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