records of such testimony and observations, or the result of research or investigation. A statement of fact can theoretically be checked for accuracy. You should know that a statement of fact may be found to be untrue.  When that happens, the statement is no longer a fact, it is an error.

An opinion is a statement of belief or judgment that cannot be objectively proven true or false. Opinions usually express the feelings, preferences or biases that a person has about a subject. You should know that a statement of opinion is sometimes disguised as a fact. For example: It is understood that the children of working mothers feel rejected. The use of the phrase "It is understood..." implies that what follows has been proven. This is not the case and the statement is an opinion.

Remember; a fact is not the opposite of an opinion. They are simply types of statements. If a fact is untrue or false, it does not turn into an opinion. By the same logic, if an opinion is believed by everyone, it does not turn into a fact. Opinions cannot be proved, however they can be supported with facts and other knowledgeable opinions.  Facts can be proved with evidence, statistics, records, photographs, data, etc.

Source: http://gened.moe.go.th/web/00103302/VocabTests/FactOpinion/Fact-Opinion%20Exercises.htm

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. Fair Market Value is an accounting term, while Market Value is an appraisal term. At times these two values may be different. See USPAP Advisory Opinion AO-8.

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.

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 develops and reports an opinion of 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 OPINION 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.

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.

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.

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 (INUTILITY) 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.

Furniture, Fixtures and Equipment Back to top

The movable property of a business enterprise not classified as stock or inventory or leasehold improvements; frequently found in the ownership of hotels or motels, restaurants, assisted-living facilities, service stations, car washes, greenhouses and nurseries, and other service-intensive properties. Furniture, fixtures, and equipment frequently wears out much more rapidly than other components of those properties.

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

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.

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.

Goodwill Back to top

1.   An intangible asset category usually composed of elements such as name or franchise reputation, customer patronage, location, products, and similar factors. (USPAP)

2.   The intangible asset that arises as a result of a name, reputation, customer patronage, location, products, and similar factors that have not been separately identified and/or valued but that generate economic benefits.

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.

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.

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.

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. HECMs typically dont 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.

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.

HOMEOWNERS 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.
 

Hypothetical Condition Back to top

That which is contrary to what exists but is supposed for the purpose of analysis. Hypothetical conditions assume conditions contrary to known facts about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis. A hypothetical condition may be used in an assignment only if:

·         Use of the hypothetical condition is clearly required for legal purposes, for purposes of reasonable analysis, or for purposes of comparison;

·         Use of the hypothetical condition results in a credible analysis; and

·         The appraiser complies with the disclosure requirements set forth in USPAP for hypothetical conditions.

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 a improved piece of land to its natural, unaltered state.

INCOME APPROACH Back to top
The process of developing an opinion of 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.
 

Incurable Functional Obsolescence Back to top

An element of depreciation; a defect caused by a deficiency or superadequacy in the structure, materials, or design, which cannot be practically or economically corrected.

Incurable Physical Deterioration Back to top

An element of depreciation; a defect caused by physical deterioration that cannot be practically or economically corrected.

INDEPENDENT APPRAISAL Back to top
An opinion of value created by a professional, licensed or 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.
 

Intended Use  Back to top

The use or uses of an appraiser’s reported appraisal, appraisal review, or consulting assignment opinions and conclusions, as identified by the appraiser based on communication with the client at the time of the assignment.

Intended User  Back to top

The client and any other party as identified, by name or type, as users of the appraisal, appraisal review, or consulting report, by the appraiser based on communication with the client at the time of the assignment.

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.

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.

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 payees 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.
 

K Back to top

Land (Raw Land) Back to top

Land on which no improvements have been made; land in its natural state before grading, construction, subdivision, or the installation of utilities. (Land that is not improved so that it is ready to be used for a specific purpose, or land for which a specific purpose has not been established.) (See “Site.”)

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.
 

Leases Back to top

Net Lease – “A lease in which the tenant pays all or most of the property charges in addition to the stipulated rent."” There are sub categories of net leases sometimes referred to a “net net lease” or “triple net lease”, each requiring the tenant to pay varying portions of the property charges.

Gross Lease – “A lease in which the landlord receives stipulated rent and is obligated to pay all or most of the operating expenses and real estate taxes.”

Modified Gross Lease – “A lease in which the landlord and tenant share the expenses according to the proportions specified by the lease.”

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 persons 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 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.

Long-Lived Item Back to top

A building component with an expected remaining economic life that is the same as the remaining economic life of the entire structure.

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.
 

Market Rent Back to top

“The most probable rent that a property should bring in a competitive and open market reflecting all conditions and restrictions of the specified lease agreement including term, rental adjustment and revaluation, permitted uses, use restrictions, and expense obligations; the lessee and lessor each acting prudently and knowledgeably, and assuming consummation of a lease contact as of a specified date and the passing of the leasehold from lessor to lessee under conditions whereby: 1.) Lessee and lessor are typically motivated. 2.) Both parties are well informed or well advised, and acting in what they consider their best interests. 3.) A reasonable time is allowed for exposure in the open market. 4.) The rent payment is made in terms of cash in United States dollars, and is expressed as amount per time period consistent with the payment schedule of the lease contract.”

Market Value Back to top

The major focus of most real property appraisal assignments. Both economic and legal definitions of market value have been developed and refined. Continual refinement is essential to the growth of the appraisal profession.

1. The most widely accepted components of market value are incorporated in the following definition:

-- The most probable price, as of a specified date, in cash, or in terms equivalent to cash, or in other precisely revealed terms, for which the specified property rights should sell after reasonable exposure in a competitive market under all conditions requisite to a fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self-interest, and assuming that neither is under undue duress.

2. Market value is defined in the Uniform Standards of Professional Appraisal Practice (USPAP) as follows:

    -- A type of value, stated as an opinion, that presumes the transfer of a property (i.e., a right of  ownership or a bundle of such rights), as of a certain date, under specific conditions set forth in the definition of the term identified by the appraiser as applicable in an appraisal. (USPAP, 2008 ed.)

USPAP also requires that certain items be included in every appraisal report. Among these items, the following are directly related to the definition of market value:

        -  Identification of the specific property rights to be appraised.

-  Statement of the effective date of the value opinion.

- Specification as to whether cash, terms equivalent to cash, or other precisely described financing terms are assumed as the basis of the appraisal.

- If the appraisal is conditioned upon financing or other terms, specification as to whether the financing or terms are at, below or above market interest rates and/or contain unusual conditions or incentives. The terms of above- or below-market interest rates and/or other special incentives must be clearly set forth; their contribution to, or negative influence on, value must be described and opined; and the market data supporting the opinion of value must be described and explained.

3. The following definition of market value is used by agencies that regulate federally insured financial institutions in the United States:

-- The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

--  Buyer and seller are typically motivated;

-- Both parties are well informed or well advised, and acting in what they consider their best interests;

--  A reasonable time is allowed for exposure in the open market;

-- Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and

-- The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

(12 C.F.R. Part 34.42(g); 55 Federal Register 34696, August 24, 1990, as amended at 57 Federal Register 12202, April 9, 1992; 59 Federal Register 29499, June 7, 1994)

4.       In 1993, the Appraisal Institute Special Task Force on Value Definitions put forward the following definition of market value:

       The most probable price which a specified interest in real property is likely to bring under all of the following conditions:

- Consummation of a sale occurs as of a specified date.

- An open and competitive market exists for the property interest appraised.

- The buyer and seller are each acting prudently and knowledgeably.

- The price is not affected by undue stimulus.

- The buyer and seller are typically motivated.

- Both parties are acting in what they consider their best interest.

- Marketing efforts were adequate and a reasonable time was allowed for exposure in the open market.

- Payment was made in cash in U.S. dollars or in terms of financial arrangements comparable thereto.

- The price represents the normal consideration for the property sold, unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

   This definition can also be modified to provide for valuation with specified financing terms.

 5.      The International Valuation Standards Committee defines market value for the purpose of international standards as  follows:

       Market value is the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arms-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion.

(International Valuation Standards 2001. London: International Valuation Standards Committee, 2001, 92.)

Persons performing appraisal services that may be subject to litigation are cautioned to seek the exact definition of market value applicable to the jurisdiction where the services are being performed. For further discussion of this important term, see The Appraisal of Real Estate, 12th ed. (Chicago: Appraisal Institute, 2001), 21-24”

Marketing Period Back to top

The time period beginning when an owner decides to start actively selling a property to when the sale is actually closed. The marketing period is typically an observable fact. If a marketing period that is shorter than typical is assumed in an analysis, the value found would be considered a forced, or liquidation value rather than market value.

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.

Modified Age-Life Method – (Method of Calculating Incurable Physical Depreciation) Back to top

A method of estimating depreciation in which the ratio between the effective age of a building and its total economic life is applied to the current cost of the improvements after the costs to cure curable physical and functional items are deducted. See also age-life method.

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 that obligations of a mortgage when the policy holder defaults or is no longer able to make payments.

MORTGAGE INSURANCE PREMIUM (MIP) Back to top
An 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 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 Back to top
A subsection of a municipality that has been designated by a developer, economic forces or physical formations. In appraising, a group of complementary land uses; a congruous grouping of inhabitants, buildings, or business enterprises.

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.

NET LEASEABLE 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.

NON-LIQUID 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 asset's 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.

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. i.e., Improvements such as streets, sidewalks, curbing, traffic signals, and water and sewer mains; typically considered with site value.

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

ON-SITE IMPROVEMENTS Back to top
Buildings, structures or other amenities that are erected on a piece of property and contribute to its value. i.e., Improvements such as grading, landscaping, fences, gutters, paving, drainage and irrigation systems, walks, and other physical enhancements to the land; often include utility hookups and are subject to physical deterioration and functional obsolescence; are always required for development of a structure on a site.

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.

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.

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. In appraising, identifiable tangible objects that are considered by the general public as being “personal”—e.g., furnishings, artwork, antiques, gems and jewelry, collectibles, machinery and equipment; all tangible property that is not classified as real estate.

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

Physical Deterioration Back to top

An element of depreciation; loss in value caused by wear, tear, age and use. See also curable physical deterioration; incurable physical deterioration; long-lived item; short-lived item.

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.
 

Principle of Contribution Back to top

States that the value of a particular component is measured in terms of its contribution to the value of the whole property, or as the amount that its absence would detract from the value of the whole.

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.

Property Rights (Estates, Interests) Back to top

-- The right of “Fee Simple Estate” is defined as “Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.”

-- The right of “Leased Fee Interest” is defined as “An ownership interest held by a landlord with the rights of use and occupancy conveyed by lease to others. The rights of the lessor (the leased fee owner) and the lessee are specified by contract terms contained within the lease.” 

-- The right of “Leasehold Interest” is defined as “The interest held by the lessee (the tenant or renter) through a lease transferring the rights of use and occupancy for a stated term under certain conditions.”

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  (aka Four-Plex) 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 borrowers 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.

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. In appraising, an identified parcel or tract of land, including improvements, if any.

REAL ESTATE AGENT(BROKER) Back to top
A licensed professional who facilitates the buying and selling of real estate. In Colorado there are no longer "sales agents." All licensed real estate professionals in Colorado are either Associate Brokers, Independent Brokers, or Employing Brokers.

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.

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, roofing, or mechanical systems, in any property. Primarily used in cooperative properties.
 

Report Back to top

Any communication, written or oral, of an appraisal, appraisal review, or consulting service that is transmitted to the client upon completion of an assignment.           

            Appraisal Report: a written report prepared under Standards Rule 10-2(a).

            Self-Contained Appraisal Report: a written report prepared under Standards Rule 2-2(a) or 8-2(a).

            Summary Appraisal Report: a written report prepared under Standards Rule 2-2(b) or 8-2(b).

            Restricted Appraisal Report: a written report prepared under Standards Rule 2-2(c) or 8-2(c).

RESIDENTIAL PROPERTY Back to top
A piece of property whose highest and best use is the maintenance of a residence. In appraising, residential properties are defined as containing only 1 to 4 units and may be appraised by either a licensed or certified residential appraiser. Five units and larger are considered to be non-residential properties requiring a certified general appraiser.

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.

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.

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 develops an opinion of 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.

Short-Lived Item Back to top

A building component with an expected remaining economic life that is shorter than the remaining economic life of the entire structure.

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

Site Back to top

Land that is improved so that it is ready to be used for a specific purpose. (Site usually includes costs associated with zoning approval, survey, off-site improvements and on-site improvements.) (See “Land.”)

SUBDIVISION Back to top
A residential or commercial 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.

Surplus Land Back to top

Land not necessary to support the highest and best use of the existing improvement but, because of physical limitations, building placement, or neighborhood norms, cannot be sold off separately. Such land may or may not contribute positively to value and may or may not accommodate future expansion of an existing or anticipated improvement. (See also "excess land.")

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.

TRUSTEE Back to top
A fiduciary who 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.

Use Value Back to top

1. In economics, the attribution of value to goods and services based upon their usefulness to those who consume them.

2. In real estate appraisal, the value a specific property has for a specific use; may be the highest and best use of the property or some other use specified as a condition of the appraisal; may be used where legislation has been enacted to preserve farmland, timberland, or other open space land on urban fringes. See also exchange value; value in use.

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).

Value In Use Back to top

The value a specific property has to a specific person or specific firm as opposed to the value to persons or the market in general. Special-purpose properties such as churches, schools, and public buildings, which are seldom bought and sold in the open market, can be valued on the basis of value in use. The value in use to a specific person may include a sentimental value component. The value in use to a specific firm may be the value of the plant as part of an integrated single-plant operation. (See also "use value.")

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.

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.

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.

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

Work file Back to top

Documentation necessary to support an appraiser’s analysis, opinions, and conclusions.

X Back to top

Y Back to top

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.