Mortgage and Real Estate Glossary

Real Estate Definitions and Terms: A

Offers a Mortgage and Real Estate glossary for real estate and mortgage terms and definitions for home buyers, home sellers, and real estate consumers. Find expanded definitions of important real estate and mortgage home loan terms.

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Definitions and Terms: A

Abstract - Notes made by a title examiner based on his examination of the land records. These notes are a concise summary of the transactions affecting the property.

Abstract of Title - Summary of the public records relating to the title to a particular piece of land. An attorney or title insurance company reviews an abstract of title to determine whether there are any title defects which must be cleared before a buyer can purchase clear, marketable, and insurable title.

Abutting - Joining, reaching, or touching of adjoining land. Abutting pieces of land have a common boundary.

Acceleration clause - Clause in a mortgage or trust deed that stipulates the entire debt is due immediately if the mortgagee defaults under the terms of the contract.

Accounting - Any agency relationship that is indicated by the words and/or actions of the agent or principal rather than by written agreement; also called accidental agency.

Accidental Agency - An agent is obligated to account for all money or property that belongs to his/her principal entrusted to that agent. The duty compels a real estate broker to safeguard any money, deeds, or other documents entrusted to them relative to their client's transactions of affairs.

Accretion - Addition of land through natural causes, such as the building up of a beach through natural wave action.

Accrued Interest - Interest earned but not yet paid.

Acknowledgment - Declaration made by a person to a notary public, or other public official authorized to take acknowledgements, that the instrument was executed by him and that it was his free and voluntary act.

Acquisition cost - Under an FHA loan, the purchase price or appraised value of the property plus the estimated closing costs.

Acre - Measure of land equal to 43,560 square feet.

Action to Quiet Title - Court action to establish ownership to real property. Although technically not an action to remove a cloud on a title, the two actions are usually referred to as "Quiet Title" actions.

Addendum - A change made to a contract.

Additional Principal Payment - Payment by a borrower of more than the scheduled principal amount due in order to reduce the remaining balance on the loan.

Adjustable Rate Mortgage (ARM) - Mortgage in which the interest rate is adjusted periodically based on an index. Also called a variable rate mortgage.

Adjusted Gross Income - Person's total income, as reported on his or her IRS 1040 tax return form, after allowable contributions, deductions and expenses.

Adjustments - Money that the buyer and sellers credit each other at the time of closing. Often includes taxes and down payment.

Adjustment Date - Date the interest rate changes on an ARM (adjustable rate mortgage).

Adjustment Interval - For an adjustable rate mortgage, the time between changes in the interest rate charged. The most common adjustment intervals are one, three or five years.

Adjusted Book Basis - Purchase price of a property plus any capital improvements less accrued depreciation, if any, to the date of the sale.

Administrator/Administratrix - Person appointed by a court to settle the estate of a deceased person who dies without a will.

Ad Valorem Tax - Tax based according to item value only, usually property tax based on the just or fair market value of the property.

Agreement of Sale - Contract signed by buyer and seller stating the terms and conditions under which a property will be sold.

Adverse Possession - Right of an occupant of land to acquire title against the real owner, where possession has been actual, continuous, hostile, visible, and distinct for the statutory period.

Agency - Relationship in which the agent is given the authority to act on behalf of another person (principal). In real estate transactions, usually the seller is the principal, and the broker is the agent. In an agency relationship, the principal delegates to the agent the right to act on his or her behalf in business transactions and to exercise some discretion while so acting.

Agent - Licensed representative who assists the buyer or seller with advice, information about current market conditions, and helps to negotiate the sale.

Agreement - Meeting of the minds. A change to the correct or alteration to the original document/agreement without changing its principal essence.

Agreement of Sale - Contract in which a seller agrees to sell and a buyer agrees to buy, under certain specific terms and conditions spelled out in writing and signed by both parties. Usually (but not always) secured by the payment of earnest money. In some states it is known as a Purchase Agreement, Land Contract, or Earnest Money Contract.

Alienation Clause - Clause in a mortgage which gives the lender the right to call the entire loan balance due if the property is sold; also know as due-on-sale clause.

Amenity - Feature of the home or property that serves as a benefit to the buyer but that is not necessary to its use; may be natural (like location, Woods, water) or man-made (like a swimming pool or garden).

Amortization - Repayment of a mortgage loan through monthly installments of principal and interest; the monthly payment amount is based on a schedule that will allow you to own your home at the end of a specific time period (for example, 15 or 30 years)

Amortized Mortgage - Mortgage which requires periodic payments which include both interest and principal.

Annual Percentage Rate (APR) - Fgure that states the total yearly cost of a mortgage as expressed by the actual rate of interest paid. The APR includes the base interest rate, points, and any other add-on loan fees and costs. As a result the APR is invariably higher for the rate of interest that the lender quotes for the mortgage but gives a more accurate picture of the likely cost of the loan. Keep in mind, however, that most mortgages are not held for their full 15 or 30 year terms, so the effective annual percentage rate is higher than the quoted APR because the points and loan fees are spread out over fewer years.

Annuity - Series of income payments of receipts over a period of years.

Antitrust Laws - Federal and state laws prohibiting, among other things, monopolies, monopolistic practices, restraint of trade, and price fixing.

Application - First step in the official loan approval process; this form is used to record important information about the potential borrower necessary to the underwriting process such as their income, savings, assets, debts, and more.

Application Fee - Fee charged by the lender to the borrower for applying for a loan. Payment of this fee does not guarantee that a loan will be approved. Some lenders may apply the cost of the application fee to certain closing costs.

Appointed Agency - Also known as Split Agency, Designated Agency. Agency relationship where the Broker appoints one agent in the office to represent the seller and another agent in the same office to represent the Buyer.

Appraisal - Determination of property value based on recent sales information of similar properties.

Appraisal Fee - Charge for estimating the value of property offered as security.

Appraised Value - Opinion of the value of a property at a given time, based on facts regarding the location, improvements, etc., of the property and surroundings.

Appraiser - Qualified individual who uses his or her experience and knowledge to prepare the appraisal estimate.

Appreciation - Increases in property value due to fluctuations in the market, inflation, et al.

Approved Attorney - An attorney authorized by a title insurance company to handle closings and render title opinions.

Appurtenance - Anything attached to the land or used with it passing to the new owner.

Arrears - Payment made after its due is in arrears. Interest is said to be paid in arrears since it is paid to the date of payment rather than in advance.

ARM - Adjustable Rate Mortgage; a mortgage loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender; the Change in monthly -payment amount, however, is usually subject to a Cap.

Asking (List) Price - Determining a property's value for the purpose of taxation.

Assessed Valuation - Value placed on real estate by governmental assessors as a basis for levying property taxes; not identical with appraised or market value.

Assessment - Determining a property's value for the purpose of taxation.

Assessment Base - Total assessed value of all property in a given assessment district.

Assessor - Government official who is responsible for determining the value of a property for the purpose of taxation.

Asset - Valuable items, encumbered or not, owned by a person, corporation, or entity.

Assign - To transfer interest.

Assignee - One who receives an assignment or transfer of rights. An assignment of a contract transfers the right to buy property.

Assignor - One who assigns to another person.

Assignment - Transfer of one's rights to another.

Assumable Loan - These loans may be passed on from a seller of a home to the buyer. The buyer "assumes" all outstanding payments.

Assumable Mortgage - A mortgage that provides for a buyer to "assume" all outstanding payments when a home is sold. The buyer usually must meet qualification standards to assume a loan.

Assumability - When a home is sold, the seller may be able to transfer the mortgage to the new buyer. This means the mortgage is assumable.

Assumption - Buying property and assuming the responsibility of the exiting mortgage.

Assumption of Mortgage - Transfer of title to property to a grantee wherein he assumes liability for payment of an existing note secured by a mortgage against the property; should the mortgage be foreclosed and the property sold for a lesser amount than that due, the grantee-purchaser who has assumed and agreed to pay the debt secured by the mortgage is personally liable for the deficiency.

Attached Homes - Home that has one or more common walls adjoining another home. Condominiums and row houses are attached homes.

Attachment - Method by which a debtor's property is placed in the custody of the law and held as security pending outcome of a creditor's suit.

Attorney in Fact - Type of agency relationship where one person holds a power of attorney allowing him to execute legal documents on behalf of another. Decisions made by the attorney in fact are binding on the principal.

Attorney's Opinion of Title - Instrument written and signed by the attorney who examines the abstract of title, stating his opinion as to whether a seller may convey good title.

Auction - Public sale of property to the highest bidder.

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