Home Buyers Glossary A

abstract of title

The condensed history of a title for a particular parcel of real estate, consisting of a summary of the original grant and all subsequent conveyances affecting the property

abstract of title with lawyers opinion

An abstract of title that has been examined by a lawyer and certified by the lawyer to be, in his or her opinion, an accurate statement of fact.

accelerated depreciation

A method of calculating for tax purposes the depreciation of income property at a faster rate than would be achieved using the straight-line method. Note that any depreciation taken in excess of that which would be claimed using the straight-line rate is sub­ject to recapture as ordinary income to the extent of gain resulting from the sale. (See also

STRAIGHT-LINE METHOD.)

acceleration clause

 The clause in a mortgage or trust deed that can be enforced to make the entire

debt due immediately if the mortgagor defaults on an installment payment or other covenant.

Acceptance

 agreeing to take an offer; the acceptance of an offer constitutes a contract.

accretion

The increase or addition of land by the deposit of sand or soil washed up naturally from a

river, lake, or sea.

Acre

 measure of land containing 43,560 square feet. Ad valorem tax tax based on the value of the property. Acre
A measurement for property. The median lot size for the United States is one-third of an acre.
 

actual eviction

The result of legal action originated by a lessor, whereby a defaulted tenant is

physically ousted from the rented property pursuant to a court order. (See also EVICTION.)

actual notice

Express information or fact; that which is known; actual knowledge.

adjusted basis See BASIS.

Adjustment margin

The percentage added to the index used to establish an Adjustable rate mortgage, typically 1-3 percent.  This margin percentage typically remains constant during the life of the mortgage

Adjustable rate mortgage (ARM)

ARM, a loan that adjusts the mortgage interest rate based on current interest rates and current market conditions.  Interest rates may be adjusted at variable times depending on the wording of the original contract. 2. Loan in which the interest rate varies according to another rate, for example when the mortgage rate is adjusted annually based on the one-year Treasury bill rate, plus a 2 percent margin. A loan with an interest rate that varies over time. ARM rates are set for a period of one to seven years and then convert to the then-prevailing market rate. ARM’s typically have lower rates than 30-year mort gages, so they help reduce cost when rates are high.
 

ad valorem tax

Tax levied according to value; generally used to refer to real estate tax. Also called the general tax.

adverse possession

 The actual, visible, hostile, notorious, exclusive, and continuous possession of

another’s land under a claim of title. Possession for a statutory period may be a means of

acquiring title.

agent

One who acts or has the power to act for another. A fiduciary relationship is created under

the law of agency when a property owner, as the principal, executes a listing agreement or

management contract authorizing a licensed real estate broker to be his or her agent. A house salesperson. Agents show houses and earn a commission from the seller.
 

Agreement of sale

 written agreement between buyer and seller to transfer real estate at a future date. Includes all the conditions required for a sale.

air lot

 A designated airspace over a piece of land. An air lot—like surface property—may be

transferred.

air rights

The right to use the open space above a property, generally allowing the surface to be

used for another purpose.

alienation

 The act of transferring property to another. Alienation may be voluntary, such as by

gift or sale, or involuntary, such as through eminent domain or adverse possession.

alienation clause

The clause in a mortgage or trust deed which states that the balance of the secured debt becomes immediately due and payable at the mortgagee’s option if the property is sold by the mortgagor. In effect, this clause prevents the mortgagor from assigning the debt without the mortgagee’s approval.

allocation of customers or markets See ANTI-TRUST LA WS.

allodial system

 A system of land ownership in which land is held free and clear of any rent or service due to the government; commonly contrasted to the feudal system. In the United States, land is held under the allodial system.

amortized loan

 A loan in which the principal as well as the interest is payable in monthly or other periodic installments over the term of the loan.

Amortization

 continual process of reducing a debt according to a systematic plan.

annual percentage rate

The interest rate of a loan that includes interest, loan discount points, loan origination fees,  and the loan brokers commission. see also APR. A number that indicates the true total cost of a mort gage, including the interest rate, points, and any fees.

anti-trust laws

 Laws designed to preserve the free enterprise of the open marketplace by making illegal certain private conspiracies and combinations formed to minimize competition. Viola­tions of anti-trust laws in the real estate business generally involve either price fixing (brokers conspiring to set fixed compensation rates) or allocation of customers or markets (brokers agreeing to limit their areas of trade or dealing to certain areas or properties).

appraisal

An estimate of the quantity, quality, or value of something. The process through which conclusions of property value are obtained; also refers to the report setting forth the process of estimation and conclusion of value.

appreciation

 An increase in the worth or value of a property due to economic or related causes, which may prove to be either temporary or permanent; opposite of depreciation.

APR

Annual Percentage Rate

ARM

Adjustable Rate Mortgage

 value against which a property tax is imposed. The assessed value is often lower than the market value due to state law, conservative tax district appraisals, and infrequent appraisals.

assessment

 The imposition of a tax, charge, or levy, usually according to established rates. assignment The transfer in writing of interest in a bond, mortgage, lease, or other instrument. assumption of mortgage Acquiring title to property which has an existing mortgage on it and agree­ing to be personally liable for the terms and conditions of the mortgage, including payments. An extra common charge in a condo or co-op to pay for unanticipated expenses, such as storm damage.

assumable loan

A mortgage which can be transferred to another buyer.  The lender must approve the assumption of the new buyer, who assumes responsibility for the debt.  This generally saves substantial costs of closing a new loan.

attachment

 The act of taking a person’s property into legal custody by writ or other judicial order in order to hold it available for application to that person’s debt to a creditor.

automatic extension

 A clause in a listing agreement which states that the agreement will continue automatically for a certain period of time after its expiration date. In many states use of this clause is discouraged or prohibited.

axial theory

 A theory of urban development which supposes that growth tends to occur along major streets, highways, and public transportation lines outward from the central business district.