Real Estate Terminology

Abandonment: Abandonment occurs when a person with a right or interest in a property voluntarily gives up that right or interest, either by physically "abandoning" the property or by showing the intention to give up the right or interest.

Abatement: A decrease or reduction in the price of a property (or in rent chargeable to a tenant). Usually occurs as a result of the discovery of a negative fact about the property which decreases its value from the price originally agreed upon by the parties.

Able: Quite literally, being capable. A Purchaser is ready, willing and able to complete a transaction when she has funds and has signed the documents required to transfer title to a property. If the Vendor is not ready, willing and able to complete the transaction on the date set for completion, the Purchaser may tender upon the Vendor and sue as a result of the failure to complete the transaction.

Absentee Owner: An owner of a property who lives elsewhere, leaving tenants in control and occupation of the property.

Absorption Rate: Expressed as a percentage, the number of properties that can be bought or sold in a particular market. May be broken down as to types and sizes of properties.

Abstract of Title: A summary listing of the documents registered in the local land registry office and which affect title (ownership) of a particular property.

Abstract Plant: See Title Plant.

Abstraction (or 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.

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.

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.

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 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 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.

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.

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 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).

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.

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.

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.

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.

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.

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.

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.

Annual Percentage Rate (APR): 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: A form of periodic payment. Made to the recipient at consistent periodic intervals either for life or for a fixed period of time.

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.

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.

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.

Arrears: Money which is not paid when due, under a payment plan or amortization schedule. Could lead to enforcement of loan agreement by lender.

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).

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.

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.

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.

Auction: The process of selling property to the highest bidder.

Authority: The right of an agent, conferred by his principal, to bind the principal in dealings with third parties.