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Property is abandoned when use of the property is voluntarily and permanently given up with the intention of ending ownership but without passing it on to anyone else.
A final and unqualified expression of agreement to the terms of an offer.
Because of Public Law 97-66, service in the armed forces, for the purpose of Eligibility for Entitlement, does not commence until entry into actual active duty status regardless of any reserve duty prior to that date OR enlistment under the Delayed Entry Program.
An agreement or list added to a contract, agreement, or other document such as a letter of intent. Both the FHA and VA require that an addendum be added to, or incorporated into, any sales contract if it is written prior to the appraisal. An addendum is also referred to as amendatory language.
A payment by a borrower of more than the scheduled principal amount due, in order to reduce the remaining balance of the loan.
An adjustable rate mortgage, commonly referred to as an ARM, is a loan type that allows the lender to adjust the interest rate during the term of the loan. Generally, these changes are determined by a margin and an index, so that interest rate changes up or down are based on market conditions at the time of the change. Most often these interest rate changes are limited by a rate change cap and a lifetime cap. Lenders are required to provide the borrower with an ARM Program Disclosure which spells out the terms of the loan.
Adjusted basis (which is the basis used to determine gain or loss or depreciation amounts) is the result of increasing or decreasing original basis according to certain events.
Gross income reduced by certain amounts, such as a deductible IRA contribution or student loan interest.
A technique used by appraisers to determine the value of the subject property. Adjustments are made to the subject property’s comparable sales. These adjustments are either added to the value of the comparable property or subtracted, depending on whether the feature of the property is deemed better or worse than the subject property’s same feature.
The date on which the interest rate changes for an adjustable rate mortgage (ARM).
The period that elapses between the adjustment dates for an adjustable rate mortgage (ARM).
Refers to one who make decisions in a Real Estate Agency, usually handling official business needs.
Formal disclosure document outlining the specific business relationships between companies providing settlement services.
“Actual” or chronological age of the subject improvement is the number of years that have elapsed since construction. “Effective” age is a property’s age based on condition and use. It can be more or less than the actual age.
An expressed contractual relationship which can be created in writing or orally in which a principal authorizes and empowers the agent to act on behalf of the principal in dealing with third parties and further agrees to accept full liability for the agents acts.
The contractual relationship between a real estate licensee who has been engaged for the purpose of procuring a seller, buyer, option, tenant; and the client who is able, and willing to sell, buy, option, exchange, or rent real estate on behalf of a client, or for the purposes of managing real estate on behalf of a client.
A documentation option that allows lenders to obtain documentation related to a borrower’s income, employment, funds for closing, and mortgage payment history directly from the borrowers, rather than from the borrowers’ employer, bank, or mortgage services. Samples of alternative documentation include W-2 forms, bank statements, pay stubs, and canceled checks.
The repayment of a mortgage debt with periodic payments of both principal and interest, calculated to fulfill the debt obligation at the end of a fixed period.
Money that taxpayers must pay to the government when the total tax is greater than their total tax payments.
A percentage which expresses the annual cost of a loan to the borrower. APR includes interest and all costs associated with the loan.
The process of applying for a mortgage. The term application generally refers to a form that is used to collect financial information from a prospective borrower by a lender. All mortgage loans must use the Uniform Real Estate Loan Application 1003.
The act or process of developing an opinion of value.
According to the Uniform Standards of Professional Appraisal Practice (USPAP), appraisal consulting is the development of an analysis, recommendation, or opinion to solve a problem. The opinion of value (appraisal) is only a component that leads to the assignment results. An example of consulting is a feasibility study or risk analysis. An appraisal report may or may not be made in conjunction with a consulting assignment.
Third party fee paid by the borrower to the appraiser.
The Appraisal Qualifications Board (AQB), another board of The Appraisal Foundation, was set in motion in the 1990s to establish qualifications for appraisers to become state licensed or certified.
An opinion of estimated value for a specific purpose of a described property on a given date. An appraisal can be either written or verbal.
An opinion of a property’s fair market value, based on an appraiser’s knowledge, experience and analysis of the property.
A person who possesses the education, training, and experience necessary to accurately render an opinion as to the value of real estate. A fee appraiser charges a fee for giving an opinion, but does not base compensation on the value found.
Every appraisal report contains a signed certification. Two main things (there are several others) that appraisers certify to in their own words are that the facts in the report are true and correct, and that their engagement for this appraisal is not contingent on developing or reporting a predetermined value or direction in value that favors the cause of the client (See USPAP Ethics Rule 2-3).
An increase in the value of a property due to changes in market conditions and other causes. The opposite of depreciation.
The valuation placed on property by a public tax assessor for purposes of taxation. The process of placing a value on property for the strict purpose of taxation. May also refer to a levy against property for a special purpose, such as a sewer assessment.
A group of people who have banded together to accomplish mutual goals.
Mortgage A provision in a mortgage that allows a buyer to assume responsibility for the mortgage from the seller. The loan does not need to be paid in full by the original borrower upon sale or transfer of the property.
AUS is a simple, easy to use application that allows lenders to obtain a preliminary or full underwriting decision, credit grade or credit report within minutes by having a computer program weigh set applicant criteria against a risk model to determine if the applicant qualifies for the loan.
The final payment that is made at the maturity date of a balloon mortgage and pays the loan in full.
is the state of insolvency of an individual or an organization that is unable to pay their debts
Basis is your investment in property for tax purposes. You need to determine your basis to figure allowable depreciation deductions as well. Your original basis is usually your cost to acquire the asset.
A person or entity that receives the benefits of a trust.
Requirements of a contract become legally enforceable for the parties involved in the contract.
The person who has responsibility for the repayment of the loan.
A title insurance policy that protects the buyer of a property from title defects.
Failure to live up to the terms of an agreement.
Sometimes called a swing loan. Usually a temporary loan to bridge gap between selling and buying a house.
A state-licensed agent who, for a commission or a fee, represents property owners in real estate transactions.
A continuous and regular activity that has income or profit as its primary purpose.
A process that allows a borrower to obtain a lower interest rate on a mortgage by paying discount points to a lender. A temporary buydown will reduce the interest rate paid during the first few years of the loan. A permanent buydown reduces the interest rate over the entire life of the loan.
A written agreement between a buyer and broker.
A decision to mutually break from an agreement. A cancellation does not cause a breach of contract.
Refers to a provision of an adjustable rate mortgage (ARM) that limits how much the interest rate or payment can increase or decrease.
1) The net worth of a business defined by the amount by which its assets exceed its liabilities. 2) Money used to create income. 3) The money or other assets comprising the wealth at the disposal of a person or business enterprise. 4) The accumulated wealth of a business or individual.
Many times, the Articles and Standards of Practice can be difficult to understand. REALTORS® Case Interpretations are published and may be used for reference by Grievance Committees and in Professional Standards Hearings as examples when similar fact patterns occur. The Case Interpretations are based on different Standards of Practice and are used for guidelines, not as precedents.
For FHA loans, the firm commitment issued by FHA approving the borrower. For VA loans, the VA’s commitment to the lender that it will guarantee a loan that was submitted for prior approval.
A document issued by the federal government certifying a veteran’s eligibility for a Department of Veterans Affairs (VA) loan.
A document issued by the Department of Veterans Affairs (VA) that establishes the maximum value and loan amount for a VA loan.
A statement of opinion rendered by a title company or attorney, stating that a title to real property is legally held by the current owner.
Also known as a Wage Earner’s Bankruptcy because debtors normally have some type of regular income and repay part of their debt. Under a Chapter 13 Bankruptcy, the debtor’s secured and unsecured debt is discounted and paid through a Trustee over the next three to five years.
The most common form of bankruptcy for consumers. Under a Chapter 7 Bankruptcy, the debtor is relieved from paying their unsecured debt, but for secured debt, either the collateral must be returned or the debt paid.
A typical civil code deals with contracts, torts, property law, family law and the law of inheritance. Commercial law, corporate law, and civil procedure are usually codified separately.
The movement for racial equality in the US that, through nonviolent protest, broke the pattern of racial segregation and achieved national equal rights legislation for blacks.
A title that is free of clouds, liens, disputed interests or legal questions as to ownership of the property.
A meeting of the parties involved in a real estate transaction to finalize the loan process.
The terms of the loan are set and the borrower’s interest rate can either be fixed or adjustable. The borrower is prohibited from borrowing additional funds under the same mortgage.
A meeting of the parties involved in a real estate transaction to finalize the process.
The total of all the items that must be paid at closing related to a new mortgage.
Also referred to as the HUD-1 or the settlement statement, this is the document that provides a line by line detail of the financial details related to a specific real estate transaction.
A person who signs a promissory note along with the primary borrower. A co-maker’s signature guarantees that the loan will be repaid, because the borrower and the co-borrower are equally responsible for the repayment. The co-borrower’s income, assets, and debts are added together with the borrowers for underwriting and ratio analysis.
Based on the “Golden Rule” (Do unto others, as you would have others do unto you), the Code of Ethics spells out clearly the fundamental principles of honest real estate practice.
Property pledged as security for a debt. The borrower risks losing the collateral if the debt is not repaid according to the terms of the loan contract.
A loan program that establishes a first and second mortgage at the same time.
Percentage The relationship between the unpaid principal balances of all the mortgages on a property and the lesser of the property’s appraised value or sales price.
A service fee earned by a Brokerage for the completion of a transaction in real estate.
A written offer from a lender to provide financing to a borrower.
Any person, firm, or corporation that is a source, compiler, or supplier of information regarding real estate for sale or lease and other data. Such sources include, but are not limited to, multiple-listing services.
An income-based community lending model, under which mortgage insurers and Fannie Mae offer flexible underwriting guidelines to increase a low or moderate income family’s buying power and to decrease the total amount of cash needed to purchase a home. Borrowers who participate in this model are required to attend pre-purchase home-buyer education sessions.
An alternative financing option that enables low to moderate income homebuyers to purchase housing that has been improved by a nonprofit Community Land Trust and to lease the land on which the property stands.
A person who organizes and supervises the affairs of a common-interest community.
In some western states, a form of ownership under which property acquired during a marriage is presumed to be owned jointly unless acquired as separate property of either spouse.
An abbreviated form of comparable properties. Comparables are used for comparative purposes in the appraisal process and are properties that are very similar to the property being appraised. They have been sold recently and have approximately the same size, location and features. Comparables help the appraiser determine the approximate fair market value of the subject property. Often just called “comps”.
To be fit in every way to adequately, according to industry standards, perform all duties with which you have been entrusted.
A loan that does not exceed the maximum loan amount allowed for the most common mortgage investors. Loans that exceed this amount are referred to as jumbo loans. The cost of obtaining a jumbo loan is generally higher than the cost of obtaining a conforming mortgage.
Mutual benefits of a contract for all parties involved. These benefits can include money, transfer of ownership, transfer of rights, exchange of services, or anything of value.
A legally binding exchange of promises or an agreement between parties that the law will enforce.
The date the loan is signed.
The interest rate charged before any points are added, and upon which monthly payments and amortization are calculated.
Mortgage loans that are not insured or guaranteed by the government.
Total dollar expenditure to produce an improvement (structure). Cost should not be confused with price, or exchange.
An index that may be used to determine the interest rate changes of an adjustable rate mortgage (ARM).
1) The extension of a loan or obligation 2) A borrowers overall history of repayments of loans or obligations 3) an addition to an account to reduce the actual amount of the closing costs.
An agency that gathers and keeps credit records.
A value given to an individual to reflect their current and past debt repayment patterns.
A record of a person’s debt history, including all open and fully repaid obligations. A credit history helps a lender to determine whether a potential borrower has satisfactory history of repaying debts in a timely fashion.
Insurance that protects the insured against loss of revenue due to unemployment.
A type of insurance, often bought by borrowers that will pay off the debt if the borrower dies while the policy is in force.
A record of an individual’s current and past debt repayment patterns. A credit history helps a lender to determine whether a borrower has a history of repaying debts in a timely manner.
A statistical system used to rate credit applicants according to various characteristics relevant to creditworthiness.
Part of the Definition of the Appraisal Problem. The date of valuation, or “effective date”, of an appraisal is determined by the date specified in the appraisal report, and the date the appraiser chooses is dictated by the appraisal assignment. Sometimes, for example, a client needs a value estimate for a date in the past (vs. current value).
An obligation to pay another.
The percentage of debt an applicant will have compared to their gross income after the loan is made.
The part of a title insurance policy that contains the policy number, named insured, insured property, inception and expiration dates, coverage and amounts, and policy premium.
The written instrument that conveys a property from the seller to the buyer. The deed is recorded at the local courthouse so that the transfer of ownership is part of the public record.
A legal document where a Trustee holds title for the lender or other third party until the loan is paid off. The deed of trust places a lien on a property.
A deed that transfers the title of a property to a lender in order to prevent foreclosure proceedings.
A breach of the agreement with a lender such as the failure to make loan payments in a timely manner.
A past encumbrance, lien, error or claim on the property that did not appear in public records or were not found during the title report.
Established by Congress in 1965 and is responsible for the implementation and administration of government housing and urban development programs.
An agency of the federal government that provides services and guarantees residential mortgages made to eligible veterans of the military services.
A form of Dual Agency where a firm takes both sides in a transaction, with different licensed agents representing each party.
The broker in charge of the agency and the transaction.
Lenders authorized by FHA to underwrite loans on behalf of HUD. Lenders certify that the loan has been closed according to HUD’s regulations and policies.
When all parties agree to terminate contract (when all obligations on the contract are fulfilled).
Information that must be given to consumers about their financial dealings.
Fees that are collected by the lender in exchange for a lower interest rate. Each discount point is 1% of the loan amount. For our comparison purposes, a discount point is considered to be a lender fee.
The interest rate that the Federal Reserve charges member banks for loans, using government securities or eligible paper as collateral. This provides a benchmark on interest rates, since banks set their loan rates a notch above the discount rate.
Acting on prejudicial judgments and beliefs.
The amount of money remaining after all monthly debts have been satisfied. The formula is: (total NET monthly income) minus (total monthly debt payments).
Loden and Rosener define diversity as having primary and secondary dimensions. Primary dimensions age, race, ethnicity, gender, and sexual orientation are aspects we are born with that cannot change. Secondary dimensions are elements that we have some power to change religion, education, income, work background, geographical affiliation, marital status, and military experience. This model highlights the infinite ways in which we can be similar to and different from one another.
The portion of the purchase price of a property that the borrower will be paying up front rather than being included in the mortgage amount.
A type of loan closing where the buyer and seller sign documents in advance of funding.
A provision in a mortgage that allows the lender to demand repayment in full upon the sale of a property.
A deposit towards the purchase of real estate or publicly tendered government contract made by a buyer or registered contractor to demonstrate that he/she is serious (earnest) about wanting to complete the purchase.
A right held by someone to use land belonging to someone else for a specific purpose.
Used to analyze both the locational and physical characteristics of property, as well as transaction differences of comparables. They explain why different prices are paid for comparables.
Any lien, easement or other claim on a property that could cause potential losses to the lender or the borrower.
The amount of a VA loan that can be insured for an individual veteran.
Equal Credit Opportunity Act (ECOA) guidelines ensure that all lenders base their credit decisions solely on the creditworthiness of the applicant. These regulations ensure that everyone has an equal opportunity to obtain a loan without discrimination under the Consumer Credit Protection Act. Also known as Regulation B.
An owner’s financial position in a property. Equity is the difference between the property’s value and the amount that is owed on mortgages.
Funds paid held until a specific date when the funds are released to a designated individual. Generally, an escrow account refers to the funds a mortgagor pays to the lender along with their monthly principal and interest payments for the payment of real estate’s taxes and hazard insurance.
A type of loan closing where the buyer and seller sign documents in advance of funding.
The portion of a borrower’s monthly mortgage payment that is held by the loan servicing company to pay for property taxes, hazard insurance, mortgage insurance and other items as they become due.
Moral principles that govern human interaction, more than just right or wrong.
The property is being listed by only one agency for the term of the contract, and should the agency find a buyer, then a commission would be due. However, if the seller finds a buyer himself, he does not owe the agency a commission. A listing contract of this type is similar to but not quite as restrictive on the seller as an “exclusive right to sell” contract.
The broker/agency has a guarantee of a commission should the property sell within the life of the agreement. It stipulates that the seller owes the real estate brokerage an agreed upon commission if the property is sold by the expiration date of the contract whether or not the buyer was found by the listing agency. The commission is due and payable even if the seller finds a buyer himself. And the seller is prohibited from listing the property with another brokerage prior to the expiration date in the “exclusive right to sell” contract.
A written contract or agreement.
A federal consumer protection regulation that controls the disclosure of credit information and establishes procedures for correcting mistakes in your credit file. The act does not apply to commercial transactions.
A federal consumer protection regulation that prevents discrimination in the purchase or rental of property based on race, color, religion, gender, handicap, familial status or national origin. It also prohibits discriminatory advertising with regard to residential real estate-related transactions. This law requires the public display of either the Equal Housing Lender poster or the Equal Housing Opportunity poster.
The highest price that a willing, but not compelled, buyer would pay and the lowest price that a willing, but not compelled, seller would accept.
A quasi-governmental agency that purchases conventional mortgages in the secondary mortgage market. It sells participation sales certificates secured by pools of conventional loans.
A division of the Department of Housing and Urban Development (HUD) that was established in 1934 to increase home ownership by providing an insurance program to safeguard lenders against borrower default. The FHA sets standards for property construction and credit underwriting, but it does not lend money, plan or build housing.
Also referred to as Fannie Mae. A government-sponsored private corporation created by Congress to support the secondary mortgage market. It is the largest purchaser and seller of conventional residential mortgages, as well as mortgages insured by the FHA or guaranteed by the VA.
An estate under which the owner is entitled to unrestrictive powers to dispose of the property, and which can be left by will or inherited.
Observance of promises in good faith.
Synonymous with interest charges, this is the amount charged to a borrower each month as interest for the balance they owe on their account.
A law that established new regulators and regulations for real estate appraisals.
The process of obtaining a loan.
A mortgage that is the first loan recorded in the public record and generally the primary loan against a property.
The monthly payment due on a mortgage loan which includes both principal and interest.
An interest rate that does not vary over the length of the loan, for either closed-end or revolving accounts.
A mortgage in which the monthly principal and interest payments remain the same throughout the life of the loan. The most common mortgage terms are 30 and 15 years. With a 30-year fixed rate mortgage your monthly payments are lower than they would be on a 15 year fixed rate, but the 15 year loan allows repayment twice as fast and saves more than half the total comparable interest costs.
The legal process in which a borrower’s ownership of a property is dissolved due to default.
The intentional perversion of truth in order to gain an advantage over another.
The use of standard FNMA/FHLMC verification forms mailed directly to and received directly from the borrowers’ employer, bank, mortgage company or landlord, to document the borrowers’ income, employment, available funds, and mortgage payment history.
An interest rate on an adjustable rate mortgage (ARM) which equals the index rate plus the margin.
An up-front fee required for all VA loans in lieu of mortgage insurance. The amount of the fee is based on the amount of down payment and the military or veteran status of the applicant.
Data that addresses social, economic, governmental, and environmental forces. General data originate outside the subject property. More or less analysis is included, depending on type of property, the form, and the purpose of the appraisal. (See “Specific Data.”)
A deed that transfers title among people who are related to each other. The exchange of money or consideration is generally referred to as ‘love and affection’ which means the property is transferred without payment of money.
A loan program that has lower payments in the first 5 to 10 years of the mortgage, by borrowing against the principal balance. The principal and interest payment increases each year. Sometimes called a temporary buy down loan.
A written estimate of the closing costs the borrower will have to pay at closing. Under the Real Estate Settlement Procedures Act (RESPA), the lender is required to provide this disclosure to the borrower within three days of receiving a loan application.
Loans insured by the VA or FHA/HUD.
Created in 1968 by an amendment to Title III of the National Housing Act. This governmental corporation guarantees securities backed by mortgages that are insured or guaranteed by other government agencies, such as FHA and VA.
Law that requires financial institutions to secure all financial customer data, and limits how that information is shared. This law is applicable to all parties involved in the financial transaction, including staff and fee appraisers.
A commonly used deed promising that the person transferring a piece of real property has the legal right to the property, and is not encumbered in any way, except as described in the deed.
(1) A person or entity that establishes a trust for the benefit of named beneficiaries. (2) A person or entity that owns property and transfers it to another person or entity.
All income from whatever source derived.
The finished above-grade room count and the square feet of gross living area that is above-grade.
Any publication that offers insight or instruction.
Insurance that protects a homeowner against the cost of damages to property caused by fire, windstorms, and other common hazards. Also referred to as homeowner’s insurance.
See Homeowners’ Association Fees.
A loan secured by a subordinate mortgage on one’s principal residence, generally to be used for some non-housing expenditure. A traditional home equity loan provides lump-sum proceeds at the time the loan is closed.
A complete and detailed inspection that examines and evaluates the mechanical and structural condition of a property.
The Home Mortgage Disclosure Act (HMDA) was enacted by Congress in 1975 and is implemented by the Federal Reserve Board’s Regulation C. This regulation provides the public loan data that can be used to 1) assist in determining whether financial institutions are serving the housing needs of their communities, 2) assist public officials in distributing public-sector investments so as to attract private investment to areas where it is needed.
A nonprofit association that manages the common areas of a condominium project or planned unit development (PUD). In a condominium development, the association has no ownership interest in the common elements. In a PUD, it holds title to the common elements of the project.
A type of insurance policy that covers repairs to certain parts of a home for an agreed upon period of time. It is typically provided by the contractor or seller as a condition of the sale.
A standard calculation performed by mortgage lenders to determine if a borrower qualifies for a specific loan type and amount. It is calculated by dividing the monthly housing expense (Principal, Interest, Taxes and Insurance) by the borrower’s monthly gross income. Also referred to as a front-end ratio, top ratio or Housing Expense Ratio.
U.S. Department of Housing and Urban Development insures home mortgage loans made by lenders meet minimum standards for such homes.
Also referred to as the closing statement or the settlement statement, this is the document that provides line by line detail of the financial details related to a specific real estate transaction such as the fees paid by the seller and the buyer for a purchase transaction or the fees paid by the borrower for refinances.
There is a one percent or greater chance that a flood level will be equaled or exceeded in any given year.
Identity theft is a crime. Identity theft and identity fraud are terms used to refer to all types of crime in which someone wrongfully obtains and uses another person’s personal data in some way that involves fraud or deception, typically for economic gain.
An agreement which is neither determined verbally or in writing.
A fund set aside for future needs, such as an escrow or reserve account.
A structure or building permanently attached to the land.
Real estate developed and improved to produce steady income.
Taxes on income, both earned (salaries, wages, tips, commissions) and unearned (interest, dividends). Income taxes can be levied on both individuals (personal income taxes) and businesses (business and corporate income taxes).
A published interest rate used to establish the interest rate offered on an Adjustable Rate Mortgage (ARM).
Property is fully owned by a single person.
The original, starting interest rate of a loan at the time of closing. This rate changes for an adjustable-rate mortgage (ARM). Sometimes called a teaser rate.
A licensed professional who examines the subject physical property and components for functionality and condition. Often the appraiser’s site visit will be called an “inspection.” Technically, it is not, though the term is used in FNMA documents to describe the appraiser’s personal scrutiny of or visitation to properties.
A method of selling an asset that the seller financed with interest on the sale of his/her real estate; the capital gains tax is spread out over a number of years. Installment sale is also known as owner financing or seller financing.
A form of contract that provides compensation for specific losses in exchange for a periodic payment. An individual contract is known as an insurance policy. The periodic payments are known as insurance premiums.
A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (PMI).
To behave in congruence with your knowledge of right and wrong.
Things that a person or entity owns or possesses that relate to creations of the mind: inventions, literary and artistic works, and symbols, names, images, and designs used in commerce, such as logos or company identities. Also relates to products of the imagination (e.g. patent, copyright and trade-mark law.)
A type of mortgage where the borrower is only required to make interest payments to keep the loan current.
The cost of borrowing a lender’s money. Interest takes into account the risk and cost to the lender for a loan. Interest rates can be fixed or variable over the life of a loan.
An arrangement where the property seller, borrower or other party deposits money to an account so that it can be released each month to reduce the borrower’s interest rate or monthly payments during a specified period of a loan.
One of the aspects of the Definition of the Appraisal Problem. Fee simple interest is usually the purpose of valuation, but other interests could be valued, such as insurance value, value of a leasehold estate, and the value of an easement.
A one-to-four unit property that the borrower does not occupy. This definition is used whether or not the property produces revenue.
Any mortgage lender, i.e., mutual savings bank, life insurance company, pension or other trust funds, or savings and loan association, or secondary lender that invests its own funds in mortgages. An investor may also include any permanent holder of the mortgage, such as the original lender.
Laws that imposed racial segregation. They existed mainly in the South and originated from the black codes that were enforced from 1865 to 1866 and from prewar segregation on railroad cars in northern cities.
Property is fully owned by two or more joint tenants with undivided interests. The interests must be equal, accruing under the same conveyance, and beginning at the same time. Upon the death of a joint tenant, the interest passes to the surviving joint tenant rather than to the heirs of the deceased.
Involuntary liens placed on a property by a third party who sues and obtains a judgment against the debtor.
A loan that exceeds the maximum conforming loan amount allowed by the most common mortgage investors, i.e. FNMA or FHLMC.
The surface of the earth and air rights.
A payment made later than agreed upon in a credit contract and on which additional charges may be imposed.
The purpose of a contract that is legal and lawful.
A written contract between a property owner and a tenant that expresses the conditions under which the tenant may possess the real estate for a specified period of time.
A lease with a clause stating that the lessee has the right to purchase the property at or before the lease term. The price and terms must be set forth in writing for the option to be valid.
A manner in which land is owned and used. For our purposes, it means that the legal owner of the land (lessor) has agreed to give possession to another (lessee) for a specified period of time (term) and for a specified consideration (rent). Our borrower is the lessee, and is renting the land from the owner (lessor). Our borrower owns the buildings on the land, but not the land. Our loan is against the building and the value of the leasehold.
A bank, mortgage banker, or financial institution providing the loan funds to a borrower.
A title insurance policy that protects the lender against title defects.
Someone who holds or is to receive a Real Estate License
1) A legal document that gives a lender the right to hold or sell the property of a borrower if the borrower fails to pay off the loan. 2) A legal claim to funds from a sale of a property to pay off debts or obligations.
In the event of a default by the borrower, the order in which lien holders are paid.
Property is owned by a Life Estate, meaning an estate for the life of a living person. The estate then reverts back to the grantor or on to a third party. In simple terms, a Life Estate means that the beneficiary of the Life Estate may live in the property for the rest of their life even if the property is foreclosed on. We do not lend on properties that have a Life Estate.
On an adjustable-rate mortgage (ARM), a limit on the amount the interest rate can increase or decrease over the term of the loan. Also known as Life Cap.
A type or form of for-profit company where ownership is divided into shares, and where the governing rules are set forth in a contract entered into by all of the initial shareholders. Also known as a Limited Liability Corporation.
Agent who represents the seller in a real estate transaction.
A legally binding contract entered into by the seller of a property and a real estate broker.
A legal entity that is in effect during the life of the settlor(s) or grantor(s). The property owned by the trust is managed by a trustee and is held for the benefit of the beneficiaries of the trust.
The legal contract that sets the terms and conditions of the loan and its repayment.
The process whereby all loan documents are signed and the money is transferred between the different parties of the transaction.
The number of months that you will make monthly payments.
A ratio used by lenders to calculate the loan amount requested as a percentage of the value of a home. To determine the loan to value ratio, divide the loan amount by the home’s value.
The number of percentage points a lender adds to the index value to calculate the ARM interest rate at each adjustment period.
The amount of money actually paid in a transaction. It is not the same as market value.
The most probable price, as of a specified date, in cash or in terms equivalent to cash, or in other precisely revealed terms, for which the specified property rights should sell after reasonable exposure in a competitive market under all conditions required to a fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self-interest, and assuming that neither is acting under undue duress.
A claim on a property when work on the property has not been paid.
Routine acts performed by an agent on behalf of a customer that does not require the expertise of the agent. Such acts may include providing a list of available properties, a list of local attorneys or indentifying churches, schools or malls for a customer.
Depravity or morally base conduct.
A legal document by which a borrower (mortgagor) gives the lender (mortgagee) a lien on property as security for the repayment of a loan. In some areas of the country, the mortgage is called a deed of trust.
A company that originates mortgages for resale in the secondary mortgage market.
A firm or individual who, for a fee, matches up borrowers and lenders.
Insurance provided by a private company to protect the mortgage lender against losses that might be incurred if a loan defaults.
Amount paid by a borrower for mortgage insurance, either to a government agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance (PMI) company.
A loan secured by a mortgage against real property.
A computer service that provides information to real estate agents about properties for sale.
The agreement and acceptance of a contract and its components by each and every party involved. All parties must recognize and acknowledge that an agreement has been made and duly accepted.
A document that attests to the true name of an individual.
In 1908, the face of the real estate industry changed. A group of real estate professionals, fed up with the cutthroat dishonesty that identified most of the real estate industry, founded the National Association for Real Estate Exchanges, now known as the National Association of REALTORS® (NAR). They hoped to establish ethical standards of conduct to guide real estate professionals.
A gradual increase in mortgage debt that occurs when the periodic monthly payment is not sufficient to cover the monthly principal and interest due. The amount of the deficit is added to the remaining principal balance to create negative amortization.
Any money instrument (check, Certificate of Deposit, stock, promissory note) that is transferable from one person to another.
A separate area with common interests and harmony of land uses.
A documentation option eligible on select non-conforming loan programs. The borrower’s employment, income or assets are not disclosed anywhere in the loan file or verified during the underwriting process.
A documentation option eligible on select non-conforming loan programs. The borrower’s source of income is verified while the amount of income is neither disclosed anywhere in the loan file nor verified during the underwriting process.
A mortgage that exceeds the maximum loan amount for the most common mortgage investors. Also known as a jumbo loan.
To confirm the signature of another. Completed by a Notary Public.
An officer appointed by the governor with authority to take the acknowledgment of persons executing documents, to verify the identity of the persons and to attest to the signatures by the affixing of a seal.
The written agreement signed by the borrower at closing that contains the promise to repay the loan. The note also contains the terms of the loan, such as interest rate, payment, and term.
Closing document mandated by the Truth In Lending Act (Reg Z) that allows a borrower 3 business days following the date of signing a real estate loan in which he may cancel the transaction with no financial repercussions other than third party fees that may have been paid in advance. This law applies to any consumer credit where a person’s principle dwelling is used as security and is primarily targeted to refinances, equity loans and equity lines of credit. When a loan is for the purchase or construction of the dwelling, the loan is exempt from the right of rescission.
An expression of willingness to contract on certain terms, made with the intention that such a contract shall become binding as soon as it is accepted by the person to whom it is addressed.
The seller is free to list the property with more than one agency, and he owes the commission only to the brokerage/agency that finds the buyer. Again, if the seller finds the buyer himself, he typically does not owe a commission under this kind of contract structure.
Also called “Estimate of Value.” An appraised value is an estimate based on market factors by a person knowledgeable in real estate markets. Licensed appraisers do not “determine” value, as valuation is not an exact science.
A contract of terms agreed to by spoken communication, in contrast to a written contract.
A fee charged by a lender as a way to cover processing expenses or to increase their profitability for originating a mortgage loan.
An individual who meets all of the following requirements: 1) Is the owner of the subject property and resides there as his/her permanent residence. 2) Is listed as an owner of record (by deed). 3) Has executed the Note and the security instrument.
The monthly principal and interest payment required when repaying a mortgage in accordance with its terms.
A business entity where one or more individuals run the organization and share the risks based upon a mutual agreement.
A limit on the amount that payments can increase during a single adjustment period.
A limit on the amount that the interest rate can increase during a single adjustment period.
The payment of discount in order to lower the interest rate, and thereby the monthly payment amount, of a loan for the entire life of the loan.
Any property that has a physical existence and that is not real property. Personal property can be tangible, like jewelry, furniture or cars, or intangible, such as stocks or investments.
(P)rinciple, (I)nterest, (T)axes, and (I)nsurance is a reference to the total monthly payment required to repay a mortgage in accordance with its term as well as monthly escrow payments for taxes and insurance.
This is insurance that is underwritten by a private mortgage insurance company, and protects the mortgage lender against financial losses if the borrower defaults on the mortgage.
Written guarantee from a lender that a borrower can qualify for a loan up to a given amount. This is with minimal verifications.
Practices of lenders that are abusive or deceptive and that can cause unnecessary losses to borrowers.
Preconceived judgments and opinions (often unfavorable) based on the view that differences are weaknesses.
Any amount that is paid to reduce the principal balance, not interest, of a loan before the due date.
A charge that a borrower may be required to pay during the early years of a mortgage (typically within the first 5 years) if it is paid in full or if a large payment is made in order to reduce the unpaid balance.
Amount a purchaser agrees to pay and seller agrees to accept in a particular transaction.
The actual balance, excluding interest, of a mortgage loan. Also refers to the amount of the monthly mortgage payment that will be applied to the original loan balance.
The monthly payment required to repay a mortgage in accordance with its terms. Sometimes referred to as P&I.
The licensed broker responsible for the operations conducted by the brokerage firm.
There are five main topics of the “Definition of the Appraisal Problem” (Step 1) which the appraiser considers, and which will result in an opinion of value. The topics are: purpose and use of the appraisal, interests to be appraised, type of value to be estimated, definition of market value, and date of the value estimate.
A written promise to pay a specified sum to specified party over a specified period of time.
The exclusive right of possessing, enjoying and disposing of a thing; that which belongs exclusively to a person, commonly used to denote anything that is subject to ownership, and has an exchangeable value. Also see Real Property.
That aspect of real estate devoted to the leasing, managing, marketing and overall maintenance of the property of others, usually commercial properties or residential rental properties.
Taxes based on the assessed value of the home, paid by the homeowner for community services such as schools, public works, and other costs of local government. Sometimes paid as a part of the monthly mortgage payment.
A community manager who has fulfilled the educational requirements for certification, but has not yet fulfilled the experience requirements for certification. A provisional community manager may perform the tasks of a community manage under the direct supervision of a supervising community manager.
State or county records that are accessible to all people.
A binding contract between the buyer and the seller that sets forth the terms and conditions under which a property is sold.
One of the steps in Defining the Appraisal Problem. In most cases, the purpose of an appraisal report is to estimate the market value of the fee simple interest in the subject property as of the appraisal date.
Calculations performed by lenders to determine one’s ability to repay a loan.
A court action that can remove defects, prior claims or easements on a property title.
A deed that transfers whatever ownership interest the grantor has in a particular property to another party or entity without guaranteeing anything about what is being transferred or any title defects or encumbrances.
The annual rate of interest for a loan. Also called the interest rate or contract rate.
Also referred to as real property, physical land and buildings or structures permanently attached to it, including trees, minerals, and the like.
A Federal law enacted to ensure consumers are made aware of all fees associated with applying for a closing a real estate loan. RESPA forms must be completed for loans that are secured by real estate that the borrower uses as the primary residence. These must be completed and provided to the borrower within 3 business days of applying for a real estate loan. Requires the provision of Good Faith Estimates of Closing Costs, prohibits kickbacks for referrals of related services, and standardizes the closing with a required form and format (HUD-1).
A Federal law enacted to ensure consumers are made aware of all fees associated with applying for a closing a real estate loan. RESPA forms must be completed for loans that are secured by real estate that the borrower uses as the primary residence. These must be completed and provided to the borrower within 3 business days of applying for a real estate loan. Requires the provision of Good Faith Estimates of Closing Costs, prohibits kickbacks for referrals of related services, and standardizes the closing with a required form and format (HUD-1). Also known as Reg. X.
Land and anything permanently affixed to the land, including structures, trees, minerals, and the interest, benefits and rights thereof.
All real estate licensees are not the same. Only real estate licensees who are members of the NATIONAL ASSOCIATION OF REALTORS® are properly called REALTORS®. They proudly display the REALTOR “®” logo on the business card or other marketing and sales literature. REALTORS® are committed to treat all parties to a transaction honestly. REALTORS® subscribe to a strict code of ethics and are expected to maintain a higher level of knowledge of the process of buying and selling real estate.
Upon the sale of investment property the IRS collects a tax on the amount of depreciation taken by the taxpayer during the period of ownership.
The period after the American Civil War when the southern states were reorganized and reintegrated into the Union; 1865-1877.
The refusal of a savings institution or other business to extend credit to, lend to, insure, or otherwise assume some financial risk involving property or a business located in a high-risk geographical area, usually a declining inner-city neighborhood. Redlining also refers to setting prohibitively high fees for financial services in a high-risk area.
The process of paying off any existing mortgages on a home with a new mortgage loan.
Federal regulation that requires a lender to provide borrowers with a disclosure estimating the costs of the loan including your total finance charge and the Annual Percentage Rate (APR) within three business days of the application for a loan. This act is designed to provide consumers with a standard method of comparing the financing costs from lender to lender.
In many states, a contract can be terminated by a mutual agreement called a release.
Any communication, written or oral, of an appraisal, appraisal review, or appraisal consulting service that is transmitted to the client upon completion of an assignment. (USPAP, p. 4).
The amount of liquid assets a borrower retains after the down payment and closing costs have been paid. Used as a buffer to make payments if income stops.
An agreement between a buyer and seller to purchase real estate and secures the right to purchase real estate upon agreed terms for a limited period of time. If the buyer changes his mind or is unable to execute the purchase, the earnest money that was paid is forfeited unless the binder expressly provides that it is to be refunded.
A first part of the appraisal process. Typical wording: “The scope of work for this appraisal is defined by the complexity of this appraisal assignment and the reporting requirements of this report form, including the following definition of market value, statement of assumptions and limiting conditions, and certifications.” The appraiser must, at a minimum (1) perform a complete visual inspection of the interior and exterior areas of the subject property, (2) inspect the neighborhood, (3) inspect each of the comparable sales from at least the street, (4) research, verify, and analyze data from reliable public and/or private sources, and (5) report his or her analysis, opinions, and conclusions in this appraisal report (FNMA).
A loan that has a lien position subordinate to the first mortgage i.e., the proceeds from a foreclosure sale must pay the first mortgage before any funds can go to repay the second mortgage.
The collateral offered to a lender in exchange for a loan.
Money paid by the seller to help cover the buyer’s closing costs.
Required disclosure in the state of Washington. This disclosure informs potential buyers of the condition of the property and any material or latent defects in the property that may affect the value.
RESPA disclosure that informs the borrower that the loan can be sold to another lender and the servicing of that loan can be taken over in the future by other parties.
A meeting of parties involved in a real estate transaction to finalize the process. In the case of a purchase, the settlement usually involves the seller, the buyer, the real estate broker and the lender. In the case of a refinance, the settlement involves the borrower and the lender. Sometimes referred to as the closing or the close of escrow.
Any service performed by different parties that are required for the closing of a loan.
see HUD. Also known today as a Closing Disclosure
A short sale is a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold.
When the original mortgage lender provides funds, the arrangement requires the borrower to provide a down payment. The fraud occurs when a second mortgage is used to fulfill the obligation of the down payment.
The land and improvements to it (such as landscaping, sewers, wells, septic systems, and street pavement) that make it ready for use.
The appraiser’s examination of both the subject site and its improvements. The term is used in lieu of the word inspection, which to some borrowers and sellers implies the work of an inspector will take place. Appraisers make a point of saying they are not qualified “inspectors” in the appraisal report.
Details of the subject property itself, including: Comparable sales and rentals. Local market information. These data are collected by the appraiser and are always about the subject and its comparables and neighborhood, and any other factors related to the specific subject. Most specific data come from the site visit and from seeing the subject in the context of its neighborhood and general market area. (See “General Data.”)
Shere of Influence (SOI) is an approach to prospecting that focuses your business-building efforts on the people you already know or meet socially, instead of the more traditional approach of prospecting to strangers.
The Standards of Practice more specifically address the concerns of the modern real estate industry by further clarifying the articles in the NAR Code of Ethics.
A part of the appraisal report that presents assumptions related to specific situations of the appraisal. Topics addressed may include date, use of the appraisal, definition of value, and the like.
A fixed and often distorted generalization made about all members of a particular group.
Straw buyers are people who consent that their names and personal details are used by certain people with the purpose of obtaining mortgage loans with no purpose of ever inhabiting these homes.
The property being appraised.
Second mortgages within combination loans.
Subprime(near-prime, non-prime, or second chance lending) is a financial term that was popularized by the media during the “credit crunch” of 2007 and involves financial institutions lending in ways which do not meet “prime” standards to an extent which puts the loans into the riskiest category of consumer loans typically sold in the secondary market.
A loan that does not meet the credit underwriting guidelines of Fannie Mae, Freddie Mac, FHA, VA or other major conforming purchasers. Subprime loans allow borrowers to qualify with more severe mortgage delinquencies and higher debt ratios. Often referred to as “B/C loans”.
A community manager who meets the qualifications set forth in NAC 116.185 and directly supervises a provisional community manager.
A type of closing where the buyer and seller sign the loan documents and the funding occurs all at the same time.
A deed is used to convey title to a buyer of a property that has been sold to pay off a tax delinquency.
A lien placed by a government entity as a method of collecting delinquent taxes, either property taxes or income taxes.
An arrangement wherein the property seller or other party deposits money to an account so that it can be released each month to reduce the borrower’s monthly payments during the early years of a mortgage. During the specified period the borrower’s effective interest rate is bought down below the actual mortgage interest rate by this subsidy.
The property is owned by a husband and wife whereby each owns the entire property. In the event of the death of one, the survivor owns the property without probate.
The property is owned undivided by two or more persons. The interest need not be equal, and, in the event of the death of one of the owners, no right of survivorship in the other owners exists.
The number of months that you will make monthly payments. If the loan term is the same as the payment calculation term, the loan will be paid in full at the end of the loan term. If the payment calculation term is greater than the loan term, a balance or balloon payment may be due at the end of the loan term.
Those who have physical disabilities receive protection as a class under Federal Fair Housing law. The Americans with Disabilities Act also adds additional impact on the real estate industry, requiring access to goods and services for persons with disabilities, including access to public buildings and transportation.
As a result of FIRREA, Congress chartered the Appraisal Foundation. One of its boards is the Appraisal Standards Board (ASB). This entity regularly updates and publishes the Uniform Standards of Professional Appraisal Practice (USPAP, YOOS-pap), which describes the minimal appraisal development and reporting standards required of appraisers.
A property jointly owned or leased by multiple people who are allowed to use it only during specified periods each year. This is a popular method for individuals to purchase vacation properties.
A legal written instrument evidencing a person’s lawful possession of a property.
A company that conducts title searches and issues title insurance policies.
Any lien, easement or other claim on a property that could cause potential losses to the lender or the borrower, whether known or unknown to the owner.
An insurance policy that protects the lender (and sometimes the property owner as well) against loss due to disputes over the ownership of a property. If defects in the title that were not found during the title search, a claim can be filed against the policy.
An examination of the public title records to determine the legal ownership of a property, and to ensure that there are no liens, encumbrances or other claims outstanding.
To change ownership from one person or entity to another.
A designated person who manages the property owned by a trust.
Also known as Regulation Z, this federal regulation requires a lender to provide borrowers with a disclosure estimating the costs of the loan including the total finance charge and the Annual Percentage Rate (APR) within three business days of the application for a loan. This act is designed to provide consumers with a standard method of comparing the financing costs from lender to lender.
Evaluates a borrower’s loan application to determine the risk involved for the lender. Underwriting usually involves an in-depth analysis of the borrower’s credit history, as well as an examination of the value and quality of the subject property.
Detailed process of evaluating a borrower’s loan application to determine the risk involved for the lender. Underwriting usually involves an in-depth analysis of the borrower’s credit history, as well as an examination of the value and quality of the subject property.
The FNMA form used in the majority of residential appraisals.
The standards that guide the development of appraisal opinions and reports, and the conduct of appraisers. They come under the purview of the Appraisal Standards Board of the Appraisal Foundation.
Methods of measurement such as price per square foot, per room, per apartment unit, per acre, and the like.
A mortgage for veterans and service persons. The loan is guaranteed by the Department of Veterans Affairs (VA) and requires low or no down payment.
The monetary relationship between properties and those who buy, sell, or use those properties. For income properties, the present worth of the future benefits that accrue from real property ownership. Four economic factors create value: utility and scarcity (supply factors); and desire and effective purchasing power (demand factors).
Sometimes incorrectly used as a synonym for “oral contract.” However, a verbal contract is one that is agreed to using words, either written or spoken, as opposed to an implied contract.
Documentation of a mortgage applicant’s work history and/or occupation that is intended to assist with the lender’s credit investigation and decision process.
Any person who served on active duty in the Armed Forces for a period of at least 90 days and was discharged under conditions other than dishonorable.
A deed that guarantees that the title is free of encumbrances or title defects.
A type of closing where the buyer and seller sign the loan documents and the funding occurs all at the same time – while the ink is still “wet”.
When both parties sign a legal document. In many countries, real estate contracts must be in writing to be enforceable. In the United States, the Statute of Frauds requires real estate contracts to be in writing to be enforceable.
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