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A
ABR
Accredited
Buyer
Representative
Only
4,000
real
estate
professionals
on two
continents
who have
been
awarded
the ABR
designation
by the
National
Association
Of
Realtors.
Abatement
Stopping
or
reducing
of
amount
or
value,
as when
assessments
for
ad
valorem
taxation
are
abated
after
the
initial
assessment
has been
made.
Absentee
landlord
An owner
of an
interest
in
income-producing
property
who does
not
reside
on the
premises
and who
may rely
on a
property
manager
to
oversee
the
investment.
Absolute
fee
simple
title
A title
that is
unqualified
Fee
simple
is the
best
title
that can
be
obtained
(See
also
fee
simple).
Abstraction
Method
of
finding
land
value in
which
all
improvement
costs
(less
depreciation)
are
deducted
from
sales
price.
Also
called
extraction.
Access
A way to
enter
and
leave a
tract of
land,
sometimes
by
easement
over
land
owned by
another
(See
also
egress
and
ingress).
Accessibility
The
relative
ease of
entrance
to a
property
by
various
means, a
factor
that
contributes
to the
probable
most
profitable
use of a
site.
Accessory
buildings
Structures
on a
property,
such as
sheds
and
garages,
that are
secondary
to the
main
building.
Accretion
Land
buildup
resulting
from the
deposit
by
natural
action
of sand
or soil
washed
up from
a river,
lake or
sea.
Accrual
basis
In
accounting,
a system
of
allocating
revenue
and
expense
items on
the
basis of
when the
revenue
is
earned
or the
expense
incurred,
not on
the
basis of
when the
cash is
received
or paid
out.
Accrued
depreciation
(1) For
accounting
purposes,
total
depreciation
taken on
an asset
from the
time of
its
acquisition.
(2) For
appraisal
purposes,
the
difference
between
reproduction
or
replacement
cost and
the
appraised
value as
of the
date of
appraisal.
Accrued
expenses
Expenses
incurred
that are
not yet
payable
In a
closing
statement,
the
accrued
expenses
of the
seller
typically
are
credited
to the
purchaser
(taxes,
wages,
interest,
etc.).
Acquisition
appraisal
A market
value
appraisal
of
property
condemned
or
otherwise
acquired
for
public
use, to
establish
the
compensation
to be
paid to
the
owner.
Acre
A
measure
of land,
208 71
by 208
71 feet
in area,
being
43,560
square
feet, or
160
square
rods or
4,840
square
yards.
Actual
age
The
number
of years
elapsed
since
the
original
structure
was
built
Sometimes
referred
to as
historical
or
chronological
age.
Adjustable-rate
mortgage
(ARRI)
A
financing
technique
in which
the
lender
can
raise or
lower
the
interest
rate
according
to a set
index,
such as
the rate
on
six-month
Treasury
bills or
the
average
cost of
funds of
FDIC-insured
institutions
(See
also
amortized
mortgage).
Adjustment
Decrease
or
increase
in the
sales
price of
a
comparable
property
to
account
for a
feature
that the
property
has or
does not
have in
comparison
with the
subject
property.
Ad
Valorem
According
to value
(Latin);
generally
used to
refer to
real
estate
taxes
that are
based on
assessed
property
value.
Adverse
land use
A land
use that
has a
detrimental
effect
on the
market
value of
nearby
properties.
Aesthetic
value
Relating
to
beauty,
rather
than to
functional
considerations.
Aggregate
In
statistics,
the sum
of all
individuals.
Allocation
method
The
allocation
of the
appraised
total
value of
the
property
between
land and
building
The
allocation
may be
accomplished
either
on a
ratio
basis or
by
subtracting
a figure
representing
building
value
from the
total
appraised
value of
the
property.
Allowance
for
vacancy
and
collection
losses
The
percentage
of
potential
gross
income
that
will be
lost due
to
vacant
units,
collection
losses
or both.
Amenities
The
qualities
and
state of
being
pleasant
and
agreeable;
in
appraising,
those
qualities
that are
attached
to a
property
and from
which
the
owner
derives
benefits
other
than
monetary;
satisfaction
of
possession
and use
arising
from
architectural
excellence,
scenic
beauty
and
social
environment.
Amortized
mortgage
A
mortgage
loan in
which
the
principal
and
interest
are
payable
in
periodic
installments
during
the term
of the
loan so
that at
the
completion
of all
payments
there is
a zero
balance.
Annuity
A fixed,
regular
return
on an
investment.
Annuity
method
A method
of
capitalization
that
treats
income
from
real
property
as a
fixed,
regular
return
on an
investment.
For the
annuity
method
to be
applied,
the
lessee
must be
reliable
and the
lease
must be
long
term.
Appraisal
An
estimate
of
quantity,
quality
or
value;
the
process
through
which
conclusions
of
property
value
are
obtained;
also
refers
to the
report
setting
forth
the
process
of
estimating
value.
Appraisal
Foundation
Nonprofit
corporation
established
in 1987
and
headquartered
in
Washington,
D C ,
sponsored
by major
appraisal
and
appraisal-related
professional
and
trade
groups.
Appraisal
methods
The
approaches
used in
the
appraisal
of real
property
(See
also
cost
approach,
income
capitalization
approach,
sales
comparison
approach).
Appraisal
process
A
systematic
analysis
of the
factors
that
bear on
the
value of
real
estate;
an
orderly
program
by which
the
problem
is
defined;
the work
necessary
to solve
the
problem
is
planned;
the data
involved
are
acquired,
classified,
analyzed
and
interpreted
into an
estimate
of
value;
and the
value
estimate
is
presented
in the
form
requested
by the
client.
Appraisal
report
An
appraiser's
written
opinion
to a
client
of the
value
sought
for the
subject
property
as of
the date
of
appraisal,
giving
all
details
of the
appraisal
process.
Appraisal
Standards
Board
Created
by the
Appraisal
Foundation
and
responsible
for
establishing
minimum
standards
of
appraisal
competence.
Appraised
value
An
estimate
by an
appraiser
of the
amount
of a
particular
value,
such as
assessed
value,
insurable
value or
market
value,
based on
the
particular
assignment.
Appraiser
One who
estimates
value.
Appraiser
Qualification
Board
Created
by the
Appraisal
Foundation
and
responsible
for
establishing
minimum
requirements
for
licensed
and
certified
appraisers
and
licensing
and
certifying
examinations.
Appreciation
Permanent
or
temporary
increase
in
monetary
value
over
time due
to
economic
or
related
causes.
Approaches
to value
Any of
the
following
three
methods
used to
estimate
the
value of
real
estate:
cost
approach,
income
capitalization
approach
and
sales
comparison
approach
.
Appurtenance
Anything
used
with
land for
its
benefit,
either
affixed
to land
or used
with it,
that
will
pass
with the
conveyance
of the
land.
Arm's-length
transaction
A
transaction
in which
both
buyer
and
seller
act
willingly
and
under no
pressure,
with
knowledge
of the
present
conditions
and
future
potential
of the
property,
and in
which
the
property
has been
offered
on the
open
market
for a
reasonable
length
of time
and
there
are no
unusual
circumstances.
ARRAY
An
arrangement
of
statistical
data
according
to
numerical
size.
Assemblage
The
combining
of two
or more
adjoining
lots
into one
larger
tract to
increase
their
total
value.
Assessed
value
The
value
placed
on land
and
buildings
by a
government
unit
(assessor)
for use
in
levying
annual
real
estate
taxes.
AssessmenT
The
imposition
of a
tax,
charge
or levy,
usually
according
to
established
rates
(See
also
special
assessment)
Assessor
One who
determines
property
values
for the
purpose
of
ad
valorem
taxation.
Asset
Property
that is
owned
and has
value,
such as
cash or
real or
personal
property.
Average
deviation
In
statistics,
the
measure
of how
far the
average
individual,
or
variate,
differs
from the
mean of
all
variants.
B
Balance
The
appraisal
principle
that
states
that the
greatest
value of
a
property
will
occur
when the
type and
size of
the
improvements
are
proportional
to each
other as
well as
to the
land.
Band of
investment
A method
of
developing
a
discount
rate
based on
(1) the
rate of
mortgage
interest
available,
(2) the
rate of
return
required
on
equity
and (3)
the debt
and
equity
share in
the
property.
A
variation
of this
method
is used
to
compute
an
overall
capitalization
rate .
Bargain
and sale
deed
A deed
that
contains
no
warranties
against
liens or
other
encumbrances
but
implies
that the
grantor
has the
right to
convey
title.
Base
line
A
reference
survey
line of
the
government
or
rectangular
survey,
being an
imaginary
line
extending
east and
west and
crossing
a
principal
meridian
at a
definite
point .
Base
rent
The
minimum
rent
payable
under a
percentage
lease.
Bench
mark
A
permanent
reference
mark (PRM)
used by
surveyors
in
measuring
differences
in
elevation.
BENCHMARK
The
standard
or base
from
which
specific
estimates
are
made.
Beneficiary
The
person
who is
to
receive
the
benefits
from a
trust
fund.
Book
value
The
value of
a
property
as an
asset on
the
books of
account;
usually,
reproduction
or
replacement
cost,
plus
additions
to
capital
and less
reserves
for
depreciation.
Breakdown
method
(See
observed
condition
depreciation).
Break-even
point
That
point at
which
total
income
equals
total
expenses.
Break-even
ratio
The
ratio of
operating
expenses
plus the
property's
annual
debt
service
to
potential
gross
income.
Building
capitalization
rate
The sum
of the
discount
and
capital
recapture
rates
for a
building.
Building
codes
Rules of
local,
municipal
or state
governments
specifying
minimum
building
and
construction
standards
for the
protection
of
public
safety
and
health.
Building
residual
technique
A method
of
capitalization
using
net
income
remaining
to
building
after
interest
on land
value
has been
deducted.
Bundle
of
rights
A term
often
applied
to the
rights
of
ownership
of real
estate,
including
the
rights
of
using,
renting,
selling
or
giving
away the
real
estate
or not
taking
any of
these
actions.
C
CRS
Certified
Residential
Specialists,
professional
designation
held by
fewer
than 5%
of
Realtors
in the
United
States (GRI)
Graduates
of the
Realtors'
Institute.
Capital
Money
and/or
property
comprising
the
wealth
owned or
used by
a person
or
business
enterprise
to
acquire
other
money or
goods.
Capitalization
The
process
employed
in
estimating
the
value of
a
property
by the
use of
an
appropriate
capitalization
rate and
the
annual
net
operating
income
expected
to be
produced
by the
property
The
formula
is
expressed
as
Income/Rate
= Value.
Capitalization
rate
The
percentage
rate
applied
to the
income a
property
is
expected
to
produce
to
derive
an
estimate
of the
property's
value;
includes
both an
acceptable
rate of
return
on the
amount
invested
(yield)
and
return
of the
actual
amount
invested
(recapture).
Capital
recapture
The
return
of an
investment;
the
right of
the
investor
to get
back the
amount
invested
at the
end of
the term
of
ownership
or over
the
productive
life of
the
improvements.
Capitalized
value
method
of
depreciation
A method
of
computing
depreciation
by
determining
loss in
rental
value
attributable
to a
depreciated
item and
applying
a gross
rent
multiplier
to that
figure.
Cash
basis
A system
of
recognizing
revenue
and
expense
items
only at
the time
cash is
received
or paid
out .
Cash
equivalency
technique
Method
of
adjusting
a sales
price
downward
to
reflect
the
increase
in value
due to
assumption
or
procurement
by buyer
of a
loan at
an
interest
rate
lower
than the
prevailing
market
rate.
Cash
flow
The net
spendable
income
from an
investment,
determined
by
deducting
all
operating
and
fixed
expenses
from
gross
income
If
expenses
exceed
income,
a
negative
cash
flow is
the
result.
Cash
flow
rate
(See
equity
capitalization
rate)
Cash on
cash
rate
(See
equity
capitalization
rate)
Chain
A
surveyor's
unit of
measurement
equal to
four
rods or
66 feet,
consisting
of 100
links of
7 92
inches
each;
ten
square
chains
of land
are
equal to
one
acre.
Change,
principle
of
The
principle
that no
physical
or
economic
condition
ever
remains
constant.
Chattels
Tangible
personal
property
items.
Client
One who
hires
another
person
as a
representative
or agent
for a
fee.
Closing
statement
The
computation
of
financial
adjustments
required
to close
a real
estate
transaction,
computed
as of
the day
of
closing
the
sale;
used to
determine
the net
amount
of money
the
buyer
must pay
to the
seller
to
complete
the
transaction,
as well
as
amounts
to be
paid to
other
parties,
such as
the
broker
or
escrow
holder
(See
also
settlement).
Code of
ethics
Rules of
ethical
conduct,
such as
those
that
govern
the
actions
of
members
of a
professional
group.
Community
property
A form
of
property
ownership
in which
husband
and wife
have an
equal
interest
in
property
acquired
by
either
spouse
during
the time
of their
marriage
Community
property
does not
include
property
that
each
spouse
owned
prior to
marriage
or
property
received
by gift
or
inheritance
or as
the
proceeds
of
separate
property.
Comparables
Properties
that are
substantially
equivalent
to the
subject
property.
Comparative
unit
method
(See
square-foot
method)
Comparison
method
(See
sales
comparison
approach)
Competition,
principle
of
The
principle
that a
successful
business
attracts
other
such
businesses,
which
may
dilute
profits.
Compound
interest
Interest
paid on
both the
original
investment
and
accrued
interest.
Condemnation
Taking
private
property
for
public
use
through
court
action,
under
the
right of
eminent
domain,
with
compensation
to the
owner.
Conditional
use
permit
Approval
of a
property
use
inconsistent
with
present
zoning
because
it is in
the
public
interest.
For
example,
a church
or
hospital
may be
allowed
in a
residential
district.
Conditions,
covenants
and
restrictions
(CC&R's)
Private
limitations
on
property
use
placed
in the
deed
received
by a
property
owner,
typically
by
reference
to a
Declaration
of
Restrictions.
Condominium
The
absolute
ownership
of an
apartment
or a
commercial
unit,
generally
in a
multiunit
building,
by a
legal
description
of the
airspace
that the
unit
actually
occupies,
plus an
undivided
interest
in the
ownership
of the
common
elements,
which
are
owned
jointly
with the
other
condominium
unit
owners.
Common
elements
All
portions
of the
land,
property
and
space
that
make up
a
condominium
property
that
include
land,
all
improvements
and
structures,
and all
easements,
rights
and
appurtenances
and
exclude
all
space
composing
individual
units.
Each
unit
owner
owns a
definite
percentage
of
undivided
interest
in the
common
elements
Parcel.
The
entire
tract of
real
estate
included
in a
condominium
development;
also
referred
to as a
development
parcel
Unit
One
ownership
space in
a
condominium
building
or a
part of
a
property
intended
for
independent
use and
having
lawful
access
to a
public
way.
Ownership
of one
unit
also
includes
a
definite
undivided
interest
in the
common
elements.
Conformity,
principle
of
The
principle
that
buildings
should
be
similar
in
design,
construction
and age
to other
buildings
in the
neighborhood
to
enhance
appeal
and
value
contiguous.
Adjacent;
in
actual
contact;
touching.
Contract
