Real Estate Glossary

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abstract of title

is the work summarizing the ownership interests and documents found during the title search of a subject property. The abstract will identify ownership transfers and liens placed against the property; and whether or not they have been released or satisfied – as well as any other pertinent information found in the search. Based on the abstract, the title insurance company or its attorney/agent will issue a certificate of title.

Keyword(s):

acceleration clause

This clause says that the lender may declare the entire debt due and payable immediately if the borrower defaults. Without this clause, the lender would have to sue the borrower every time a payment was overdue.

accession

acquiring title to additions or improvements to real property as a result of the annexation of fixtures or the accretion of alluvial deposits along the banks of streams.

accretion

is the process or natural action of wind and water occurring from a body of water, such as a lake or river, slowly depositing soil on the edges of the land which may cause an expansion of the land.

accrued depreciation

is the sum of all diminished value associated with the improvements. That is, any loss in value suffered by the improvements from any and all causes would be included in accrued depreciation. Accrued depreciation measures actual value loss and not theoretical value loss. Accrued depreciation is the difference between the cost new of improvements and the present worth of those improvements.

There are only three categories of accrued depreciation. Accrued depreciation can be categorized as physical depreciation, functional obsolescence, or economic obsolescence.

accrued items

Expenses to be prorated (such as water bills and interest on an assumed mortgage) that are owed by the seller but will be paid late by the buyer. Therefore, the seller pays for these items by giving the buyer credits for them at closing.

acknowledgment

is an affirmation by the preparer of a document in front of a notary public (or other judicial official) that the signature is that of the preparer and the signature was given freely and willingly usually for the pupose of making the document legally valid.

actual age

refers to the chronological age or actual 'physical' age of an improvement and does not account for any maintenance, repair or upkeep of structure.

Adjustments for differences in actual age of the improvements accounts for value differences associated with different amounts of depreciation taking place in the improvements. Those differences are most notable in the first 15 to 20 years of the improvement’s existence.

Keyword(s):

actual agency

is an agency when an agent is in fact employed by a principal

actual notice

one of the three ways the law presumes an indivual has notice of an event. Actual notice occurs when an individual has been informed in some way of the event, such as; overhearing a conversation, presented a document, or in some other way being made aware of the fact that the event occurred.

ad valorem tax

a tax levied according to value, generally used to refer to real estate tax.

Keyword(s):

Adjustable-rate mortgage (ARMs)

Mortgages originate at one rate then can change over the course of loan based upon different factors.

adverse possession

is a statutory means of acquiring title to the land of another by occupying the property. A claimant under adverse possession must actually be in possession of the property in such a manner as to satisfy the statutory requirements. Possession must be open, notorious, hostile, exclusive, and continuous.

The precise period required for a claim of adverse possession varies depending on the state.

agency

is the relationship between a licensee and the person he/she is representing.

agency coupled with an interest

an agency relationship in which the agent is given an estate or interest in the subject of the agency (the property).

agent

the person who acts on behalf of another person under a contractual relationship

air lots

is a desgnated airspace over a piece of land. An air lot, like surface property, meay be transferred.

Keyword(s):

air rights

the right to use the open space above a property, usually allowing the surface to be used for another purpose.

alienation clause

also known as a resale clause, due-on-sale clause, or call clause, this provides that when the property is sold, the lender may either declare the entire debt due immediately or permit the buyer to assume the loan at an interest rate acceptable to the lender.

allocation method

is the process of identifying how the market allocates value between the land and the improvements made to the land. This method is based on the economic principle of balance, which states that maximum values are achieved when the agents of production (land, labor, capital management) are in balance. Simply put, there is an identifiable relationship or ratio between the value of the improvements and the value of the land.

Keyword(s):

allodial

is a concept of land ownership which recognizes complete or absolute ownership of real estate by individuals. This ownership is considered free and clear with no encumberances or claims including government taxation.

Keyword(s):

alluvion

is the soil that is deposited on a lands edge from the process of accretion.

Americans with Disabilities Act (ADA)

A federal law that is to eliminate discrimination against people with disabilities by allowing equal access to jobs, public accommodations, government services, public transportation, and telecommunications.

amortized loan

The payment in an amortized loan partially pays both principal and interest. The word amortize literally means to kill off so they are paid off slowly, over time, in equal payments.

annexation

process of converting personal property into real property.

anticipation

the value associated with a real estate purchase anticipates that the need or desire satisfied by the purchase will continue for the foreseeable future. Buyers also anticipate that the property will appreciate and that they will achieve financial rewards as their equity increases in the property. The principle of anticipation is a factor in the selection process as the typical purchaser chooses from among the comparable or substitute properties.

antitrust laws

laws designed to preserve the free enterprise of the open marketplace by making illegal certain private conspiracies and combinations formed to minimize competition. Examples are price-fixing and allocation of customers or markets.

appraisal process

is an orderly procedure followed by appraisers when estimating a value that is accurate, supportable, and defensible. Appraisers must adhere to professional regulations and standards mandated by the Appraisal Standards Board, presented in the provisions of the Uniform Standards and Professional Appraisal Practice (USPAP) and state appraisal boards.

The appraisal process consists of the following six steps:

Identify the problem to be solved
Plan the appraisal (scope of work)
Collect and analyze relevant data
Apply the relevant approaches to value
Final reconciliation
Prepare the report

Keyword(s):

appraisal purpose

the appraiser must identify and define the specific value sought, the purpose of the appraisal, in the appraisal assignment. The value sought will influence the selection of the relevant data.

Market value is the typical purpose of an appraisal but an appraiser must determine in the first step of the appraisal process if client might need any other purpose. Value could be needed for insurance purposes, liquidation or some other need.

Keyword(s):

appraiser

a real estate professional who competently and objectively performs valuation services that are supportable and defensible.

Keyword(s):

appraiser classification

refers to the licensing levels mandated by state appraisal boards to satisfy the requirements by FIREEA.

In Georgia there are four appraiser classification levels: registered, licensed, certified residential, and certified general.

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appurtenance

anything that attaches to the land and transfers with the land even if not specified in the deed – appurtenances are said to “run with the land.” Examples of appurtenances include property improvements, easements, water rights, condominium parking, etc. These rights transfer to future owners of the land.

Keyword(s):

appurtenant easement

is the right attached to one parcel of real estate to use a portion of another parcel of real estate.

Example: the owner of Lot A has the right to use a 50’ strip across the rear of Lot B, in other words, Lot A owns an easement across Lot B. The right attached to the property and not the owner of the property. Whoever owns Lot A will have the right to cross Lot B. Also, whoever owns Lot B will have to tolerate the use of the easement by the owner of Lot A. Lot A is referred to as the “benefitted” property or dominant estate (or tenement) and Lot B is referred to as the “burdened” property or servient estate.

arms-length transaction

refers to a transaction where the parties to the agreement have opposing interests. The purchaser wants to purchase for as little money as possible and the seller wants to sell for as much money as possible.

asbestos

A mineral fiber found in rocks that are known to be used in a variety of household products such as appliances, ceilings, wall and pipe coverings, floor tiles, roofing and siding materials. The fiber has been found to cause lung and stomach cancer, therefore real estate salespeople must reveal to the buyer the known presence of asbestos on the property.

assemblage

is the process of combining two or more parcels of adjacent land into one larger tract.

assessed value

The value for purposes of imposing ad valorem tax. Assessed value may be equal to the total market value of the property as it is in the state of Florida; or it may be equal to a portion of the total market value of the property such as 40% as is the practice in Georgia.

assessment

The imposition of a tax, charge, or levy, usually according to established rates.

Keyword(s):

assessment ratio

The ratio of assessed value to market value. For example, if the property tax applies to $40,000 when a property has a market value of $100,000 - the assessment ratio is .40 or 40% as follows:

$40,000 ÷ $100,000 = .40 or 40%

The assessment ratio will be a function of the state in which the property is located.

assignment

the transfer of the rights and obligations under a contract to another party.

assume

to take on a responsibility or duty

Attorney-in-fact

A person who is allowed by another person to act in his or her place with a power of attorney.

auctioneer

in GA an auctioneer selling real estate, they must also hold a salesperson's or a broker's license.

avulsion

The sudden tearing away of land, as by earthquake, flood, volcanic action, or the sudden change in the course of a stream.

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