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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.
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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.
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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.
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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.
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ACCRETION
The natural growth of a piece of land resulting from forces
of nature.
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ACRE
43,560 square feet. A measurement of area.
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ACTUAL AGE
The amount of time that has passed since a building or other
structure was built.
See also: EFFECTIVE AGE
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ADJUSTMENT DATE
The date the interest rate changes on an adjustable rate
mortgage.
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AD VAL OREM TAX
Taxes assessed based on the value of the land and
improvements.
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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.
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ADJUSTABLE-RATE MORTGAGE (ARM)
A type of mortgage where the interest rate varies based on a
particular index, normally the prime lending rate.
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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.
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ADJUSTED SALES PRICE
An estimate of a property's sales price, after adjustments
have been made to account for differences between it and
another comparable property.
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AESTHETIC VALUE
The additional value a property enjoys based on subjective
criteria such as look or appeal.
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AFFIRMATION
A declaration that a certain set of facts are truthful.
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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.
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AGENT
A person who has been appointed to act on behalf of another
for a particular transaction.
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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.
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AMERICAN
SOCIETY OF APPRAISERS
An organization of appraisal
professionals and others interested in the appraisal
profession.
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AMORTIZATION
The repayment of a loan
through regular periodic payment.
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AMORTIZATION SCHEDULE
The breakdown of individual payments throughout the
life of an amortized loan, showing both principal
contribution and debt service (interest) fees.
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AMORTIZATION
TERM
The length of time over which an amortized
loan is repaid. Mortgages are commonly amortized over 15 or
30 years.
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AMPERAGE
A measure of electric current
describing the magnitude.
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ANNUAL PERCENTAGE RATE (APR)
The rate of annual interest charged on a loan.
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ANNUITY
A sum of money paid at regular intervals, often
annually.
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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.
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APPRAISAL
A ''defensible'' and
carefully documented opinion of value. Most commonly derived
using recent sales of comparable properties by a licensed,
professional appraiser.
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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).
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APPRAISAL
INSTITUTE
A world-wide organization dedicated to
real estate appraisal education, publication and
advocacy.
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APPRAISAL PRINCIPLES
The basic building
blocks of the property valuation process, including property
inspection, market analysis and basic economics.
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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 estimated value
of the subject property and support that estimate with
corroborating information.
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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.
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APPRAISED VALUE
The estimated fair market
value of a property as developed by a licensed, certified
appraiser following accepted appraisal principals.
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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.
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APPRECIATION
The natural rise in property value due to market forces.
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ARMS LENGTH TRANSACTION
Any
transaction in which the two parties are unconnected and
have no overt common interests. Such a transaction most
often reflects the true market value of a property.
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ASSESSED
VALUE
The value of a property according to
jurisdictional tax assessment.
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ASSESSMENT
The
function of assigning a value to a property for the purpose
of levying taxes.
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ASSESSMENT RATIO
The comparative
relationship of a property's assessed value to its market
value.
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ASSESSOR
The jurisdictional official who
performs the assessment and assigns the value of a
property.
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ASSET
Any item of value which a person owns.
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ASSIGNMENT
Transfer of ownership of a
mortgage usually when the loan is sold to another
company.
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ASSUMABLE MORTGAGE
A mortgage that can be taken over by the buyer when a
home is sold.
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ASSUMPTION
When a buyer takes over, or "assumes" the sellers
mortgage.
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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.
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BACKFILL
The slope of the ground
around a house.
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BALL COCK VALVE
The valve inside a
toilet tank that controls the filling of the tank.
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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.
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BALLOON PAYMENT
The final large payment at the end of a balloon
mortgage term.
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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.
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BEAM
A structural
supporting member.
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BILL OF SALE
A physical receipt
indicating the sale of property.
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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.
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BLIGHTED AREA
Any
region of a city or town that has fallen into disrepair or
otherwise has become undesirable.
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BONA FIDE
Any
genuine offer, made without intent to defraud or
deceive.
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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.
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BRIDGING
Structural members
used between beams to strengthen the structure.
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BROKER
An individual who facilitates the purchase of property
by bringing together a buyer and a seller.
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BTU
British Thermal Unit. A unit of measurement used to
describe heating or cooling capacity.
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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.
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BUILDING CODE
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.
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BUILDING
LINE OR SETBACK
The statutory distance between buildings and the
property line, imposed by municipalities, home associations,
or other agreements.
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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.
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BUNGALOW
A one-story, home-style dating from the early
twentieth century. Often characterized by a low-pitched
roof.
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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.
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BX CABLE
Electrical cable shrouded in a galvanized steel outer
cover.
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CALL OPTION
A clause in a mortgage which
allows the lender to demand payment of the outstanding
balance at a specific time.
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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.
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CAPE COD
COLONIAL
A single-story house style made popular
in New England. Often characterized by a steep roof with
gables.
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CAPITAL
Accumulated goods and money which is most often used to
generate additional income.
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CAPITAL
EXPENDITURE
An outlay of funds designed to
improve the income-producing capabilities of an asset or to
extend its economic life.
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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.
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CAULKING
A pliable material used
to seal cracks or openings such as around windows.
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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.
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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.
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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.
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CERTIFICATE
OF ELIGIBILITY
A document issued by the Veterans
Administration that certifies eligibility for a VA
loan.
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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.
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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.
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CERTIFICATE
OF TITLE
A document designating the legal owner of a
parcel of real estate. Usually provided by a title or
abstract company.
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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.
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CERTIFIED
RESIDENTIAL APPRAISER
A
sub-classification of appraiser who is only licensed to
appraise residential property, usually up to four
units.
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CHAIN OF
TITLE
The complete history of
ownership of a piece of property.
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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.
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CIRCUIT
BREAKERS
Electrical devices
which automatically open electrical circuits if they are
overloaded.
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CLEAR TITLE
Ownership of property that
is not encumbered by any counter-claim or lien.
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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).
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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.
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CLOSING
STATEMENT
The document detailing
the final financial arrangement between a buyer and seller
and the costs paid by each.
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CO-BORROWER
A second
person sharing obligation on the loan and title on the
property.
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COLLATERAL
An asset which is placed at
risk to secure the repayment of a loan.
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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.
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CO-MAKER
A second party who signs a
loan, along with the borrower, and becomes liable for the
debt should the borrower default.
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COMMON LAW
As
opposed to statute law. Laws that have been established by
custom, usage and courts over many years.
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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.
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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.
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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.
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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.
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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.
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COMPOUND
INTEREST
Interest
paid on the principal amount, as well as any accumulated
interest.
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CONCESSIONS
Additional value granted by
a buyer or seller to entice another party to complete a
deal.
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CONDEMNATION
The official process by which a
property is deemed to be uninhabitable or unusable due to
internal damage or other external conditions.
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CONDENSATION
The transition of water vapor to liquid.
Typically forms in areas of high humidity.
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CONDOMINIUM
A development where individual units are owned, but
common areas and amenities are shared equally by all
owners.
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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.
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CONDUIT
The pipe through which
electric wiring is run.
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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.
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CONTIGUOUS
Connected to or touching along an unbroken
boundary.
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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.
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CONTRACT
A legally binding agreement,
oral or written, between two parties.
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CONVENTIONAL
MORTGAGE
A traditional, real estate financing mechanism that is
not backed by any government or other agency (FHA, VA,
etc.).
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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.
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COOPERATIVE
(CO-OP)
A form of ownership where each resident
of a multiunit property owns a share in a cooperative
corporation that owns the building. With each resident
having rights to a specific unit within the
building.
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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.
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COST
OF FUNDS INDEX (COFI)
An index of financial
institutions costs used to set interest rates for some
Adjustable Rate Mortgages.
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COVENANT
A stipulation
in any mortgage that, if not met, can be cause for the
lender to foreclose.
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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.
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CREDIT
HISTORY
A record of debt payments, past and
present. Used by mortgage lenders in determining credit
worthiness of individuals.
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CREDITOR
A person to
whom money is owed.
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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.
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CREDIT
REPOSITORY
Large companies that gather and store financial
and credit information about individuals who apply for
credit.
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CUL-DE-SAC
A dead-end street. One with only one entrance/exit.
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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.
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DEBT
An obligation to repay some amount owed. This may or may
not be monetary.
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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.
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DEED
A
document indicating the ownership of a property.
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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.
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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.
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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.
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DEED OF
RELEASE
A document which dismisses a lien or other claim on a
property.
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DEED OF
SURRENDER
A document used to
surrender any claim a person has to a property.
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DEFAULT
The condition in which a borrower has failed to meet
the obligations of a loan or mortgage.
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DELINQUENCY
The state in which a borrow has failed to meet payment
obligations on time.
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DEPOSIT
Cash given along with
an offer to purchase property, Also called EARNEST
MONEY.
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DEPRECIATION
The natural decline in
property value due to market forces or depletion of
resources.
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DETACHED
SINGLE-FAMILY HOME
A single
building improvement intended to serve as a home for one
family.
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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.
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DISTRESSED
PROPERTY
A mortgaged property which has been
foreclosed on.
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DOWNSPOUT
The pipe that water moves
through to reach the ground from the rain gutter.
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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.
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DUPLEX
A
single-building improvement which is divided and provides
two units which serve as homes to two families.
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DWELLING
A house or other building which serves as a home.
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DOWN
PAYMENT
An amount paid in cash for a property,
with the intent to mortgage the remaining amount due.
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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.
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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.
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EAVE
The part of the roof that extends
beyond the exterior wall.
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ECONOMIC
DEPRECIATION
The decline in property value caused by external forces,
such as neighborhood blight or adverse development.
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ECONOMIC
LIFE
The amount of time which any
income-producing property is able to provide benefits to its
owner.
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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.
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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.
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ENCROACHMENT
A building or other improvement on one property
which invades another property or restricts its
usage.
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ENCUMBRANCE
A claim against a property.
Examples are mortgages, liens and easements.
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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.
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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.
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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.
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EQUITY
BUILDUP
The natural increase in the amount of equity an
owner has in a property, accumulated through market
appreciation and debt repayment.
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ERRORS AND
OMISSIONS INSURANCE
An insurance policy taken out by
appraisers to cover their liability for any mistakes made
during the appraisal process.
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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.
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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.
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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.
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ESCROW
DISBURSEMENTS
The payout of funds from an escrow account to pay
property expenses such as taxes and insurance.
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ESTATE
The total of all property and assets owned by an
individual.
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EXAMINATION
OF TITLE
The report on
the title of a property from the public records or an
abstract of the title.
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EXCLUSIVE
LISTING
An
agreement between the owner of a property and a real estate
agent giving the agent exclusive right to sell the
property.
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EXECUTOR
The person named in a will to
administer the estate.
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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.
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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.
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FAIR MARKET
VALUE
The price at
which two unrelated parties, under no duress, are willing to
transact business.
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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.
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FASCIA
The
boards that enclose the eaves.
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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.
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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.
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FEE
APPRAISER
A certified, professional appraiser who estimates the
fair market value of property and receives a set fee in
exchange.
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FEE SIMPLE
A
complete, unencumbered ownership right in a piece of
property.
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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.
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FHA
MORTGAGE
A
mortgage that is insured by the Federal Housing
Administration (FHA).
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FINAL VALUE
ESTIMATE
The
estimated value of a piece of property resulting from an
appraisal following the USPAP guidelines.
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FIRST
MORTGAGE
The primary loan or mortgage secured by a piece of
property.
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FIXED-RATE MORTGAGE (FRM)
A mortgage
which has a fixed rate of interest over the life of the
loan.
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FIXTURE
Any piece of personal property which
becomes permanently affixed to a piece of real
property.
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FLASHING
The metal used around the base
of roof mounted equipment, or at the junction of angles used
to prevent leaking.
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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.
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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.
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FLUE
The furnace
exhaust pipe, usually going through the roof.
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FLUSH VALVE
The valve between the toilet bowl and the
tank.
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