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Real Estate Dictionary
Abatement: A reduction or decrease in property taxes, approved by the taxing authority, initiated at the request of the taxpayer.
Acre: A unit of land of any shape that measures 43,560 square feet.
Adjustable Rate Mortgage (ARM): A mortgage loan in which rate/payments vary according to the current rate of interest and may increase or decrease at specified intervals. It is usually based on an outside index such as US Treasury Bills or the cost of funds in the local Federal Reserve District.
Adjustments at Closing: Money that buyers and sellers credit to each other at closing, such as proportion of taxes, lake rights fees, down payments etc.
Ad Valorem Tax: Literally, Latin for "at value." A tax based on a fixed percentage of the property's value. The value of the property is determined by the tax assessor.
Agent: Licensed representative of the seller who assists both the buyer and the seller with information.
Amortization: The payment of a financial obligation over a period of time on an installment bases in equal amounts. The amount of the loan, the interest rate and the total number of payments are used to determine what the monthly payments will be.
Annual Assessment Date: All comparable sales used for a property tax reduction must precede this date. Twelve months is acceptable, however, more recent comparable sales would be more favorable. A professional appraiser looks for data within 6 months of the date of sale and gives an explanation why any later comparable sales are used.
Apportion: Once the amount of taxes to be levied by each taxing district has been determined, the total tax levy must be divided, or apportioned, among all the taxation districts which contain territory in the jurisdiction. (Guide for the Property Owner, Wisconsin Department of Revenue, 1993, p. 1)
Appraisal: The act or process of estimating value. Its estimate of probable selling price should be thorough, comprehensive, supportable and justifiable. (Uniform Standards of Professional Appraisal Practice, 1/1/89)
Appraised Value: An estimate of the fair market value of a particular property. This should be 100% of the property's market value.
Asking Price: The price at which the owner wishes to sell a property.
Assessed Value: Value placed on land and building(s) by a government tax assessor for use in levying property taxes. The assessed value of the property may be different than the appraised value.
Assessor: Municipal or county tax official who determines the value of property for taxation.
Balloon Mortgage: A large payment on a mortgage due at the end of a certain time period.
Broker: A person licensed to represent home buyers or sellers for a fee.
Closing: The final exchange of title and signing of the mortgage.
Closing Cost: The fees and other charges paid by both the buyers and sellers at closing.
Commission: The percentage of the home's final sales price paid at closing to the listing agent and cooperating agents.
Competitive Market Analysis (CMA): An estimate of a home's current market value based on using recent sales of comparative home with similar features.
Conventional Mortgage: A mortgage not FHA (Federal Housing Administration) insured or guaranteed by the VA (Veteran's Administration). Conventional loans are made by institutional lenders, mortgage companies and private individuals.
Counteroffer: The offer made by the buyer or seller in response to the other's bid.
Deed: A written instrument that, when executed, transfers title from the seller to the buyer.
Down Payment: The amount of the selling price that is paid in the beginning. It is usually in cash and not financed.
Earnest Money: Money that is put down to show the buyer's good faith intentions. It is generally applied against the purchase price of the house. If the buyer backs out, it may be forfeited.
Easement: A right or privilege that one has in order to use land for a specific purpose. For example, a right of way for pipes, utility poles, private or public passage, etc.
Estate: The degree of ownership a person has in real property.
Equity: The difference between the anticipated sales price of a house and the mortgage or other lien or indebtedness.
Escrow Account: A third-party account for holding money in trust for others.
Exclusive Agency: A sales contract by which sellers own no commission to an agent if they find a buyer for their house on their own.
Exclusive Right to Sell: A sales contract in which sellers owe commission to the listing agent even if the sellers find a buyer for their house on their own.
Fair Market Value: See market value.
FHA-Insured Mortgage: The Federal Housing Administration, a government agency, insures FHA-approved conventional lenders against loss under FHA loan programs. They often are mortgages with a low down payment requirement.
Fee Simple: Sometimes called fee or fee simple absolute. It is the greatest possible estate or degree in the right of ownership and continues without time limitation.
Fixed Rate Mortgage: A mortgage that is locked into a set interest rate. The interest and payment amount remain the same throughout the life of the loan.
Frontage: The length of the property's boundary that parallels the street. On a lakefront home, the frontage is the shore line.
Gradual Payment Mortgage: Mortgage offering low initial monthly payments that increase by a predetermined amount before leveling off for the the duration of the loan.
Gross Living Area: Used by appraisers, it is the method for measuring the size of a house by measuring the outside of the house above the foundation. Each story is included. Areas such as basements, attics, porches or garages, are excluded from the total calculation.
Highest and Best Use: All land is appraised "as if vacant and available for its highest and best use." It is one of the most important principles in valuation and can have tremendous impact on the value of a property. The highest and best use of the land must be legally and economically possible. It is the most profitable use of the land and must be physically possible.
Homeowner's Policy: An insurance policy covering a home for its appraised value.
Home Warranty: A policy that is purchased by a buyer or seller as assurance against unexpected repair costs.
Improvements: Improvements are buildings, additions to buildings, parking lots, decks, sidewalks, wells and/or other permanently attached additions to land.
Inspection Clause: A stipulation in an offer that makes the contract contingent on the findings of a professional home inspector.
Intangible Personal Property: This includes such things as stocks, bonds, notes and patents.
Leasehold: The right to possess and use real estate for a specific time created by a lease.
Lease-Purchase Agreement: An agreement between tenant and landlord that a portion of the monthly rent may be credited toward the eventual purchase of a rental property.
Listing: A contract in which the seller agrees to pay a commission to the agent who finds a purchaser
Location: An economic concept unique to real estate because of its immobility.
Lot and Block System: A legal description used in describing a parcel of land as found in the plat record of subdividable land.
Market Value: The most probable price that a property will sell for in a free market of buyers and sellers, free from constraining pressures or unusual situations.
Mill: This equals one tenth of a cent. It is given as a percentage figure that everyone pays on the assessed value of the property. See tax rate.
Millage Rate: This is also known as the tax rate and is set by the county government. The millage rate is derived at by dividing the county's operating budget by the total assessed value in the county. A millage rate of 35 mills, or $35.00 per thousand, means that the assessed value of the property is multiplied by $35.00 for each thousand dollars of the assessment. See tax rate.
Mortgage: The document creating a mortgage lien.
Mortgage Broker: The independent third party who arranges transactions between the borrowers and lenders by finding favorable terms for the buyers.
Mortgage Note: The legal, negotiable evidence of debt that is created by a signed promise to repay a mortgage loan. It specifies the amount of the loan, rate of interest, repayment schedule and other terms associated with the debt repayment.
Multiple Listing Service (MLS): An association of real estate brokers that agrees to work together, pooling their data and cooperating to sell the group's listings.
Neighborhood: A separately identifiable area within a community retaining some quality or character which distinguishes it from other areas.
Obsolescence: One of the causes of depreciation brought about by changes in design, new concepts and/or new inventions.
Offer (Offer-to-Purchase): A legally binding, written contract that stipulates the amount the buyer will pay for the house providing certain conditions are met.
Origination Fee: Is a fee paid to the lender, similar to points.
Over-Improvement: A feature to a house or attached to the house in which the cost is greater that the increased value to that property
PITI: Principal, Interest, Taxes,and Insurance. The main parts of a monthly mortgage payment.
Personal Property: Non-real items and tangible items not permanently attached to the ground. Permanent items would cause injury to the item or to the real estate if they were extracted.
Plat: A plan, map or chart of a city, town or section, usually on land that has been subdivided, indicating boundaries and borders of individual properties. Each lot is identified by number and letter. Lot dimensions are noted. It may also include features such as building locations, water pipes, sewer lines, vegetation, topography, etc.
PMI: Private mortgage insurance which protects the lender against default by the borrower. Most lenders not insured by the federal government require PMI on low down payment loans.
Points: One point equals 1% of the total mortgage loan amount. They are up-front mortgage interest fees, pre-paid interest, used to reduce the initial interest payment. Generally, if you keep the loan for more than 4 years or if the inerest rate is not declining (if it is declining you'll want to consider refinancing) you'll be able to recoup the cost and points make sense.
Principal: The original amount of the money borrowed from a lender. This does not include interest or fees.
Productive Use Value: Productive use value is that value which land has for agricultural and/or horticultural use.
Property Classification: For property tax purposes, property is divided into three classes: (1) real property (2) tangible personal property and (3) intangible personal property. Real property is further subclassified as (1) residential, (2) agricultural or horticultural, and (3) utility, industrial, commercial railroad, etc.
Property Record Card: This card is found at the tax assessor's office and contains the information gathered on a particular property along with calculations used to determine assessed value.
Real Estate: This is the land itself and all things permanently attached to it.
Real Property: Real property refers to the rights of ownership.
Referral: The recommendation of a potential buyer or seller to another cooperating agent.
Repairs: This is the expenditure for general upkeep to maintain the property close to the original condition. It does not include the renovation or replacement of any substantial part of the house.
Replacement Costs: This is the cost of construction to replace a similar building at current prices using up-to-date materials and a design meeting current building codes.
Revaluation: This is the mass appraisal of all property within an assessment district, municipality, county, parish, precinct, township, or ward to obtain equalization of assessed values.
Right of Way: The privilege to cross over the land of another by one person or persons. An easement.
Settlement Disclosure Statement: A complete breakdown of costs prepared by the lender's agent at closing.
Site: A plot of land that has been improved or is suitable upon which to build.
Special Assessments: A variety of the property tax that requires that the rate of assessment be uniform for all property within a particular special benefit classification.
Substitution: The principle of substitution says that the maximum value of a property tends to be set by the cost of an equivalent, equally desirable, similar substitute property at a certain date. The cost of an addition or the cost of remodeling work may not increase the value of your house by a value equivalent to the construction cost. The value of a component part of the property's value depends on the amount that it contributes to the value of the whole property. For example, if the cost of building an attached greenhouse is $16,000, the actual amount that increases and contributes to the total property value may be only $3,000. A prudent buyer will buy a feature at the lowest price given a choice of features.
Tangible Personal Property: Includes such things as automobiles, boats, planes, farm implements which are moveable and are not attached to the land.
Tax Abatement: A decrease in the amount of property tax resulting in a refund of taxes due to the taxpayer.
Tax Base: The sum of all assessed property values in a community.
Taxing District: The specific area, such as a county, over which a taxing authority can levy taxes. Synonymous with assessment district.
Tax Map: A map that shows by block and lot the boundaries of individual lots within a taxing district.
Tax Rate: The ratio of dollars of tax found by dividing the budget (the amount of money the local government will spend in one year) by the total assessed value of real estate in the taxing district. The tax rate is shown as dollars per hundred ($7.00 per hundred shown as .07) and may also be known as the mill rate (millage means per thousand. A millage rate quoted as 70 mills would be equivalent to a tax rate of $70.00 per thousand in valuation).
Tax Sale: The sale of property for unpaid taxes done by public auction.
Title: The right of ownership and possession of a property.
Title Insurance: An errors and omissions insurance policy that protects a buyer against defects in the title of a property.
VA Mortgage: A mortgage guaranteed by the Department of Veterans Affairs to people who have served in the armed forces or their dependents or survivors. Terms are favorable with little or no money down, easy qualification and a relative low interest rate.
Variable Rate Mortgage: See ARM (Adjustable Rate Mortgage).
Zoning: The division of a community into separate areas showing how the property in each zone may be developed such as residential, multifamily, local business district, light industrial, commercial park district, etc.
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