ABSORPTION RATE
The ratio of the number of properties in an area that have been sold
against the number available. Used to show the volatility of a market.
ABSTRACTION METHOD
This method of estimating the value of property uses similar properties
available in the same market to extract the value of a parcel of land.
ACCELERATION CLAUSE
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
A building separate from the main structure on a property Often used for a
specific purpose, such as a workshop, storage shed or garage.
ACCRETION
The natural growth of a piece of land resulting from forces of nature.
ACRE
43,560 square feet. A measurement of area.
ACTUAL AGE
The amount of time that has passed since a building or other structure was
built. See also: EFFECTIVE AGE.
ADJUSTMENT DATE
The date the interest rate changes on an adjustable rate mortgage.
AD VAL OREM TAX
Taxes assessed based on the value of the land and improvements.
ADDENDUM
A supplement to any document that contains additional information pertinent to
the subject. Appraisers use an addendum to further explain items for which there
was inadequate space on the standard appraisal form.
ADJUSTABLE-RATE MORTGAGE (ARM)
A type of mortgage where the interest rate varies based on a particular
index, normally the prime lending rate.
ADJUSTED BASIS
The value of an asset (property or otherwise) that includes the original price
plus the value of any improvement, and less any applicable depreciation.
ADJUSTED SALES PRICE
An opinion of a property's sales price, after adjustments have been made to
account for differences between it and another comparable property.
AESTHETIC VALUE
The additional value a property enjoys based on subjective criteria such as look
or appeal.
AFFIRMATION
A declaration that a certain set of facts are truthful.
AFFORDABILITY ANALYSIS
A calculation used to determine an individual's likelihood of being able to meet
the obligations of a mortgage for a particular property. Takes into account the
down payment, closing costs and on-going mortgage payments.
AGENT
A person who has been appointed to act on behalf of another for a particular
transaction.
AMENITY
Any feature of a property that increases its value or desirability. These might
include natural amenities such as location or proximity to mountains, or
man-made amenities like swimming pools, parks or other recreation.
AMORTIZATION
The repayment of a loan through regular periodic payment.
AMORTIZATION SCHEDULE
The breakdown of individual payments throughout the life of an amortized loan,
showing both principal contribution and debt service (interest) fees.
AMORTIZATION TERM
The length of time over which an amortized loan is repaid. Mortgages are
commonly amortized over 15 or 30 years.
AMPERAGE
A measure of electric current describing the magnitude.
ANNUAL PERCENTAGE RATE (APR)
The rate of annual interest charged on a loan.
ANNUITY
A sum of money paid at regular intervals, often annually.
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A trustworthy & professional Denver area Real Estate Broker/Agent &
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investment properties in the Denver Metro area.
APPLICATION
A form used to apply for a mortgage loan that details a potential borrower's
income, debt, savings and other information used to determine credit worthiness.
APPRAISAL
A ''defensible'' and carefully documented opinion of value. Most commonly
derived using recent sales of comparable properties by a licensed, professional
appraiser.
APPRAISAL FOUNDATION
A not-for-profit educational organization established by the appraisal
profession in the United States in 1987. It is dedicated to the advancement of
professional valuation and responsible for establishing, improving, and
promoting the Uniform Standards of Professional Appraisal Practice (USPAP).
APPRAISAL INSTITUTE
A world-wide organization dedicated to real estate appraisal education,
publication and advocacy.
APPRAISAL PRINCIPLES
The basic building blocks of the property valuation process, including property
inspection, market analysis and basic economics.
APPRAISAL REPORT
The end result of the appraisal process, usually consists of one major,
standardized form such as the Uniform Residential Appraisal Report form 1004, as
well as all supporting documentation and additional detail information. The
purpose of the report is to convey the opinion of value of the subject property
and support that opinion with corroborating information.
APPRAISAL STANDARDS BOARD (ASB)
An independent board of the APPRAISAL FOUNDATION, which writes, amends, and
interprets USPAP. The ASB is composed of up to seven appraisers appointed by the
Foundation's Board of Trustees. The ASB holds public meetings throughout the
year to interpret and amend USPAP.
APPRAISED VALUE
An opinion of the fair market value of a property as developed by a licensed,
certified appraiser following accepted appraisal principals.
APPRAISER
An educated, certified professional with extensive knowledge of real estate
markets, values and practices. The appraiser is often the only independent voice
in any real estate transaction with no vested interest in the ultimate value or
sales price of the property.
APPRECIATION
The natural rise in property value due to market forces.
ASSESSED VALUE
The value of a property according to jurisdictional tax assessment.
ASSESSMENT
The function of assigning a value to a property for the purpose of levying taxes.
ASSESSMENT RATIO
The comparative relationship of a property's assessed value to its market value.
ASSESSOR
The jurisdictional official who performs the assessment and assigns the value of
a property.
ASSET
Any item of value which a person owns.
ASSIGNMENT
Transfer of ownership of a mortgage - usually when the loan is sold to another
company.
ASSUMABLE MORTGAGE
A mortgage that can be taken over by the buyer when a home is sold.
ASSUMPTION
When a buyer takes over, or "assumes" the sellers mortgage.
ATTACHED HOUSING
Any number of houses or other dwellings which are physically attached to one
another, but are occupied by a number of different people. The individual houses
may or may not be owned by separate people as well.
BACKFILL
The slope of the ground around a house.
BALL COCK VALVE
The valve inside a toilet tank that controls the filling of the tank.
BALLOON MORTGAGE
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
The final large payment at the end of a balloon mortgage term.
BANKRUPTCY
When a person or business is unable to pay their debts and seeks protection of
the state against creditors. Bankruptcies remain on credit records for up to ten
years and can prevent a person from being able to get a loan.
BEAM
A structural supporting member.
BILL OF SALE
A physical receipt indicating the sale of property.
BIWEEKLY MORTGAGE
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
Any region of a city or town that has fallen into disrepair or otherwise has
become undesirable.
BONA FIDE
Any genuine offer, made without intent to defraud or deceive.
BRIDGE FINANCING
An interim loan made to facilitate the purchase of a new home before the buyer's
current residence sells and its equity is available to fund the new purchase.
BRIDGING
Structural members used between beams to strengthen the structure.
BROKER
An individual who facilitates the purchase of property by bringing together a
buyer and a seller.
BTU
British Thermal Unit. A unit of measurement used to describe heating or
cooling capacity.
BUFFER ZONE
A segment of land between two disparate municipal zones which acts as a shield
to keep one zone from encroaching upon the other. Often used to separate
residential districts from commercial areas.
BUILDING CODES
Regulations that ensure the safety and material compliance of new construction
within a municipality. Building codes are localized to ensure they are adequate
to meet the risk of common hazards.
BUILDING LINE OR SETBACK
The statutory distance between buildings and the property line, imposed by
municipalities, home associations, or other agreements.
BUILT-INS
Specific items of personal property which are installed in a real estate
improvement such that they become part of the building. Built-in microwave ovens
and dishwashers are common examples.
BUNGALOW
A one-story, home-style dating from the early twentieth century. Often
characterized by a low-pitched roof.
BUY DOWN
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
A clause in a mortgage which allows the lender to demand payment of the
outstanding balance at a specific time.
CAP
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.
CAPITAL
Accumulated goods and money which is most often used to generate additional
income.
CAPITAL EXPENDITURE
An outlay of funds designed to improve the income-producing capabilities of an
asset or to extend its economic life.
CASH-OUT REFINANCE
Refinancing a mortgage at a higher amount than the current balance in order to
transform a portion of the equity into cash.
CAULKING
A pliable material used to seal cracks or openings such as around windows.
CAVEAT EMPTOR
Literally translated: ''Let the buyer beware.'' A common business tenet whereby
the buyer is responsible for verifying any and all claims by the seller of
property.
CERTIFICATE OF DEPOSIT
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
An index based on the interest rate of six month CD's. Used to set interest
rates on some Adjustable Rate Mortgages.
CERTIFICATE OF ELIGIBILITY
A document issued by the Veterans Administration that certifies eligibility for
a VA loan.
CERTIFICATE OF OCCUPANCY
Issued by an appropriate jurisdictional entity, this document certifies that a
building complies with all building codes and is safe for use or habitation.
CERTIFICATE OF REASONABLE
VALUE (CRV)
Usually based on an independent appraisal, a CRV for a particular property
establishes the maximum amount which can be secured by a VA mortgage.
CERTIFICATE OF TITLE
A document designating the legal owner of a parcel of real estate. Usually
provided by a title or abstract company.
CERTIFIED GENERAL APPRAISER
Generally, any professional who has met the local or state requirements, and
passed the appropriate certification exam, and is capable of appraising any type
of property.
CERTIFIED RESIDENTIAL
APPRAISER
A sub-classification of appraiser who is only licensed to appraise residential
property, usually up to four units.
CHAIN OF TITLE
The complete history of ownership of a piece of property.
CHATTEL
Any personal property which is not attached to or an integral part of a
property. Chattel is not commonly taken into consideration when appraising the
value of real property.
CIRCUIT BREAKERS
Electrical devices which automatically open electrical circuits if they are
overloaded.
CLEAR TITLE
Ownership of property that is not encumbered by any counter-claim or lien.
CLOSING
A torturous process designed to induce cramping in a home buyer's hands by
requiring signature on countless pieces of documentation that nobody has ever
read. Or, the process whereby the sale of a property is consummated with the
buyer completing all applicable documentation, including signing the mortgage
obligation and paying all appropriate costs associated with the sale (CLOSING
COSTS).
CLOSING COSTS
All appropriate costs generated by the sale of property which the parties must
pay to complete the transaction. Costs may include appraisal fees, origination
fees, title insurance, taxes and any points negotiated in the deal.
CLOSING STATEMENT
The document detailing the final financial arrangement between a buyer and
seller and the costs paid by each.
CO-BORROWER
A second person sharing obligation on the loan and title on the property.
COLLATERAL
An asset which is placed at risk to secure the repayment of a loan.
COLLECTION
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
A second party who signs a loan, along with the borrower, and becomes liable for
the debt should the borrower default.
COMMON LAW
As opposed to statute law. Laws that have been established by custom, usage and
courts over many years.
COMMISSION
A percentage of the sales price or a fixed fee negotiated by an agent to
compensate for the effort expended to sell or purchase property.
COMMON AREA ASSESSMENTS
Fees which are charged to the tenets or owners of properties to cover the costs
of maintaining areas shared with other tenets or owners. Commonly found in
condominium, PUD or office spaces.
COMMON AREAS
Any areas, such as entryways, foyers, pools, recreational facilities or the
like, which are shared by the tenets or owners of property near by. Commonly
found in condominium, PUD or office spaces.
COMMUNITY PROPERTY
In many jurisdictions, any property which has been acquired by a married couple.
The ownership of the property is considered equal unless stipulated otherwise by
both parties.
COMPARABLES
An abbreviated term used by appraisers to describe properties which are similar
in size, condition, location and amenities to a subject property who's value is
being determined. The Uniform Standards of Professional Appraisal Practice (USPAP)
establish clear guidelines for determining a comparable property.
COMPOUND INTEREST
Interest paid on the principal amount, as well as any accumulated interest.
CONCESSIONS
Additional value granted by a buyer or seller to entice another party to
complete a deal.
CONDEMNATION
The official process by which a property is deemed to be uninhabitable or
unusable due to internal damage or other external conditions.
CONDENSATION
The transition of water vapor to liquid. Typically forms in areas of high
humidity.
CONDOMINIUM
A development where individual units are owned, but common areas and amenities
are shared equally by all owners.
CONDOMINIUM CONVERSION
Commonly, the conversion of a rental property such as an apartment complex into
a CONDOMINIUM-style complex where each unit is owned rather than leased.
CONDUIT
The pipe through which electric wiring is run.
CONSTRUCTION LOAN
A loan made to a builder or home owner that finances the initial construction of
a property, but is replaced by a traditional mortgage one the property is
completed.
CONTIGUOUS
Connected to or touching along an unbroken boundary.
CONTINGENCY
Something that must occur before something else happens. Often used in real
estate sales when a buyer must sell a current home before purchasing a new one.
Or, when a buyer makes an offer the requires a complete home inspection before
it becomes official.
CONTRACT
A legally binding agreement, oral or written, between two parties.
CONVENTIONAL MORTGAGE
A traditional, real estate financing mechanism that is not backed by any
government or other agency (FHA, VA, etc.).
CONVERTIBLE ARM
A mortgage that begins as and adjustable, that allows the borrower to convert
the loan to a fixed rate within a specific timeframe.
CORPORATE RELOCATION
A situation where a person's employer pays all or some of the expenses
associated with moving from one location to another, usually over a substantial
distance. Relocation expenses often include the amounts, such as brokerage fees,
incurred in the selling and buying of the employee's primary residence.
COST OF FUNDS INDEX (COFI)
An index of financial institutions costs used to set interest rates for some
Adjustable Rate Mortgages.
COVENANT
A stipulation in any mortgage that, if not met, can be cause for the lender to
foreclose.
CREDIT
A loan of money for the purchase of property, real or personal. Credit is either
secured by an asset, such as a home, or unsecured.
CREDIT HISTORY
A record of debt payments, past and present. Used by mortgage lenders in
determining credit worthiness of individuals.
CREDITOR
A person to whom money is owed.
CREDIT REPORT
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
Large companies that gather and store financial and credit information about
individuals who apply for credit.
CUL-DE-SAC
A dead-end street. One with only one entrance/exit.
DATE OF APPRAISAL
The specific point in time as of which an appraiser designates the value of a
home. Often stipulated as the date of inspection.
DEBT
An obligation to repay some amount owed. This may or may not be monetary.
DEBT EQUITY RATIO
The ratio of the amount a mortgagor still owes on a property to the amount of
equity they have in the home. Equity is calculated at the fair-market value of
the home, less any outstanding mortgage debt.
DEED
A document indicating the ownership of a property.
DEED-IN-LIEU (OF FORECLOSURE)
A document given by a borrower to a lender, transferring title of the property.
Often used to avoid credit-damaging foreclosure procedures.
DEED OF TRUST
A document which transfers title in a property to a trustee, who's obligations
and powers are stipulated. Often used in mortgage transactions.
DEED OF RECONVEYANCE
A document which transfers ownership of a property from a Trustee back to a
borrower who has fulfilled the obligations of a mortgage.
DEED OF RELEASE
A document which dismisses a lien or other claim on a property.
DEED OF SURRENDER
A document used to surrender any claim a person has to a property.
DEFAULT
The condition in which a borrower has failed to meet the obligations of a loan
or mortgage.
DELINQUENCY
The state in which a borrow has failed to meet payment obligations on time.
DEPOSIT
Cash given along with an offer to purchase property, Also called EARNEST MONEY.
DEPRECIATION
The natural decline in property value due to market forces or depletion of
resources.
DETACHED SINGLE-FAMILY HOME
A single building improvement intended to serve as a home for one family.
DISCOUNT POINTS
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
A mortgaged property which has been foreclosed on.
DOWNSPOUT
The pipe that water moves through to reach the ground from the rain gutter.
DUE-ON-SALE PROVISION
A clause in a mortgage giving the lender the right to demand payment of the full
balance when the borrower sells the property.
DUPLEX
A single-building improvement which is divided and provides two units which
serve as homes to two families.
DOWN PAYMENT
An amount paid in cash for a property, with the intent to mortgage the remaining
amount due.
EARNEST MONEY DEPOSIT
A cash deposit made to a home seller to secure an offer to buy the property.
This amount is often forfeited if the buyer decides to withdraw his offer.
EASEMENT
The right of a non-owner of property to exert control over a portion or all of
the property. For example, power companies often own an easement over
residential properties for access to their power lines.
EAVE
The part of the roof that extends beyond the exterior wall.
ECONOMIC DEPRECIATION
The decline in property value caused by external forces, such as neighborhood
blight or adverse development.
ECONOMIC LIFE
The amount of time which any income-producing property is able to provide
benefits to its owner.
EFFECTIVE AGE
The subjective, estimated age of a property based on its condition, rather
than the actual time since it was built. Excessive wear and tear can cause a
property's effective age to be greater than its actual age.
EMINENT DOMAIN
The legal process whereby a government can take ownership of a piece of property
in order to convert it to public use. Often, the property owner is paid
fair-market value for the property.
ENCROACHMENT
A building or other improvement on one property which invades another property
or restricts its usage.
ENCUMBRANCE
A claim against a property. Examples are mortgages, liens and easements.
ENERGY EFFICIENCY RATIO
An efficiency rating system for air conditioning units that corresponds to the
number of BTU's output per watt of electricity used.
EQUAL CREDIT OPPORTUNITY ACT (ECOA)
U.S. federal law requiring that lenders afford people equal chance of getting
credit without discrimination based on race, religion, age, sex etc.
EQUITY
The difference between the fair market value of a property and that amount an
owner owes on any mortgages or loans secured by the property.
EQUITY BUILDUP
The natural increase in the amount of equity an owner has in a property,
accumulated through market appreciation and debt repayment.
ERRORS AND OMISSIONS INSURANCE
An insurance policy taken out by appraisers to cover their liability for any
mistakes made during the appraisal process.
ESCROW
An amount retained by a third party in a trust to meet a future obligation.
Often used in the payment of annual taxes or insurance for real property.
ESCROW ACCOUNT
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
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
The payout of funds from an escrow account to pay property expenses such as
taxes and insurance.
ESTATE
The total of all property and assets owned by an individual.
EXAMINATION OF TITLE
The report on the title of a property from the public records or an abstract of
the title.
EXCLUSIVE LISTING
An agreement between the owner of a property and a real estate agent giving the
agent exclusive right to sell the property.
EXECUTOR
The person named in a will to administer the estate.
FACADE
The front exposure of any building. Often used to describe an artificial or
false front which is not consistent with the construction of the rest of the
building.
FAIR CREDIT REPORTING ACT
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
The price at which two unrelated parties, under no duress, are willing to
transact business.
FANNIE MAE
A private, shareholder-owned company that works to make sure mortgage money is
available for people to purchase homes. Created by Congress in 1938, Fannie Mae
is the nation's largest source of financing for home mortgages.
FASCIA
The boards that enclose the eaves.
FEDERAL DEPOSIT INSURANCE
CORPORATION (FDIC)
The U.S. Government agency created in 1933 which maintains the stability of and
public confidence in the nation's financial system by insuring deposits and
promoting safe and sound banking practices.
FEDERAL HOUSING ADMINISTRATION
(FHA)
A sub-agency of the U.S. Department of Housing and Urban Development created in
the 1930's to facilitate the purchase of homes by low-income, first-time home
buyers. It currently provides federally-subsidized mortgage insurance for
private lenders.
FEE APPRAISER
A certified, professional appraiser who forms an opinion of the fair market
value of property and receives a set fee in exchange.
FEE SIMPLE
A complete, unencumbered ownership right in a piece of property.
FEE SIMPLE ESTATE
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
A mortgage that is insured by the Federal Housing Administration (FHA).
FINAL VALUE ESTIMATE
The opinion of value of a piece of property resulting from an appraisal
following the USPAP guidelines.
FIRST MORTGAGE
The primary loan or mortgage secured by a piece of property.
FIXED-RATE MORTGAGE (FRM)
A mortgage which has a fixed rate of interest over the life of the loan.
FIXTURE
Any piece of personal property which becomes permanently affixed to a piece of
real property.
FLASHING
The metal used around the base of roof mounted equipment, or at the junction of
angles used to prevent leaking.
FLOOD INSURANCE
Supplemental insurance which covers a home owner for any loss due to water
damage from a flood. Often required by lenders for homes located in FEMA-designated
flood zones.
FLOOR PLAN
The representation of a building which shows the basic outline of the structure,
as well as detailed information about the positioning of rooms, hallways, doors,
stairs and other features. Often includes detailed information about other
fixtures and amenities.
FLUE
The furnace exhaust pipe, usually going through the roof.
FLUSH VALVE
The valve between the toilet bowl and the tank.
FOOTING
The partially buried support for a vertical structural member such as a post.
FORECLOSURE
The process whereby a lender can claim the property used by a borrower to secure
a mortgage and sell the property to meet the obligations of the loan.
FORFEITURE
The loss of property or money due to the failure to meet the obligations of a
mortgage or loan secured by that property.
FOUNDATION
The solid structural element upon which a structure is built.
FRONTAGE
The segment of a property that runs along a point of access, such as a street or
water front.
FUNCTIONAL OBSOLESCENCE
A decrease in the value of property due to a feature or lack thereof which
renders the property undesirable. Functional obsolescence can also occur when
the surrounding area changes, rendering the property unusable for its originally
intended purpose.
GABLE ROOF
A steeply angled, triangular roof.
GALVANIZED PIPE
Iron pipe with a galvanized (zinc) coating.
GAMBREL ROOF
A ''barn-like'' roof, where the upper portion of the roof is less-steeply angled
than the lower part.
GENERAL LIEN
A broad-based claim against several properties owned by a defaulting party.
GFI
Ground Fault Interrupter. A type of circuit breaker required in areas where
water is present.
GINNIE MAE
A wholly owned corporation created in 1968 within the U.S. Department of Housing
and Urban Development to serve low-to moderate-income homebuyers.
GIRDER
A main supporting beam.
GOVERNMENT MORTGAGE
Any mortgage insured by a government agency, such as the FHA or VA.
GRADE
The slope of land around a building. Also ground level.
GRANTEE
Any person who is given ownership of a piece of property.
GRANTOR
Any person who gives away ownership of a piece of property.
GROSS AREA
The sum total of all floor space, including areas such as stairways and closet
space. Often measured based on external wall lengths.
GROUTING
Material used around ceramic tile.
GUTTER
The trough around the edge of the roof that catches and diverts rain.
HALF-SECTION
320 acres.
HAZARD INSURANCE
Insurance covering damage to a property caused by hazards such as fire, wind and
accident.
HEADER
The framing elements above an opening such as a window or door.
HEARTH
The floor of a fireplace or the area immediately in front of it.
HEIGHT ZONING
A municipal restriction on the maximum height of any building or other
structure.
HIDDEN AMENITIES
Assets of a property which contribute to its value, but are not readily
apparent. Examples might include upgraded or premium building materials.
HIGHEST AND BEST USE
The most profitable and likely use of a property. Selected from reasonably
probable and legal alternative uses, which are found to be physically possible,
appropriately supported and financially feasible to result in the highest
possible land value.
HOME EQUITY CONVERSION
MORTGAGE (HECM)
Also known as a reverse annuity mortgage. It allows home owners (usually older)
to convert equity in the home into cash. Normally paid by the lender in monthly
payments. HECM's typically don't have to be repaid until the borrower is no
longer occupying the home.
HOME EQUITY LINE OF CREDIT
A type of mortgage loan that allows the borrower to draw cash against the equity
in his home.
HOME INSPECTION
A complete examination of a building to determine its structural integrity and
uncover any defects in materials or workmanship which may adversely affect the
property or decrease its value.
HOME INSPECTOR
A person who performs professional home inspections. Usually, with an extensive
knowledge of house construction methods, common house problems, how to identify
those problems and how to correct them.
HOMEOWNER'S ASSOCIATION
An organization of home owners in a particular neighborhood or development
formed to facilitate the maintenance of common areas and to enforce any building
restrictions or covenants.
HOMEOWNER'S INSURANCE
A policy which covers a home owner for any loss of property due to accident,
intrusion or hazard.
HOMEOWNER'S WARRANTY
An insurance policy covering the repair of systems and appliances within the
home for the coverage period.
HUD MEDIAN INCOME
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
A standardized, itemized list, published by the U.S. Department of Housing and
Urban Development (HUD), of all anticipated CLOSING COSTS connected with a
particular property purchase.
IMPROVED LAND
Any parcel of land which has been changed from its natural state through the
creation of roads, buildings or other structures.
IMPROVEMENTS
Any item added to vacant land with the intent of increasing its value or
usability.
IMPROVEMENT RATIO
The comparative value of a improved piece of land to its natural, unaltered
state.
INCOME APPROACH
The process of estimating the value of property by considering the present value
of a stream of income generated by the property.
INCOME PROPERTY
A piece of property whose highest and best use is the generation of income
through rents or other sources.
INDEPENDENT APPRAISAL
An estimation of value created by a professional, certified appraiser with no
vested interest in the value of the property.
INSPECTION
The examination of a piece of property, its buildings or other amenities.
INSURABLE TITLE
The title to property which has been sufficiently reviewed by a title insurance
company, such that they are willing to insure it as free and clear.
INTEREST RATE
A percentage of a loan or mortgage value that is paid to the lender as
compensation for loaning funds.
INVESTMENT PROPERTY
Any piece of property that is expected to generate a financial return. This may
come as the result of periodic rents or through appreciation of the property
value over time.
JAMB
The side of a door frame.
JOINT TENANCY
A situation where two or more parties own a piece of property together. Each of
the owners has an equal share, and may not dispose of or alter that share
without the consent of the other owners.
JOISTS
Horizontal beams laid on edge to support flooring or a ceiling.
JUDGMENT
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
A type of foreclosure conducted as a civil suit in a court of law.
JUMBO LOAN
A mortgage loan for an amount greater than the limits set by Fannie Mae and
Freddie Mac. Often called non-conforming loans.
LALLY COLUMN
A concrete filled steel pipe used to support beams.
LATE CHARGE
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
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
A contract between a property owner and a tenant specifying the payment amount,
terms and conditions, as well as the length of time the contract will be in
force.
LEASEHOLD ESTATE
A type of property ''ownership'' where the buyer actually has a long-term lease
on the property.
LEASE OPTION
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
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
The person or entity who loans funds to a buyer. In return, the lender will
receive periodic payments, including principal and interest amounts.
LIABILITIES
A person's outstanding debt obligations.
LIABILITY INSURANCE
Insurance that covers against potential lawsuit brought against a property owner
for alleged negligence resulting in damage to another party.
LIEN
Any claim against a piece of property resulting from a debt or other obligation.
LIFE CAP
A limit on how far the interest rate can move for an Adjustable Rate Mortgage.
LIKE-KIND PROPERTY
Any property which is substantially similar to another property.
LINE OF CREDIT
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
Any asset which can be quickly converted into cash at little or no cost, or cash
itself.
LOAN
Money borrowed, to be repaid with interest, according to the specific terms and
conditions of the loan.
LOAN OFFICER
A person that "sells" loans, representing the lender to the borrower, and the
borrower to the lender.
LOAN ORIGINATION
How a lender refers to the process of writing new loans.
LOAN SERVICING
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)
The comparison of the amount owed on a mortgaged property to its fair market
value.
LOCK-IN
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
The amount of time the lender has guaranteed an interest rate to a borrower.
MAJOR DEFICIENCY
A deficiency that strongly impacts the usability and habitability of a house. Or
a deficiency that may be very expensive to repair.
MANUFACTURED HOUSING
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
The difference between the interest rate and the index on an adjustable rate
mortgage.
MARGINAL LAND
Land whose value has been diminished due to some internal defect or external
condition. In most cases, the cost to correct the flaw or condition is as much
or more than the expected return from the property.
MASTER ASSOCIATION
An umbrella organization that is made up of multiple, smaller home owner's
associations. Often found in very large developments or condominium projects.
MATURITY
The date on which the principal balance of a financial instrument becomes due
and payable.
MERGED CREDIT REPORT
A credit report derived from data obtained from multiple credit agencies.
METES AND BOUNDS
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
The accumulated land in and around a city or other municipality which falls
under the political and economic influence of that entity.
MINERAL RIGHTS
The legal right to exploit and enjoy the benefits of any minerals located below
the surface of a parcel of land.
MISREPRESENTATION
A statement by one party in a transaction that is incorrect or misleading. Most
misrepresentations are deemed to be intentional and thus may constitute fraud.
Others, however, some are rendered through simple mistakes, oversights or
negligence.
MORTGAGE
A financial arrangement wherein an individual borrows money to purchase real
property and secures the loan with the property as collateral.
MORTGAGE BANKER
A financial institution that provides primary and secondary mortgages to home
buyers.
MORTGAGE BROKER
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
The entity that lends money in a real estate transaction.
MORTGAGE INSURANCE
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)
An fee that is often included in mortgage payments that pays for mortgage
insurance coverage.
MORTGAGE LIFE INSURANCE
A policy that fulfills the obligations of a mortgage when the policy holder
dies.
MORTGAGOR
The entity that borrows money in a real estate transaction.
MULTI-FAMILY PROPERTIES
Any collection of buildings that are designed and built to support the
habitation of more than four families.
NATIONAL ASSOCIATION OF MASTER
APPRAISERS (NAMA)
A non profit professional association organized in 1982, dedicated to the
advancement of professionalism in real estate appraisal.
NATURAL VACANCY RATE
The percentage of vacant properties in a given area that is the result of
natural turnover and market forces.
NEGATIVE AMORTIZATION
When the balance of a loan increases instead of decreases. Usually due to a
borrower making a minimum payment on an Adjustable Rate Mortgage during a period
when the rate fluctuates to a high enough point that the minimum payment does
not cover all of the interest.
NEIGHBORHOOD LIFE-CYCLE
The evolution of neighborhood use and demographics over time. Economic
fluctuations, municipal zoning changes and population shifts can effect the life
cycle.
NEIGHBORHOOD
A subsection of a municipality that has been designated by a developer, economic
forces or physical formations.
NO-COST LOAN
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
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
The use of land for purposes contrary to the applicable municipal zoning
specifications. Often occurs when zoning changes after a property is in use.
NONLIQUID ASSET
Any asset which can not be quickly converted into cash at little or no cost.
NOTE
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
The interest rate stated on a mortgage note.
NOTICE OF DEFAULT
Formal written notice from a lender to a borrower that default has occurred.
OBSOLESCENCE
The process of an assets value diminishing due to the development of more
desirable alternatives or because of the degradation of its capabilities.
OCCUPANCY
A physical presence within and control of a property.
OCCUPANCY RATE
The percentage of properties in a given area that are occupied.
OCTOPUS RECEPTACLE
An outlet with too many devices plugged into it, using a power strip or other
device to multiply the outlets.
OFF-SITE IMPROVEMENTS
Buildings, structures or other amenities which are not located on a piece of
property, but are necessary to maximize the use of the property or in some way
contribute to the value of the property.
OFF-STREET PARKING
Designated parking spaces associated with a particular building or other
structure which are not located on public streets.
OLD TERMITE ACTIVITY
Where no termites are currently active, but indications of past activity can be
seen.
ON-SITE IMPROVEMENTS
Buildings, structures or other amenities that are erected on a piece of property
and contribute to its value.
OPEN SPACE
Any land which has not had any significant buildings or structures erected on
it. Most often used to describe desirable neighborhood features like parks.
OPEN SPLICE
An uncovered electrical connection.
ORIGINAL EQUITY
The amount of cash a home buyer initially invests in the home.
ORIGINAL PRINCIPAL BALANCE
The total amount of principal owed on a mortgage loan at the time of closing.
ORIGINATION FEE
Refers to the total number of points paid by a borrower at closing.
OWNER FINANCING
A transaction where the property owner provides all or part of the financing.
OWNER OCCUPIED
The state of property wherein the owner occupies at least some portion of the
property.
PARGING
The cement coat applied to block foundations.
PARTIAL INTEREST
A shared ownership in a piece of property. May be divided among two or more
parties.
PARTIAL PAYMENT
A payment of less than the regular monthly amount. Usually, a lender will not
accept partial payments.
PERIODIC PAYMENT CAP
The limit on how much regular monthly payments on an Adjustable Rate Mortgage
can change during one adjustment period.
PERIODIC RATE CAP
The limit on how much the interest rate on an Adjustable Rate Mortgage can
change during any one adjustment period.
PERSONAL PROPERTY
Owned items which are not permanently affixed to the land.
PERSONAL RESIDENCE
The primary domicile of a person or family.
PLANNED UNIT DEVELOPMENT (PUD)
A coordinated, real estate development where common areas are shared and
maintained by an owner's association or other entity.
PLAT
A plan or chart of a piece of land which lays out existing or planned streets,
lots or other improvements.
POINT
A percentage of a mortgage amount (one point = 1 percent).
PRE-APPROVAL
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
Any building or portion thereof which is manufactured and assembled off site,
then erected on a property.
PREPAYMENT
Payment made that reduces the principal balance of a loan before the due date
and before the loan has become fully amortized.
PREPAYMENT PENALTY
A fee that may be charged to a borrower who pays off a loan before it is due.
PRE-QUALIFICATION
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
The interest rate that banks and other lending institutions charge other banks
or preferred customers.
PRINCIPAL
The amount owed on a mortgage which does not include interest or other fees.
PRINCIPAL BALANCE
The outstanding balance of principal on a mortgage. Does not included interest
due.
PRINCIPAL, INTEREST, TAXES,
AND INSURANCE (PITI)
The most common constituents of a monthly mortgage payment.
PRIVATE MORTGAGE INSURANCE (PMI)
A form of mortgage insurance provided by private, non-government entities.
Normally required when the LOAN TO VALUE RATIO is less that 20%.
PROPERTY
Any item which is owned or possessed.
PURCHASE AGREEMENT
A written contract signed by the buyer and seller stating the terms and
conditions under which a property will be sold.
QUADRAPLEX
Any building designed to accommodate four families.
QUALIFYING RATIOS
Two ratios used in determining credit worthiness for a mortgage loan. One is the
ratio of a borrower's monthly housing costs to monthly income. The other is a
ratio of all monthly debt to monthly income.
QUITCLAIM DEED
A legal document which transfers any ownership an individual has in a piece of
property. Often used when the amount of ownership is not known or is unclear.
RAFTER
A structural element of the roof, sloping from the peak to the outer walls.
RANCH HOUSE
An architectural style typified by a single-story, low-roof construction.
Popular in the western U.S.
RATE LOCK
A guarantee from a lender of a specific interest rate for a period of time.
RAW LAND
Any land which has not been developed.
REAL ESTATE
A piece of land and any improvements or fixtures located on that land.
REAL ESTATE AGENT
A licensed professional who facilitates the buying and selling of real estate.
Remember, not real estate agents are
REALTORS.
Anthony Rael is a licensed REALTOR in the state of
Colorado with REMAX Alliance in Arvada.
REAL ESTATE SETTLEMENT
PROCEDURES ACT (RESPA)
A federal law requiring lenders to give full disclosure of closing costs to
borrowers.
REAL PROPERTY
Land, improvements and appurtenances, and the interest and benefits thereof.
REALTOR
A real estate agent or broker who is a member of the
National Association
of Realtors.
RECEPTACLE
An electrical outlet to plug into.
RECORDER
A local government employee whose role it is to keep records of all real estate
transactions within the jurisdiction.
RECORDING
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
A new loan to pay off an existing loan. Typically to gain a lower interest rate
or convert equity into cash.
REGISTER
Where air from a furnace or air conditioning system enters the room.
RELOCATION SERVICE
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
The amount of principal, interest and other costs that has not yet been repaid.
REMAINING TERM
The amount of time remaining on the original amortization schedule.
REMODELING
An activity designed to improve the value or desirability of a property through
rebuilding, refurbishing, redecorating or adding on to it.
REPAYMENT PLAN
A plan to repay delinquent payments, agreed upon between a lender and borrower,
in an effort to avoid foreclosure.
REPLACEMENT RESERVE FUND
An account, or fund, setup for the replacement of short life items , such as
carpeting, in the common areas of a cooperative property.
RESIDENTIAL PROPERTY
A piece of property whose highest and best use is the maintenance of a
residence.
REVOLVING DEBT
A type of credit that allows the borrower/customer to make charges against a
predetermined line of credit. The customer then pays monthly installments on the
amount borrowed, plus interest.
RIDGE BOARD
The structural member of a roof where the rafters join at the top.
RIGHT OF FIRST REFUSAL
An agreement giving a person the first opportunity to buy or lease a property
before the owner offers it for sale to others.
ROOF PITCH
The degree of slope in a roof.
RURAL
An area outside of an established urban area or metropolitan district.
SALE PRICE
The actual price a property sells for, exclusive of any special financing
concessions.
SALES COMPARISON APPROACH
An appraisal practice which estimates the value of a property by comparing it to
comparable properties which have sold recently.
SCARCITY
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
A loan secured by the equity in a home, when a primary mortgage already exists.
SECONDARY MORTGAGE MARKET
An economic marketplace where mortgage bankers buy and sell existing mortgages.
SECURED LOAN
A loan that is backed by collateral. In the case of a mortgage loan, the
collateral is the house.
SECURITY
The property used as collateral for a loan.
SEMIDETACHED HOUSING
Two residences which share a common wall.
SERVICER
A financial institution which collects mortgage payments from borrowers and
applies the appropriate portions to principal, interest and any escrow accounts.
SERVICING
The processing of payments, mailing of monthly statements, management and
disbursement of escrow funds etc Typically carried out by the company you make
payments to.
SHEATHING
The covering on outside walls beneath the siding or exterior finish such as
stucco.
SHEETROCK
Also called drywall, the gypsum board commonly used on interior walls.
SILL PLATE
The lumber used around the foundation to support exterior wall framing.
SILL COCK
Garden hose pipe connection.
SINGLE-FAMILY PROPERTY
A property designed and built to support the habitation of one family.
SOFFIT
The underside of a cornice at the eaves.
STUCCO
A textured plaster exterior (and occasionally interior) wall finish.
STUD
A vertical framing piece in a wall, generally 2x4 lumber in interior walls.
SUBDIVISION
A residential development that is created from a piece of land which has been
subdivided into individual lots.
SUBJECT PROPERTY
A term which indicates a property which is being appraised.
SUMP
A basin into which water drains and from which the water is pumped out.
SURVEY
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
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
Any property which is not taxed.
TENANCY
The right to occupy a building or unit.
TENANCY IN COMMON
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
When a lender uses a third party to originate and package loans for sale to the
secondary market (Fannie Mae, Freddie Mac).
TITLE
A specific document which serves as proof of ownership.
TITLE COMPANY
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
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
The process whereby the TITLE COMPANY researches a properties title history and
ensures that no outstanding claims exist.
TRANSFER OF OWNERSHIP
Any means by which the ownership of a property changes hands.
TRANSFER OF TAX
Taxes payable when title passes from one owner to another.
TRAP
A bend in water pipe.
TRUSTEE
A fiduciary who holds or controls property for the benefit of another.
TRUTH IN LENDING
A federal law requiring full disclosure by lenders to borrowers of all terms,
conditions and costs of a mortgage.
TUDOR
A style of architecture typified by exposed stone, wood and brick construction.
Similar in style to English manor homes.
UNDER IMPROVED LAND
A piece of land which has been improved, but not to the full extent of its
potential.
UNENCUMBERED PROPERTY
Any property which has no outstanding claims or liens against it.
USEFUL LIFE
The span of time over which a property can be used or can provide benefits to
its owner.
VACANCY RATE
The current percentage of vacant properties in a given area, regardless of why
they are vacant.
VA MORTGAGE
A mortgage that is guaranteed by the Department of Veterans Affairs (VA).
VARIANCE
An exception to municipal zoning regulations granted for a specific time period
to allow for non-conforming use of the land.
VENT PIPE
A pipe allowing gas to escape.
VESTED
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)
The successor to the Veteran's Administration, this government agency is
responsible for ensuring the rights and welfare of our nation's veterans and
their dependents. Among other duties, the VA insures home loans made to
veterans.
VOLTAGE
An expression of electric force, or pressure. One volt being the force needed to
move one amp against one ohm resistance.
WALK-THROUGH INSPECTION
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
An affidavit given to stipulate the condition of a property. The person giving
the warranty assumes liability if the condition turns out to be untrue.
WATT
An expression of amount of electrical power. Volt times amps equals watts.
WEAR AND TEAR
A term used to indicate the normal damage inflicted on a property through
every-day use.
WEATHER STRIPPING
Material used around windows and doors to prevent drafts.
WEEP HOLE
Drainage hole that allows water to escape.
ZERO LOT LINE
A municipal zoning category wherein a building or other fixture may abut the
property line.
ZONE
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.
Anthony Rael, RE/MAX Alliance offers professional & trustworthy real estate
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