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Real Estate Terms Glossary
by Guest on May 23, 2012
Joint tenancy. Ownership of real estate between two or more parties who have been named in one conveyance as joint tenants. On the death of a joint tenant, the decedent's interest passes to the surviving joint tenant(s) by the right of survivorship.
Joint venture. The joining of two or more people to conduct a specific business enterprise. A joint venture is similar to a partnership in that it must be created by agreement between the parties to share in the losses and profits of the venture. It is unlike a partnership in that the venture is for one specific project only, rather than for a continuing business relationship.
Land. The earth's surface in its natural condition, extending down to the center of the globe, its surface and all things affixed to it, and the airspace above the surface.
Land capitalization rate. The rate of return, including interest, on land only.
Land development method. (See subdivision development method)
Landlocked parcel. A parcel of land without any access to a public road or way.
Landlord. One who owns property and leases it to a tenant.
Land residual technique. A method of capitalization using the net income remaining to the land after return on and recapture of the building value have been deducted.
Land trust. A trust originated by the owner of real property in which real estate is the only asset. Because the interest of a beneficiary is considered personal property and not real estate, a judgment against the beneficiary will not create a lien against the real estate. Thus land trusts are popular when there are multiple owners who seek protection against the effects of divorce, judgments or bankruptcies of each other.
Latent defect. Physical deficiencies or construction defects not readily ascertainable from a reasonable inspection of the property, such as a defective septic tank or underground sewage system, or improper plumbing or electrical wiring.
Lease. A written or oral contract for the possession and use of real property for a stipulated period of time, in consideration for the payment of rent. Leases for more than one year generally must be in writing.
Leased fee. The lessor's interest and rights in the real estate being leased.
Leasehold estate. The lessee's right to possess and use real estate during the term of a lease. This is generally considered a personal property interest.
Legal description. A statement identifying land by a system prescribed by law. (See also lot and block system, metes and bounds description and rectangular survey system)
Lessee. The person to whom property is leased by another; also called a tenant.
Lessee's interest. An interest having value only if the agreed-on rent is less than the market rent.
Lessor. The person who leases property to another; also called a landlord.
Lessor's interest. The value of lease rental payments plus the remaining property value at the end of the lease period.
Letter of opinion. Report of property value that states the appraiser's conclusion of value or a range of values and provides only a brief summary of the supporting data and appraiser's analysis.
Letter of transmittal. First page of a narrative appraisal report, in which the report is formally presented to the person for whom the appraisal was made.
Levy. To impose or assess a tax on a person or property; the amount of taxes to be imposed in a given district.
License. (1) The revocable permission for a temporary use of land--a personal right that cannot be sold. (2) Formal permission from a constituted authority (such as a state agency) to engage in a certain activity or business (such as real estate appraisal)
LID Land improvement district. special tax or assessment passed on to home buyers to pay for roadwork and improvements. can last up to 17 years or more, can be billed, monthly, quarterly, or annually. Usually becomes lien on property and is passed down to future owners until paid off.
Lien. A right given by law to certain creditors to have their debts paid out of the property of a defaulting debtor, usually by means of a court sale.
Life estate. An interest in real or personal property that is limited in duration to the lifetime of its owner or some other designated person or persons.
Living trust. An arrangement in which a property owner (truster) transfers assets to a trustee, who assumes specified duties in managing the asset. After the payment of operating expenses and trustee's fees, the income generated by the trust property is paid to or used for the benefit of the designated beneficiary. The living trust is gaining popularity as a way to hold title and avoid probate of trust assets.
Lot and block system. Method of legal description of an individual parcel of land by reference to tract, block and lot numbers and other information by which the parcel is identified in a recorded subdivision map. Also called lot, block and tract system and subdivision system.
Maintenance expenses. Costs incurred for day-to-day upkeep, such as management, wages and benefits of building employees, fuel, utility services, decorating and repairs.
Marital property. (See community property and tenancy by the entirety)
Markers. (See monuments)
Market. A place or condition suitable for selling and buying.
Market comparison method of depreciation. (See sales comparison method of depreciation)
Market extraction method of depreciation. (See series comparison method of depreciation)
Market price. (See sales price)
Market rent. The amount for which the competitive rental market indicates property should rent. An estimate of a property's rent potential.
Market value. The most probable price real estate should bring in a sale occurring under normal market conditions.
Mean. The average of all items included within a group, calculated by dividing the sum of the individual items, or variates, by the number of variates.
Mechanic's lien A lien created by statute that exists in favor of contractors, laborers or material men who have performed work or furnished materials in the erection or repair of a building. meridian. (See principal meridian)
Metes and bounds description. A method of legal description specifying the perimeter of a parcel of land by use of measured distances from a point of beginning along specified boundaries, or bounds, using monuments, or markers, as points of reference.
Mile. A measurement of distance, being 1,760 yards or 5,280 feet.
Mobile home. A structure transportable in one or more sections, designed and equipped to contain not more than two dwelling units to be used with or without a foundation system; does not include a recreational vehicle. Also called a manufactured home.
Monuments. Natural or artificial objects used to define the perimeter of a parcel of land using the metes and bounds method of legal description.
Mortgage. A conditional transfer or pledge of real property as security for the payment of a debt; also, the document used to create a mortgage lien.
Mortgagee. The lender in a loan transaction secured by a mortgage.
Mortgagor. An owner of real estate who borrows money and conveys his or her property as security for the loan.
NAR National Association of Realtors
Narrative appraisal report. A detailed written presentation of the facts and reasoning behind an appraiser's estimate of value.
Neighborhood. A residential or commercial area with similar types of properties, buildings of similar value or age, predominant land-use activities, and natural or fabricated geographic boundaries, such as highways or rivers.
Neighborhood life cycle. The period during which most of the properties in a neighborhood undergo the stages of development, equilibrium and decline. decline. Properties require an increasing amount of upkeep to retain their original utility and become less desirable. development (growth). Improvements are made, and properties experience a rising demand. equilibrium. properties undergo little change; also called stability.
Net income ratio. The ratio of net operating income to effective gross income.
Net lease. A lease requiring the tenant to pay rent and part or all of the costs of maintenance including taxes, insurance, repairs and other expenses of ownership. Sometimes known as an absolute net lease, triple net lease or net, net, net lease.
Net operating income. Income remaining after operating expenses are deducted from effective gross income.
Non-conforming use. A once lawful property use that is permitted to continue after a zoning ordinance prohibiting it has been established for the area; a use that differs sharply from the prevailing uses in a neighborhood.
Non-liquidity rate. A penalty charged for the time needed to convert real estate into cash. risk rate. An addition to the safe rate to compensate for the hazards that accompany investments in real estate.
Observed condition depreciation. A method of computing depreciation in which the appraiser estimates the loss in value for all items of depreciation. (See also incurable depreciation and curable depreciation)
Obsolescence. Lessening of value from out-of-date features as a result of current changes in property design, construction or use; an element of depreciation. (See also external obsolescence and functional obsolescence)
Occupancy. Possession and use of property as owner or tenant.
Occupancy rate. The percentage of total rental units occupied and producing income.
Operating expense ratio. The ratio of total operating expenses to effective gross income.
Operating expenses. The cost of all goods and services used or consumed in the process of obtaining and maintaining income. (See also fixed expenses, maintenance expenses and reserves for replacement)
Operating statement. The written record of a business's gross income, expenses and resultant net income.
Operating statement ratio. Relationship of a property's expenses to income, found by dividing total operating expenses by effective gross income.
Opportunity cost. The value differential between alternative investments with differing rates of return.
Option. A right given for a valuable consideration to purchase or lease property at a future date, for a specified price and terms. The right may or may not be exercised at the option holder's (optionee's) discretion.
Orientation. Positioning a structure on its lot with regard to exposure to the sun, prevailing winds, privacy and protection from noise.
Overage rent. Rent paid over a base amount in a percentage lease.
Overall capitalization rate. A rate of investment return derived by comparing the net income and sales prices of comparable properties.
Overall rate. The direct ratio between a property's annual net income and its sales price.
Over improvement. An improvement to property that is more than warranted by the property's highest and best use and thus not likely to contribute its cost to the total market value of the property.
Ownership in severalty. Individual ownership of real estate, not to be confused with the use of the word several to mean "more than one"; also called tenancy in severalty, sole tenancy or separate ownership.
Paired sales analysis. A method of estimating the amount of adjustment for the presence or absence of any feature by pairing the sales prices of otherwise identical properties with and without the feature in question. A sufficient number of sales must be found to allow the appraiser to isolate the effect on value of the pertinent factor (also called paired data set analysis and matched pairs analysis).
Parameter. A single number or attribute of the individual things, persons or other entities in Population.
Partial interest. Any property interest that is less than full fee simple ownership of the entire property.
Partnership. An association of two or more individuals who carry on a continuing business for profit as co-owners. Under the law a partnership is regarded as a group of individuals rather than as a single entity.
Percentage lease. A lease commonly used for commercial property that provides for a rental based on the tenant's gross sales at the premises. It generally stipulates a base monthly rental, plus a percentage of any gross sales exceeding a certain amount.
Personal property. Items that are tangible and movable and do not fit the definition of realty; chattels.
Physical deterioration-curable. Loss of value due to neglected repairs or maintenance that are economically feasible and, if performed, would result in an increase in appraised value equal to or exceeding their cost.
Physical deterioration-incurable. Loss of value due to neglected repairs or maintenance of short-lived or long-lived building components that would not contribute comparable value to a building if performed.
Physical life. The length of time a structure can be considered habitable, without regard to its economic use.
Planned unit development (PUD). A subdivision consisting of individually owned residential and/or commercial parcels or lots as well as areas owned in common.
Plat. A map representing a parcel of land subdivided into lots, showing streets and other details or a single site.
Plottage value. The subsequent increase in the unit value of a group of adjacent properties when they are combined into one property in a process called assemblage.
Point of beginning. Place at which a legal description of land using the metes and bounds method starts.
Police power. The right of the government to impose laws, statutes and ordinances to protect the public health, safety and welfare. Includes zoning ordinances and building codes.
Possession. The right of the owner to occupy property. When property is occupied by a tenant, the owner has constructive possession by right of title.
Potential gross income. A property's total potential income from all sources during a specified period of time.
Prepaid items of expense. Expense items, such as insurance premiums and tax reserves, that have been paid in advance of the time that the expense is incurred. Prepaid expenses typically are prorated and credited to the seller in the preparation of a closing statement.
Price. The amount of money set or paid as the consideration in the sale of an item at a particular time.
Principal. (1) A sum lent or employed as a fund or investment--as distinguished from its income or profits; (2) the original amount (as of a loan) of the total due and payable at a certain date; or (3) a party to a transaction--as distinguished from an agent.
Principal meridian. One of 35 north and south survey lines established and defined as part of the U.S. government or rectangular survey system.
Profit-and-loss statement. (See operating statement)
Property residual technique. A method of capitalization using the net income remaining to the property as a whole.
Proration. The adjustment of taxes, interest, insurance and/or other costs on a pro-rata basis as of the closing of a sale. (See also closing statement)
Purchase money mortgage. A note secured by a mortgage or trust deed given by the buyer, as mortgagor, to the seller, as mortgagee, as part of the purchase price of real estate.
Quantity survey method. A method for finding the reproduction cost of a building in which the costs of erecting or installing all of the component parts of a new building, including both direct and indirect costs, are added.
Quit Claim deed. A conveyance by which the grantor transfers whatever interest he or she has in the land, without warranties or obligations.
Real estate. Land; a portion of the earth's surface extending downward to the center of the earth and upward into space including fixtures permanently attached thereto by nature or by man, anything incidental or appurtenant to land and anything immovable by law; freehold estate in land.
Real estate broker. Any person, partnership, association or corporation that, for a compensation or valuable consideration, sells or offers for sale, buys or offers to buy, or negotiates the purchase, sale or exchange of real estate, or who leases or offers to lease, or rents or offers for rent any real estate or the improvement thereon for others. Such a broker must secure a state license. For a license to be issued to a firm, it is usually required that all active partners or officers be licensed real estate brokers.
Real estate investment trust (REIT). Trust ownership of real estate by a group of individuals who purchase certificates of ownership in the trust, which in turn invests the money in real property and distributes the profits to the investors free of corporate income tax.
Real estate salesperson. Any person who, for a compensation or valuable consideration, is employed either directly or indirectly by a real estate broker to sell or offer to sell, or to buy or offer to buy, or to negotiate the purchase, sale or exchange of real estate, or to lease, rent or offer for rent any real estate, or to negotiate leases thereof or improvements thereon. Such a salesperson must secure a state license.
Real property. The rights of ownership of real estate, often called the bundle of rights; for all practical purposes, synonymous with real estate.
Recapture rate. The percentage of a property's original cost that is returned to the owner as income during the remaining economic life of the investment.
Reconciliation. The final step in the appraisal process, in which the appraiser reconciles the estimates of value received from the sales comparison, cost and income capitalization approaches to arrive at a final estimate of market value for the subject property.
Reconstruction of the operating statement. The process of eliminating the inapplicable expense items for appraisal purposes and adjusting the remaining valid expenses, if necessary.
Reconveyance deed. A deed used by a trustee under a deed of trust to return title to the truster.
Rectangular survey system. A system established in 1785 by the federal government, which provides for the surveying and describing of land by reference to principal meridians and base lines; also called U.S. government survey system and section and township system.
Regional multipliers. Adjustment factors by which standard cost figures can be multiplied to allow for regional price differences.
Remainder. The remnant of an estate that has been conveyed to take effect and be enjoyed after the termination of a prior estate; for instance, when an owner conveys a life estate to one party and the remainder to another. (For the case in which the owner retains the residual estate, see reversion)
Remainderman. The party designated to receive a remainder estate. There are two types: vested remainderman (one who is known and named) and contingent remainderman (one whose identity is not certain or who is to be selected).
Remaining economic life. The number of years of useful life left to a building from the date of appraisal. Renewal option. Lease provision that allows the lessee to renew the lease for the same term or some other stated period, usually with a rent increase at a stated percentage or based on an index or other formula.
Rent. Payment under a lease or other arrangement for use of a property.
Rent loss method of depreciation. (See capitalized value method of depreciation)
Replacement cost. The current construction cost of a building having exactly the same utility as the subject property.
Reproduction cost. The current construction cost of an exact duplicate of the subject building.
Reserves for replacement. Allowances set up for replacement of building and equipment items that have a relatively short life expectancy.
Residual. In appraising, the value remaining after all deductions have been made.
Resolution trust corporation (RTC). Federal agency created by the Financial Institutions Reform, Recovery and Enforcement Act of 1989 to oversee management and liquidation of assets of failed savings and loan associations.
Reverse annuity mortgage (RAM). An instrument designed to aid elderly homeowners by providing them a monthly income over a period of years in exchange for equity they have acquired in their homes. RAM borrowers typically may obtain up to 80 percent of the appraised value of free-and-clear property.
Reversion. The remnant of an estate that the grantor (as opposed to a third party) holds after he or she has granted a limited estate such as a leasehold or life estate to another person and that will return or revert back to the grantor. (See also remainder)
Right-of-way. The right that one has to travel over the land of another; an easement.
Riparian rights. Rights of an owner of land that borders on or includes a stream, river, lake or sea. These rights include definition of(and limitations on) access to and use of the water, ownership of streambed, navigable water and uninterrupted flow and drainage. (See also accretion)
Risk rate. (See interest rate)
Rod. A measure of length, 16 feet.
Sales comparison approach. The process of estimating the value of property through examination and comparison of actual sales of comparable properties; also called the direct market comparison or market data approach.
Sales comparison method of depreciation. Way of estimating loss in value through depreciation by using sales prices of comparable properties to derive the value of a depreciated item. Also called the market data method and the market extraction method.
Salesperson. (See real estate salesperson)
Sales price. The actual price that a buyer pays for a property.
Sandwich lease. The ownership interest of a sublessee.
Scheduled rent. Rent paid by agreement between lessor and lessee; also called contract rent.
Second mortgage. A mortgage loan secured by real estate that has previously been made security for an existing mortgage loan. Also called a junior mortgage or junior lien.
Selling price. The actual price that a buyer pays for a property.
Settlement. The process of closing a real estate transaction by adjusting and prorating the required credits and charges.
Shared appreciation mortgage (SAM). A loan designed for borrowers whose current income is too low to qualify for another type of mortgage. The SAM loan makes the lender and the borrower partners by permitting the lender to share in property appreciation. In return, the borrower receives a lower interest rate.
Sheriffs deed. Deed given by a court to effect the sale of property to satisfy a judgment.
Sinking fund method. Use of a factor by which a property's annual net income may be multiplied to find the present worth of the property over a given period at a given rate of interest.
Site. Land suitable for building purposes, usually improved by the addition of utilities or other services.
Special assessment. A charge against real estate made by a unit of government to cover the proportional cost of an improvement, such as a street or sewer.
Special-purpose property. Property that has unique usage requirements, such as a church or a museum, making it difficult to convert to other uses.
Square-foot method. A method for finding the reproduction cost of a building in which the cost per square foot of a recently built comparable structure is multiplied by the number of square feet in the subject property.
Standard deviation. A measure of the difference between individual entities, called variates, and an entire population, in which the square root of the sum of the squared differences between each variate and the mean of all the variates in the population is divided by the number of variates in the population.
Statistics. The science of collecting, classifying and interpreting information based on the number of things.
Straight-line method of depreciation. (See economic age-life method of depreciation) straight-line recapture. A method of capital recapture in which total accrued depreciation is spread over the useful life of a building in equal amounts.
Subdivision. A tract of land divided by the owner into blocks, building lots and streets by a recorded subdivision plat. Compliance with local regulations is required.
Subdivision development method. A method of valuing land to be used for subdivision development. It relies on accurate forecasting of market demand, including both forecast absorption (the rate at which properties will sell) and projected gross sales (total income that the project will produce); also called the land development method.
Sub-leasehold. The interest of a sublessee under a sandwich lease.
Subletting. The leasing of premises by a lessee to a third party for a part of the lessee's remaining term.
Substitution, principle of. The basic appraisal premise that the market value of real estate is influenced by the cost of acquiring a substitute or comparable property.
Summation method. Another name for the cost approach to appraising.
Supply and demand, principle of. A principle that the value of a commodity will rise as demand increases and/or supply decreases.
Survey. The process of measuring land to determine its size, location and physical description; also, the map or plat showing the results of a survey.
Tax deed. The instrument used to convey legal title to property sold by a governmental unit for nonpayment of taxes.
Tax-stop clause. A clause in a lease providing that the lessee will pay any increase in taxes over a base or an initial year's taxes.
Tenancy by the entirety. The joint ownership, recognized in some states, of property acquired by husband and wife during marriage. On the death of one spouse the survivor becomes the owner of the property.
Tenant. One who has possession of real estate; an occupant, not necessarily a renter; the lessee under a lease. The estate or interest held is called a tenancy.
Time-share. Estate or use interest in real property for a designated time period each year.
Title. The evidence of a person's right to the ownership and possession of land.
Topography. Surface features of land; elevation, ridges, slope, contour.
Trade fixtures. Articles of personal property installed by a commercial tenant under the terms of a lease. Trade fixtures are removable by the tenant before the lease expires and are not true fixtures.
Triple net lease. (See net lease)
Trust. A fiduciary arrangement whereby property is conveyed to a person or an institution, called a trustee, to be held and administered on behalf of another person or entity, called a beneficiary. The one who conveys the trust is called the truster.
Trust deed. An instrument used to create a mortgage lien by which the borrower conveys title to a trustee, who holds it as security for the benefit of the note holder (the lender); also called a deed of trust.
Trustee. The holder of bare legal title in a deed of trust loan transaction.
Truster. The borrower in a deed of trust loan transaction.
Underimprovement. An improvement that is less than a property's highest and best use.
Uniform Standards Of Professional Appraisal Practice (USPAP). Minimal criteria for appraisal competency promulgated by the Appraisal Foundation at the direction of Congress, to be applied to appraisals that require the services of a state-licensed or certified appraiser.
Unit-in-place method. A method for finding the reproduction cost of a building in which the construction cost per square foot of each component part of the subject building (including material, labor, overhead and builder's profit) is multiplied by the number of square feet of the component part in the subject building.
Use-value. The value of a property designed to fit the specific requirements of the owner but that would have little or no use to another owner. Also referred to as value-in-use.
Usury. Charging interest in excess of the maximum legal rate.
Valuation principles. Factors that affect market value, such as the principle of substitution, highest and best use, supply and demand, conformity, contribution, increasing and decreasing returns, competition, change, stage of life cycle, anticipation, externalities, balance, surplus productivity, opportunity cost, and theory of distribution.
Value. The power of a good or service to command other goods or services in exchange; the present worth of future rights to income and benefits arising from ownership.
Value in exchange. The value of goods and services in exchange for other goods and services, or money, in the marketplace; an economic concept of market value.
VA mortgage. A mortgage loan on approved property made to a qualified veteran by an authorized lender and guaranteed by the Department of Veterans Affairs to limit possible loss by the lender.
Variance. (See zoning variance)
Variate. In statistics, an individual thing, person or other entity.
Warranty deed. A deed in which the grantor fully warrants good clear title to the property.
Yield. Income produced by an investment. Usually used to refer to equity investments.
Yield capitalization. Method used to estimate value from annual net operating income by applying a capitalization rate derived by analyzing each of the rate's component parts to provide both return on and return of the investment.
Zoning. Municipal or county regulation of land use within designated districts or zones. Zoning is an application of a state's police power to regulate private activity by enacting laws that benefit the public health, safety and general welfare. Zoning may affect use of the land, lot sizes, type of structure permitted, building heights, setbacks and density.
Zoning ordinance. Regulation of the character and use of property by a municipality or other government Entity through the exercise of its police power.
Zoning variance. An exemption from a zoning ordinance or regulation permitting a structure or use that would not otherwise be allowed.
Copy write Information - This list is complied from several sources on the Internet, and through my personal experience of terms in question. If this list infringes on your copy write laws, please notify 411, and we will remove any necessary information immediately.
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