Terms to know when buying a home in Las Cruces NM 

AAA TENANT A tenant with a top credit rating. To a real estate developer, attracting such a tenant is important since the ability to arrange both construction and permanent financing for a major commercial project, such as a shopping center or office building, is often dependent upon pre- leasing a certain amount of the space to an AAA tenant(s).

AAE Accredited Assessment Evaluator. A professional designation awarded by the International Association of Assessing Officers.

ABANDONMENT The voluntary release of a claim or right one has in a piece of property with the clear intention of terminating possession or interest and without giving this interest to anyone else. Abandonment includes both the intention to release any claim one has against the property as well as the actual act of "abandoning" the property.

ABATEMENT A decrease or reduction in the amount of a charge such as rent. For example, a tenant receives an abatement of rent during the time the leased space cannot be inhabited due to fire or flood damage.

ABLE A term referring to the financial capability of a purchaser. The word is often used in a phrase appearing in real estate listing agreements and sales contracts as "ready, willing and able."

ABNORMAL SALE A sale that is not typical within the context of what is happening in the marketplace.

ABODE A home or place of residence.

ABROGATE To repeal or cancel. For example, a law could be repealed (abrogated) by legislative action.

ABSENTEE OWNER The owner(s) of property who does not physically reside on the property. When this occurs both the rental as well as the upkeep of the property are normally done by someone other than the actual owner, such as a property manager.

ABSORPTION RATE The percentage of a particular type of real estate that can be sold or leased in a particular location during a certain period of time.

ABSTRACT OF TITLE A condensed chronological history of all recorded instruments in the chain of title which affect the title.

ABSTRACTION (EXTRACTION) METHOD A method of estimating the value of land by establishing a ratio of site value to total property value based on data from comparable improved properties. The ratio derived from comparable properties is then applied to the total value of the property being appraised to estimate the value of the land.

ABUT To border on or to share a common boundary. For example, a property owner could have land that "abuts" a highway, which means the two properties border each other.

ACCELERATED DEPRECIATION The method(s) of depreciation for income tax purposes which increases the write-off at a rate higher than under the straight-line method of depreciation.

ACCELERATION CLAUSE A clause in a promissory note, mortgage or deed of trust giving the creditor (mortgagee) the legal right to demand immediate payment of all future payments due to the occurrence of some event such as the default on an installment payment or the failure to keep the property adequately insured.

ACCEPTANCE A voluntary expression by the person receiving the offer (the offeree, and quite often the seller of the property) to be bound by the exact terms of the offer in the manner requested or authorized by the person making the offer (the offeror, and quite often the potential buyer of the property). An acceptance must be unequivocal and unconditional.

ACCESS The right to enter upon and leave property. The owner of land which abuts or adjoins a road or highway normally has a vested right to come and go from his or her land to the highway without obstruction, subject to limitations imposed by the governing body.

ACCESSIBILITY The ease with which a person can either enter or exit a particular parcel of land. The accessibility of a particular parcel is a function of many things such as frontage to a road, traffic flow, and topography. Good accessibility will usually result in higher value; likewise, a parcel of land with poor accessibility will normally sell for less in the marketplace.

ACCESSION The legal right that entitles the owner of land to all that the soil produces or all that is added to the land either intentionally or by mistake.

ACCESSORY BUILDING A second building on a lot and one that is not considered to be the primary building. A storage shed or a detached garage would be an accessory building.

ACCORD AND SATISFACTION An agreed-to substitution of a different performance for the original obligation, the accord being the agreement and the satisfaction the execution or performance.

ACCREDITED RESIDENTIAL MANAGER (ARM) A professional designation awarded by the Institute of Real Estate Management (IREM), an affiliate of the National Association of Realtors. The designation is intended for those persons specializing in the management of residential property.

ACCRETION The accumulation of land (soil) as a result of the gradual washing or motion of water (alluvion).

ACCRUED An accumulation over a certain period of time, such as accrued depreciation or accrued interest.

ACCRUED DEPRECIATION Any diminishment or loss of utility or value of a building from the time of initial construction to the present. Accrued depreciation is calculated as the difference between what it would cost to replace the building new and the current appraised value of the building.

ACCRUED INTEREST Unpaid interest that has already been earned.

ACKNOWLEDGMENT A formal declaration to a public official by a person who has signed (executed) an instrument which states that the signing was voluntary.

ACQUISITION The act or process by which property ownership is achieved. The ways in which title to real property is transferred may be classified as (1) voluntary conveyance (deed), (2) transfer by devise (dying with a will) or descent (dying without a will), (3) transfer by adverse possession, (4) transfer by accession and (5) transfer by public action or by operation of law.

ACQUISITION COST The total cost of purchasing or acquiring title to real property. In addition to the sales price, additional costs could also include loan origination fees, appraisal fee, credit report fee, title charges, attorney fees and other normal closing costs.

ACRE A measure of land in whatever shape equal to 43,560 square feet, 4,840 square yards or 160 square rods. A square parcel of land measuring 208.71 feet on each side contains one acre. There are 640 acres in a section of land.

ACREAGE PROPERTY A large tract of land that has had few, if any, improvements made either "to" the land, such as roads or the platting of individual lots, or "on" the land, such as buildings.

ACTION TO QUIET TITLE A lawsuit filed by a person to remove a cloud on title or clear the claims of others filed against a parcel of property. The objective of such action is to have a court rule that the claims filed against the property are invalid.

ACT OF GOD Any act of nature such as rain, lightning, floods or earthquakes. Many casualty insurance policies do not cover losses resulting from an "Act of God."

ACTUAL AGE The historical (chronological) age of a building, as for example a building constructed ten years ago is ten years old in actual age. Actual age should not be confused with effective age which is the age of a building that is indicated by the condition and utility of the improvement. It should be clear that the amount of maintenance and care given to a building helps determine its effective age. For example, a ten-year-old building might have an effective age of twenty-five years because of poor or deferred maintenance.

ACTUAL AUTHORITY The power that a principal has expressly conferred upon an agent or any power that is incidental or necessary to carry out the express power of the agency. This power may be broad, general power or it may be limited, special power.

ACTUAL CASH VALUE The monetary worth of a structure for insurance purposes. Actual cash value is calculated by taking the replacement cost of the property and then subtracting the value of the physical wear and tear of the property.

ACTUAL DAMAGES The compensation received by an injured party for the actual injuries or loss suffered by the party.

ACTUAL EVICTION The violation of any material breach of covenants by the landlord or any other act which wrongfully deprives the tenant of the possession of the premises.

ACTUAL POSSESSION The physical occupancy and control by someone of a parcel of real estate. For example, if John has clear title to his house and is living in the house then he is in actual possession of the house. A distinction should be made between actual possession and constructive possession which occurs when a person has the legal right to assume occupancy but does not actually occupy the space.

ADC LOAN A type of loan intended to cover the three phases of a project: (1) acquisition, (2) development, and (3) construction. Such loans, while considered more risky than some other types of real estate loans, are normally made with a variable interest rate and are expected to be repaid over a reasonably short period of time.

ADDENDUM Something that is added and thus made part of a document. Quite often a real estate listing agreement or sales contract is a pre-printed form and thus may not have the space within the document to include specific and detailed information that the parties to the contract wish to include.

ADD-ON-INTEREST A method of calculating the amount of interest due by taking the simple interest that would be charged if the loan principal amount was not amortized over the term of the loan. Periodic installments are thus calculated by dividing the sum of the add-on interest and original principal by the number of periods in the term.

ADEQUATE PUBLIC FACILITIES ORDINANCE A local government ordinance that requires that certain public facilities such as road and utilities be completed or soon to be completed before any new real estate development can be permitted. This technique is used by municipalities to control growth and direct new development toward areas where adequate public facilities exist.

ADJACENT LAND Land lying close to or near another parcel, though the two parcels may not actually touch. The term should not be confused with adjoining land which exists when two parcels are actually jointed to each other.

ADJUNCTION The process of adding or annexing a parcel of land to a larger parcel.

ADJUSTABLE RATE MORTGAGE (ARM) A type of real estate loan in which either the interest rate charged or the length of the loan, or both, can change. Adjustable rate mortgages became very popular during the 1980s due primarily to the reluctance of lenders to quote a fixed interest rate loan to potential borrowers. By using an ARM, a lender is able to pass on the uncertainty of changes in interest rates to the borrower if rates change during the life of the loan. ARMs are normally tied to some index such as government securities.

ADJUSTED COST BASIS The value of property for accounting purposes used to determine the amount of gain or loss realized by the owner upon the sale of the property.

ADJUSTED SALES PRICE The estimated sales price of a comparable property after additions and/or subtractions have been made to the actual sales price for improvements and deficiencies when compared to the subject property being appraised.

ADJUSTMENTS The additions and subtractions made in the market data or comparable sales approach to value to account for differences in location, design, age, etc. between the properties being used as comparables and the subject property being appraised.

ADMINISTRATOR A person appointed by a court to administer or settle the estate of a deceased person who has died intestate (dying without a will).

ADMINISTRATRIX A female administrator of an estate.

ADMINISTRATOR'S DEED A conveyance of property which is issued to a grantee (purchaser) who purchases property from an estate.

ADULT A person who has attained the age of majority and thus has the legal capacity to be bound under a contract. The age of majority varies from state to state.

AD VALOREM A Latin prefix meaning "according to value." Local and state governments levy taxes on real property based on the assessed value of the property. Two different pieces of property with the same assessed value have the same ad valorem tax.

ADVANCE The word has two common meanings in real estate finance: (1) to pay or advance money before it is due, and (2) to disburse working capital to a builder/developer through a construction loan. Under the first meaning, an owner might have both a first mortgage and a second mortgage on a parcel of real estate.

ADVERSE POSSESSION A method of acquiring title to real property by possession for a statutory period of time.

AESTHETIC VALUE The intangible value of property created when the property possesses unique characteristics or features that make it attractive.

AFFIANT The person who makes an affidavit.

AFFIDAVIT Latin meaning "has pledged his faith." A written statement of facts made voluntarily and sworn to under oath before a public official or other persons authorized to administer such an oath.

AFFIDAVIT OF TITLE A sworn statement by the seller of real estate that no defects of title other than those stated in the sales contract or deed exist in the title being conveyed.

AFFIRM Ratification of a voidable contract by the party who is to be bound under the contract.

AFFIRMATION A solemn and formal declaration attesting to the truth of some matter. In certain instances, an affirmation is substituted for an oath, as for example, when a person for religious or personal reasons does not wish to take an oath.

AFFIRMATIVE FAIR HOUSING MARKETING PLAN Action taken with the intent of encouraging minority integration in housing. The Department of Housing and Urban Development (HUD) has required an affirmative fair housing marketing plan from all subdivisions, multi-family projects and mobile home parks of five or more units before these projects are eligible for participation in various federal programs, including home mortgage programs.

AFTER ACQUIRED TITLE Legal ownership in real property acquired by someone who had previously transferred his or her legal interest in the property.

AFTER-TAX CASH FLOW The spendable cash from an income- producing asset, such as an office building or apartment complex, calculated by taking gross income and subtracting fixed and variable costs, replacement for reserves, debt service plus tax savings or minus tax liability.

AFTER-TAX EQUITY YIELD RATE The internal rate of return on the equity investment after considering federal income taxes.

AFTER-TAX PROCEEDS FROM RESALE The amount of money a property seller would receive from a property sale after subtracting transaction costs, capital gains taxes and other expenses. Generally, this figure is calculated by taking the selling price less the sum of the existing debt, the income or capital gains taxes, and the expenses of sale.

AGE-LIFE METHOD A method of estimating accrued depreciation by applying to the reproduction cost new of the property the ratio of the property's effective age to its economic useful life.

AGENCY A relationship in which one party (known as the principal) authorizes another party (the agent) to act as the principal's representative in dealing with third parties. Agency law generally involves rights and liabilities among these three parties.

AGENCY BY ESTOPPEL (Ostensible Agency) A type of agency relationship that occurs when the principal in a principal-agent relationship leads a third person to believe that someone is an agent. The principal may create the impression of agency either intentionally or negligently.

AGENCY BY NECESSITY An agency relationship in which authority to act is created by operation of law in an emergency. During such an emergency, it is generally unnecessary to gain consent from a principal in order for a person to act to protect property or person.

AGENCY BY RATIFICATION A type of agency relationship that occurs when a principal agrees to be bound by the acts of a person purporting to act as an agent, even though the person was not in fact an agent. The principal may also be bound if there are acts of an agent who acted beyond the scope of authority.

AGENT One who acts for and in the place of a principal for the purpose of affecting the principal's legal relationship with third persons. The power of an agent to affect the principal's legal relations for lawful purposes is called authority.

AG LAND Land zoned for agricultural use such as farmland or land used to raise livestock.

AGGRAVATION COSTS The annoyance and irritation to a driver or passenger during a linkage trip caused by congestion, bad weather, delay or other inconveniences.

AGREEMENT An expression of mutual assent, or a meeting of the minds, by two or more parties on a given proposition.

AGRICULTURAL PROPERTY Land zoned for agricultural or farming activities.

AIR RIGHTS The right to use, control and occupy the space above a particular parcel of real estate.

ALC Accredited Land Consultant. A professional designation awarded by the Realtors Land Institute to people involved in the marketing and brokerage of land.

ALIENATION The voluntary transfer of property and possession of the land or tenements from one party to another.

ALIENATION CLAUSE A provision often included in a mortgage or deed of trust that legally permits the lender (mortgagee) to demand payment of all the outstanding principal if the property is sold or transferred by the borrower (mortgagor). Such a provision is also commonly known as a due-on-sale clause.

ALLOCATION (ABSTRACTION) METHOD An appraisal technique used to estimate the value of the site (land) by deducting the value of the improvements from the total sales price of the property.

ALLODIAL SYSTEM The free and complete ownership of land by individuals. The allodial system is the system of property ownership in America today. The term allodial means free from the tenurial or vested rights in the king or feudal overlord.

ALLUVION The increase of soil, gravel or sand upon the bank of a stream or river or the shore of a sea due to the flow or current of the water. The actual act of the soil being added is known as accretion.

ALONSO, WILLIAM An urban economist who believed that urban sites are composed of both land and location. In his book, Location and Land Use, Alonso explained the trade-off that exists between land rent and the transportation cost incurred by individuals in determining where to locate within an urban area.

ALTERATION An unauthorized modification of a contract by one of the parties to the contract. The alteration is considered material when it affects the rights of the parties to the contract. If the alteration is intentional and material, it will be treated as fraud and the innocent party may void the contract at his or her option.

AMENITY A feature or benefit received from a particular parcel of property which increases the satisfaction received by the owner or user of that property. Amenities may be both natural, for example, location or scenic view, and manmade, such as a swimming pool or tennis courts. Both material and manmade amenities increase the desirability of a certain location or parcel of land and thus that particular land will normally have a higher value than a parcel of land without the amenities.

AMERICAN BANKERS ASSOCIATION (ABA) Membership in the American Bankers Association is comprised of persons employed in the commercial banking business. The organization serves as a spokesman for the banking community. The Association is headquartered at Connecticut Avenue, N.W., Washington, D.C. 20036; (202) 663-5000.

AMERICAN ECONOMIC DEVELOPMENT COUNCIL (AEDC) The American Economic Development Council is an international organization whose mission is to advance the art and science of economic development. AEDC publishes a journal, Economic Development Review, and awards the professional designation CIDICED (Certified Industrial or Economic Developer). The council's address is Suite 22, 4849 North Scott Street, Schiller Park, Illinois 60176.

AMERICAN INSTITUTE FOR PROPERTY AND LIABILITY UNDERWRITER The American Institute for Property and Liability Underwriters is the main professional organization of property insurance agents. In addition to numerous educational programs and seminars, a professional designation, CPCU (Chartered Property Casualty Underwriter), is sponsored by the institute. The mailing address is Providence and Sugartown Roads, Malvern, Pennsylvania 19355; (215) 64-2100.

AMERICAN INSTITUTE OF ARCHITECTS This institute awards the designation AL4 and is the primary group for promoting architecture as a profession. Among the group's activities is its national committee on housing which provides numerous services in an effort to improve the quality of the living environment. The institute is located at 1735 New York Avenue, N.W., Washington, D.C 20006; (202) 626-7300.

AMERICAN INSTITUTE OF HOUSING CONSULTANTS This organization works with nonprofit sponsors in developing low-income housing. The institute also serves as a spokesman for low-income housing.

AMERICAN LAND DEVELOPMENT ASSOCIATION (ALDA) The American Land Development Association is a trade organization comprised primarily of land developers. The association's primary function is to represent the interstate land development industry in matters related to land development. The mailing address is 1200 L Street, N.W., Washington, D.C. 20005; (202) 371-6700.

AMERICAN LAND TITLE ASSOCIATION (ALTA) An association, founded in 1907, representing more than 2,100 title abstractors, title insurance companies, title insurance agents, and associate members. Since the role and responsibility of the title industry, and of its ALTA members, is to guarantee the safe, efficient transfer of real property, the ALTA membership functions cooperatively and effectively to provide protection for consumers and lenders alike. Members of the association use standardized title insurance forms developed by ALTA to provide uniformity within the industry. The ALTA staff represents specialists in the fields of government relations, public affairs, research and state governmental affairs. ALTA’s national headquarters is located at 1828 L Street, N.W., Suite 303, Washington, D.C. 20036; (202) 296-3671.

AMERICAN PLANNING ASSOCIATION (APA) A professional trade association comprised of both publicly and privately employed planners. APA was formed by the merger of the American Institute of Planners and the American Society of Planning Officials. The association is located at 1313 East 60th Street, Chicago, Illinois 60637; (312) 947-2560.

AMERICAN REAL ESTATE AND URBAN ECONOMICS ASSOCIATION (AREUEA) The principal professional organization of real estate education, AREUEA consist of both educators and professional practitioners. The association publishes a journal of articles dealing with land use, urban economics and related topics.

AMERICAN SOCIETY OF APPRAISERS An appraisal organization consisting of persons involved in the appraisal of both real and personal property. The society sponsors the designation ASA. The society's mailing address is Dulles International Airport, P.O. Box 17265, Washington, D.C. 20041; (703) 478-2228.

AMERICAN SOCIETY OF CONSULTING PLANNERS A professional society whose membership is limited to private planning firms. The society offers various services to its members and serves as a spokesman for consulting planners. The address is Suite 647, 210 7th Street, S.E., Washington, D.C. 20003; (202) 544-0035.

AMERICAN SOCIETY OF HOME INSPECTORS, INC. (ASHI) A professional trade organization whose membership specializes in the physical inspection of homes. ASHI publishes numerous pamphlets and proceedings, conducts seminars and provides a Standards of Practice. The society's address is 7th Floor, 3299 K Street, N.W., Washington, D.C. 20007; (202) 842- 3096.

AMERICAN SOCIETY OF REAL ESTATE COUNSELORS (ASREC) As an affiliate with the National Association of Realtors, this society consists of real estate brokers, appraisers, and consultants involved in assisting people in the buying and selling of real estate. The professional designation CPE (Counselor, Real Estate) is awarded by the society. The mailing address is 430 North Michigan Avenue, Chicago, Illinois 60611; (312) 440-8091.

AMO Accredited Management organization. A professional designation awarded by the Institute of Real Estate Management to companies involved in the management of property.

AMORTIZATION The repayment of a financial obligation over a period of time in a series of periodic installments. Specifically, this is the payback of the principal owed to the lender. The effect of amortization is to build up the paper value of the investor's (owner's) equity and to reduce the debt obligation. It should be noted that a portion of each payment consists of a blend of interest and amortization of principal. The interest portion is tax deductible, whereas the amortization is not.

AMORTIZATION RATE The percentage of a periodic payment that is applied to the reduction of the principal; in a level- payment mortgage this corresponds to the sinking fund factor.

AMORTIZATION TERM The time period over which the principal amount would be retired on the basis of the periodic installments paid.

AMORTIZED LOAN A financial obligation that is repaid over a period of time by a series of periodic payments.

ANACONDA MORTGAGE A type of mortgage in which a clause is included which states that the mortgage secures all debts of the mortgagor (borrower) that may be due and payable to the mortgagee (lender). Such a provision is also referred to as a Mother Hubbard clause.

ANALYST An individual who performs various studies and calculations to help make decisions or solve problems concerning real estate investments.

ANCHOR TENANT A well-known commercial retail business such as a national chain store or regional department store strategically placed in a shopping center so as to generate the most amount of customers for all of the stores located in the shopping center.

ANNEXATION The act of adding, joining and attaching one thing to another. With respect to the annexing of land, from time to time municipalities legally incorporate into the existing town or city limits a certain amount of land or territory outside their legal boundary. This may be done to consolidate two governments into one or perhaps to increase property tax revenue for the municipality.

ANNUAL Occurring once a year.

ANNUAL DEBT SERVICE Total payments required in one year in regard to a loan. The amount of payment is affected by either a change in the interest rate or a change in the payback period.

ANNUAL LOAN CONSTANT A ratio of the annual debt payment on a loan to the original amount borrowed. The loan constant is also referred to as a mortgage constant.

ANNUAL PERCENTAGE RATE (APR) The actual yearly cost of credit stated to the nearest one-fourth of one percent. Any lender subject to the federal Truth-in-Lending Act must fully disclose the APR to the borrower.

ANNUITY A series of payments made or received at even intervals either for life or for a fixed number of years.

ANNUITY IN ADVANCE An annuity in which payments are made at the beginning of each period as contrasted with an ordinary annuity in which payments are made at the end of each period.

ANNUITY METHOD A means of capitalizing future income streams from an investment. The procedure uses compound interest formulas that treat the income stream as an annuity providing for both a return "on" the investment and a return "of" the investment.

ANTICIPATION, PRINCIPAL OF A basic value principle which states that value changes in expectation of some future benefit or detriment affecting the property. For example, the value of a vacant parcel of land may increase if an office building is constructed next to it; likewise, use of land as an open dump may result in decreased values of surrounding residential properties.

ANTITRUST LAWS State and federal laws enacted to protect individuals and business entities from monopolies and unfair restrictions. For example, local real estate boards cannot require its members to charge a certain brokerage commission rate since to do so would be in violation of federal antitrust laws.

APARTMENT BUILDING A type of property intended for permanent residents who lease a specific space or unit. Payment for use of the space is referred to as rent.

APPARENT AUTHORITY In agency law such authority which a third person can reasonably assume that an agent has on the basis of actions or inactions of the principal. This is so despite the fact that the agent may not have actual authority.

APPEALS BOARD A means by which a property owner can formally protest a tax bill and seek a change in the assessed value of his or her property. Jurisdictions that have such a board normally require the property owner to have first met with the tax assessor prior to appealing the property tax.

APPOINTMENTS Items such as furniture or equipment found in a building that may increase or decrease the intrinsic value of the property.

APPORTIONMENT A division or allocation of responsibility among two or more persons. In regard to the sale of real estate, the allocation is typically of a cost or expense such as property taxes between the purchaser and the seller, or, in the case of income producing property, the allocation of rental income between the purchaser and seller. Normally the seller is responsible for expenses up to and including the day of settlement or closing.

APPORTIONMENT CLAUSE A clause normally included in standard insurance policies to prevent financial gain by the insured as a result of insuring the same property with two or more companies and hoping to collect more than the loss.

APPRAISAL An estimate or opinion of value supported by factual information as of a certain date.

APPRAISAL FOUNDATION An educational self-regulatory organization which functions for the purpose of developing appraisal standards and appraiser qualifications. The Appraisal Foundation is comprised of member organizations representing various appraisal groups, users of appraisal services and the public at large. The address is 1029 Vermont Avenue, N.W., Suite 900, Washington, D.C, 20005; (202) 347-7722.

APPRAISAL INSTITUTE A professional real estate appraisal organization whose members specialize in valuation and market analysis. The mailing address is 225 North Michigan Avenue, Chicago, Illinois 60611; (8ffl) 732-7732.

APPRAISAL INSTITUTE OF CANADA An appraisal organization comprised of persons doing appraisal work in Canada. The institute offers membership to those appraisers in the United States who do appraisal work in Canada. The address is 177 Lombard Avenue, Winnipeg, Manitoba, Canada; (204) 942-0751.

APPRAISAL PRINCIPLES Economic concepts used to explain the rationale and process of market behavior. Appraisal principles include anticipation, change, competition, substitution, and supply and demand.

APPRAISAL PROCESS A systematic step-by-step analysis used by the appraiser to accurately reach an opinion of value. While each appraisal assignment varies according to the purpose of the appraisal and the approach(es) used, a well-done estimate of value will follow some standardized procedure.

APPRAISAL REPORT A written report submitted by the appraiser to support and document the opinion of value rendered by the appraiser. The form of the appraisal report can be a letter of valuation, a single page standard form or a more elaborate report.

APPRAISED VALUE An estimate of value based on the appraiser's analysis of data within the context of the appraisal problem that the appraiser was employed to solve.

APPRAISER An individual who has the experience, training, and legal qualifications to appraise real or personal property. Effective July 1, 1991, appraisers must be state certified or licensed in order to appraise property involving a federally insured or regulated agency.

APPRECIATION An increase in an asset's market value over its value at some previous point in time. The increase can be a result of inflation, increased demand or some other related cause. The term denotes the opposite of depreciation.

APPROACHES TO VALUE The various acceptable methods used by appraisers in deriving an estimate of value. There are three traditional approaches to value: (1) cost approach, (2) sales comparison approach, and (3) income approach.

APPURTENANCE That which belongs to something else and thus passes with the property. Examples would include riparian rights, easements, barns and other outbuildings, gardens and orchards.

ARA An appraisal designation for Accredited Rural Appraiser awarded by the American Society of Farm Managers and Rural Appraisers.

ARM Accredited Resident Manager. A professional designation awarded by the Institute of Real Estate Management to individuals involved in the management of property.

ARBITRATION A procedure for resolving disputes out of court by an impartial third party chosen by the disputing parties who agree to abide by the decision of the arbitrator. While disagreements and disputes involving real estate often result in court action, disputing parties sometimes agree to settlement through arbitration.

"ARM'S LENGTH" TRANSACTION A transaction such as a sale of property or the lending of money in which all parties involved are acting in their own self-interest and are under no undue influence or pressure from the other parties. Such a situation is the basis for deriving fair market value, and if the transaction is not at arm's length then the actual selling price will likely be less than or greater than the market value.

ARPEN(ARPENT) A French measurement term used to denote an area equal to seven-eighths of one acre. (See Acre)

ARREARS Money which is not paid on time, as for example, if a borrower has not made the last two mortgage payments, he or she is said to be in arrears. In many political jurisdictions, property taxes are paid at the end of the year rather than at the beginning and are thus referred to as due in arrears rather than in advance.

ARTERIAL STREET A major road designed to be a through street and to handle a large volume of traffic.

ARTIFICIAL PERSON A person created and recognized by law as having legal rights, an example being corporation. Within a legal context, such a person should be distinguished from natural person.

ASA Senior Member, American Society of Appraisers. A professional designation awarded to individuals involved in the appraisal of both real and personal property.

AS IS A phrase included in a contract of sale disclaiming any warranty or guarantee on the part of the seller. A person purchasing real estate "as is" takes it in exactly the condition in which it is found and must trust his or her own inspection of the property.

ASKING PRICE The listed price of the property. Often such a price denotes a willingness on the part of the owner to sell the property for a lower price.

ASSEMBLAGE The combining of two or more adjoining lots into a single large lot. Often the purpose of bringing a number of lots together under one ownership is to allow a developer/investor to construct a large building or buildings on a single lot. By assembling the lots, the single value of the one large lot is often greater than the total single values of each of the smaller lots.

ASSESSED VALUE The worth or value of a piece of property as determined by the taxing authority for the purpose of levying an ad valorem (property) tax. The assessed value of property is normally based on some percentage of market value. Property may be assessed at full market value or, as is more commonly the case, assessed at something less.

ASSESSMENT (1) A determination of the value of a parcel for the purpose of levying a property tax on that parcel. (2) The term also is used to denote the means by which local governments raise the money to pay for certain improvements which directly benefit property owners adjoining or adjacent to the improvements. For example, the cost of paving a previously unpaved road could be assessed to the land on each side of the road. The actual cost to a particular landowner would be based on his or her front footage as a percentage of the total footage being improved. (3) Joint forms of ownership such as condominiums and cooperatives allocate the expenses incurred for the maintenance and upkeep of the common areas and limited common areas and assess each unit owner for his or her proportionate share.

ASSESSMENT RATIO The ratio of assessed value to full market value as set by a taxing authority.

ASSESSMENT ROLL A list of all taxable property showing the assessed value of each parcel. Such information is public and is normally available in the tax assessor's office or in the local land records.

ASSESSOR A public official either appointed or elected to appraise property and place an assessed value on that property for the purpose of levying a property (ad valorem) tax.

ASSETS An accounting term used to denote the real and personal property one possesses, as distinguished from debts and obligations which are known as liabilities. Assets minus liabilities equals net worth.

ASSIGN To transfer to another.

ASSIGNEE The person to whom a claim, benefit, or right in property is made.

ASSIGNMENT The transfer of a claim, benefit or right in property belonging to one person (the assignor) to another person (the assignee). Real estate instruments in which assignments occur include sales contracts, mortgages, options, and leases. Rights under contracts are valuable property rights which can ordinarily be assigned to third persons. The legal effect of an assignment is to substitute the assignee for the assignor in the contractual relationship with the other original contracting party.

ASSIGNMENT OF LEASE A transfer by the tenant (lessee) of his or her interest in the lease to a third person. Both the lessor and lessee may transfer their respective interests in a lease to a third person, unless prohibited by the terms of the lease.

ASSOCIATE BROKER A person who has met the qualifications necessary for a real estate broker's license but who works jointly with and is employed by another broker.

ASSOCIATED GENERAL CONTRACTORS OF AMERICA (AGCA) AGCA serves as a leading spokesman for the construction industry. Four classifications of construction contractors are represented: buildings, heavy industrial, municipal utility construction, and highway. The association's address is 1957 E Street, N.W., Washington, D.C. 20006; (202) 393-2040.

ASSUMPTION FEE A charge levied by a lender to a purchaser who takes title to property by assuming an existing mortgage. The charge can be a fixed amount; for example, $100, or perhaps a percentage of the outstanding balance, for example, one percent. The assumption fee is paid to the lender at the time of settlement or closing.

ASSUMPTION OF MORTGAGE Taking title to property which has an existing mortgage and agreeing to be personally liable for the payment of the existing mortgage debt. A distinction exists between "assuming" a mortgage and taking title 'subject to' a mortgage. If the purchaser agrees to assume the mortgage, he or she becomes personally liable on any deficiencies, such as not making payments, occurring in a foreclosure sale. When a purchaser takes title subject to the mortgage, no personal liability is undertaken to the lender; thus, the purchaser could walk away from the mortgage and lose nothing but the equity already invested. In both situations the original borrower is liable to the lender unless specifically released in a novation. A mortgage may obtain a non-assumption clause or due on sale clause which prohibits an assumption without consent of the lender. Such consent is normally given for a fee and a possible jump in the interest rate if the contract rate is below the prevailing market rate.

AT-RISK RULE A part of the Tax Reform Act of 1986 which limits the amount that an investor can claim as a loss suffered from a real estate investment.

ATTACHED HOUSING Two or more units that are physically attached but intended and designed for occupancy as individual housing units. Such units may be in the form of a duplex, triplex or fourplex as well as row houses which may extend for a complete city block. In contrast, most residential units are in the form of detached units.

ATTACHMENT The act of taking a person's property into the legal custody of a court for the purpose of serving as security for satisfaction of a judgment which has been filed. The action itself is often called a writ of attachment and serves to create a lien against the property. As a result the property may not be sold free of the attachment unless the attachment has either been satisfied or released.

ATTESTATION The act of witnessing a person's signing of a written instrument. Some states require that a deed be witnessed by at least two witnesses one of whom may need to be an official witness such as a notary. Without the attestation the deed is void in those states that have this requirement. Some deeds may require a witnessing in cases involving grantors who have not learned to write or are paralyzed. Such a grantor would be required to make a mark or at least a thumbprint which manifests intent to sign. Both the marking and the statement or declaration of intent by the grantor would need to be witnessed.

ATTORNEY AT LAW A person authorized to practice law in his or her respective state and thus permitted to give legal advice, draft legal instruments, and represent clients in courts of law.

ATTORNEY IN FACT A person authorized to act on behalf of another by virtue of a power of attorneys. Anyone of legal capacity may be an attorney in fact, and depending on the desire of the person creating the relationship, the attorney in fact's authority could be that of a universal, general, or specific agent.

ATTORNEY'S OPINION OF TITLE A statement issued by an attorney as to the quality of title after examining an abstract of title. Commonly referred to as "opinion of title."

ATTRACTIVE NUISANCE A potentially hazardous object, such as a swimming pool, or a condition, such as an open pit on a parcel of land, that is inviting and potentially dangerous to young children.

AUCTION The selling of real or personal property to the highest bidder by a person licensed and authorized to sell the property. The auctioneer is employed by the owner or seller of the property as an agent and normally receives a percentage of the sales price as his or her commission.

AUCTIONEER A person licensed or authorized to sell real or personal property belonging to someone else at public auction. In some states an auctioneer selling real property must be licensed as a real estate broker, whereas in others he or she is licensed as an auctioneer.

AUTHORITY The power of an agent to affect the principal in legal relations with third persons for lawful purposes. Authority may be classified into: (1) actual authority, (2) implied authority, (3) apparent or ostensible authority, (4) inherent authority, and (5) other authority which may be implied from particular circumstances. Generally, the authority of an agent is strictly construed by the courts.

AUTHORIZATION TO SELL A listing agreement entered into by the owner of property and a broker determining the rights and responsibilities of both parties in the selling of the property.

AVERAGE RATE OF RETURN A technique used to estimate a rate of return. To compute this rate, investment outflows are subtracted from total investment inflows. The result is divided by the number of years the investment was held, and that result is divided by the total investment to arrive at the average annual rate of return.

AVULSION A sudden loss or gain of land as the result of action of water or a shift in a bed of a river which has been used as a boundary by property owners. If land is lost as a result of avulsion the riparian owner does not lose title to the land that has been lost; the boundary lines remain the same. This is not true when land is lost by erosion.

AXIAL THEORY OF GROWTH A pattern of land growth and development which takes the form of a star and occurs along the main transportation routes outward from a city. The city or central business district remains the center of the "star."