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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
An
agreement
entered
into by
two or
more
legally
competent
parties
who, for
a
consideration,
undertake
to do or
to
refrain
from
doing
some
legal
act or
acts.
Contract
rent
(See
scheduled
rent)
Contribution,
principle
of
The
principle
that any
improvement
to a
property,
whether
to
vacant
land or
a
building,
is worth
only
what it
adds to
the
property's
market
value,
regardless
of the
improvement's
actual
cost.
Conventional
loan
A
mortgage
loan,
made
with
real
estate
as
security,
that is
neither
insured
by the
FHA nor
guaranteed
by the
VA
Conveyance.
A
written
instrument,
such as
a deed
or
lease,
by which
title or
an
interest
in real
estate
is
transferred.
Cooperative
A
multiunit
residential
building
with
title in
a trust
or
corporation
that is
owned by
and
operated
for the
benefit
of
persons
living
within
it, who
are the
beneficial
owners
of the
trust or
the
stockholders
of the
corporation,
each
possessing
a
proprietary
lease
granting
occupancy
of a
specific
unit in
the
building.
Corporation
An
association
of
shareholders,
created
under
law,
having a
legal
identity
separate
from the
individuals
who own
it .
Correction
lines
A system
of
compensating
for
inaccuracies
in the
rectangular
survey
system
due to
the
curvature
of the
earth.
Every
fourth
township
line
(24-mile
intervals)
is used
as a
correction
line on
which
the
intervals
between
the
north
and
south
range
lines
are
measured
again
and
corrected
to a
full six
miles.
Correlation
(See
reconciliation)
Cost
The
amount
paid for
a good
or
service.
Cost
approach
The
process
of
estimating
the
value of
a
property
by
adding
the
appraiser's
estimate
of the
reproduction
or
replacement
cost of
property
improvements,
less
depreciation,
to the
estimated
land
value.
Cost
index
Figure
representing
construction
cost at
a
particular
time in
relation
to
construction
cost at
an
earlier
time,
prepared
by a
cost
reporting
or
indexing
service.
Cost
service
index
method
(See
index
method)
Covenant
An
agreement
written
into
deeds
and
other
instruments
promising
performance
or
nonperformance
of
certain
acts or
stipulating
certain
uses or
non-uses
of
property.
Cubic-foot
method
A method
of
estimating
reproduction
cost by
multiplying
the
number
of cubic
feet of
space a
building
encloses
by the
construction
cost per
cubic
foot.
Curable
depreciation
A
depreciated
item
that can
be
restored
or
replaced
economically
(See
also
functional
obsolescence-curable
and
physical
deterioration-curable).
D
Datum
A
horizontal
plane
from
which
heights
and
depths
are
measured.
Debt
investors
Investors
who take
a
relatively
conservative
approach,
typically
taking a
passive
role in
investment
management
while
demanding
a
security
interest
in
property
financed.
Declaration
of
restrictions
Document
filed by
a
subdivision
developer
and
referenced
in
individual
deeds to
subdivision
lots
that
lists
all
restrictions
that
apply to
subdivision
properties
(See
also
deed
restrictions).
Decreasing
returns,
laws of
The
situation
in which
property
improvements
no
longer
bring a
corresponding
increase
in
property
income
or
value.
Deed
A
written
instrument
that
conveys
title to
or an
interest
in real
estate
when
properly
executed
and
delivered.
Deed of
trust
(See
trust
deed)
Deed
restrictions
Provisions
in a
deed
limiting
the
future
uses of
the
property.
Deed
restrictions
may take
many
forms:
they may
limit
the
density
of
buildings,
dictate
the
types of
structures
that can
be
erected
and
prevent
buildings
from
being
used for
specific
purposes
or used
at all .
Deed
restrictions
may
impose a
myriad
of
limitations
and
conditions
affecting
the
property
rights
appraised.
Default
Failure
to
perform
a duty
or meet
a
contractual
obligation.
Demised
premises
Property
conveyed
for a
certain
number
of
years,
most
often by
a lease.
Demography
The
statistical
study of
human
populations,
especially
in
reference
to size,
density
and
distribution.
Demographic
information
is of
particular
importance
to
people
involved
in
market
analyses
and
highest
and best
use
analyses
in
determining
potential
land
uses of
sites.
Depreciated
cost
For
appraisal
purposes
the
reproduction
or
replacement
cost of
a
building,
less
accrued
depreciation
to the
time of
appraisal.
Depreciation
For
appraisal
purposes,
loss in
value
due to
any
cause,
including
physical
deterioration,
functional
obsolescence
and
external
obsolescence
(See
also
obsolescence)
Depth
factor
An
adjustment
factor
applied
to the
value
per
front
foot of
lots
that
vary
from the
standard
depth.
Development
(See
neighborhood
life
cycle)
Direct
capitalization
Selection
of a
capitalization
rate
from a
range of
overall
rates
computed
by
analyzing
sales of
comparable
properties
and
applying
the
formula
I/V = R
to each.
Direct
costs
Costs of
erecting
a new
building
involved
with
either
site
preparation
or
building
construction,
including
fixtures.
Direct
market
comparison
approach
(See
sales
comparison
approach)
E
Easement
A right
to use
the land
of
another
for a
specific
purpose,
such as
a
right-of-way
or for
utilities;
a non-possessory
interest
in land.
An
easement
appurtenant
passes
with the
land
when
conveyed.
Economic
age-life
method
of
depreciation
A method
of
computing
accrued
depreciation
in which
the cost
of a
building
is
depreciated
at a
fixed
annual
percentage
rate;
also
called
the
straight-line
method.
Economic
base
The
level of
business
activity
in a
community-particularly
activity
that
brings
income
into the
community
from
surrounding
areas.
Economic
life
The
period
of time
during
which a
structure
may
reasonably
be
expected
to
perform
the
function
for
which it
was
designed
or
intended.
Economic
obsolescence
(See
external
obsolescence)
Economic
rent
(See
market
rent)
Effective
age
The age
of a
building
based on
the
actual
wear and
tear and
maintenance,
or lack
of it,
that the
building
has
received.
Effective
demand
The
desire
to buy
coupled
with the
ability
to pay.
Effective
gross
income
Estimated
potential
gross
income
of a
rental
property
from all
sources,
less
anticipated
vacancy
and
collection
losses.
Egress
A way to
leave a
tract of
land;
the
opposite
of
ingress
(See
also
access).
Eminent
domain
The
right of
a
federal,
state or
local
government
or
public
corporation,
utility
or
service
corporation
to
acquire
private
property
for
public
use
through
a court
action
called
condemnation,
in which
the
court
determines
whether
the use
is a
necessary
one and
what the
compensation
to the
owner
should
be.
Encroachment
A
building,
wall or
fence
that
extends
beyond
the land
of the
owner
and
illegally
intrudes
on land
of an
adjoining
owner or
a street
or an
alley .
Encumbrance
Any lien
(such as
a
mortgage,
tax lien
or
judgment
lien),
easement,
restriction
on the
use of
land,
outstanding
dower
right or
other
interest
that may
diminish
the
value of
property
to its
owner.
Entrepreneurial
profit
The
amount
of
profit
attributable
to the
development
function.
Environmental
obsolescence
(See
external
obsolescence)
Equalization
The
raising
or
lowering
of
assessed
values
for tax
purposes
in a
particular
county
or
taxing
district
to make
them
equal to
assessments
in other
counties
or
districts
.
Equilibrium
(See
neighborhood
life
cycle)
equity
The
interest
or value
that an
owner
has in
real
estate
over and
above
any
mortgage
or other
lien or
charge
against
it.
Equity
capitalization
rate
A
rate
that
reflects
the
relationship
between
a single
year's
before
tax cash
flow and
the
equity
investment
in the
property.
The
before-tax
cash
flow is
the net
operating
income
less the
annual
debt
service
payment,
and the
equity
is the
property
value
less any
outstanding
loan
balance.
The
equity
capitalization
rate,
when
divided
into the
before
tax cash
flow,
gives an
indication
of the
value of
the
equity.
Also
called
cash on
cash
rate,
cash
flow
rate or
equity
dividend
rate.
Equity
dividend
rate
(See
equity
capitalization
rate)
Equity
investors
Investors
making
use of
what is
termed
venture
capital
to take
an
unsecured
and thus
relatively
risky
part in
an
investment.
Escalator
clause
A clause
in a
contract,
lease or
mortgage
providing
for
increases
in
wages,
rent or
interest,
based on
fluctuations
in
certain
economic
indexes,
costs or
taxes.
Escheat
The
reversion
of
property
of a
decedent
who died
intestate
(without
a will)
and
without
heirs to
the
state or
county
as
provided
by state
law .
Escrow
The
closing
of a
transaction
through
a
disinterested
third
person
called
an
escrow
agent or
escrow
holder,
who
holds
funds
and/or
documents
for
delivery
on the
performance
of
certain
conditions.
Estate
The
degree,
quantity,
nature
and
extent
of
ownership
interest
that a
person
has in
real
property.
Estate
in land
The
degree,
quantity,
nature
and
extent
of
interest
a person
has in
real
estate.
Estate
in
remainder
The
remnant
of an
estate
that has
been
conveyed
to take
effect
and be
enjoyed
after
the
termination
of a
prior
estate;
for
instance,
when an
owner
conveys
a life
estate
to one
party
and the
remainder
to
another
(For a
case in
which
the
owner
retains
the
residual
estate,
see
estate
in
reversion.
Estate
in
reversion
An
estate
that
comes
back to
the
original
holder,
as when
an owner
conveys
a life
estate
to
someone
else,
with the
estate
to
return
to the
original
owner on
termination
of the
life
estate.
Excess
income
(See
excess
rent)
Excess
rent
The
amount
by which
scheduled
rent
exceeds
market
rent.
Expense
The cost
of goods
and
services
required
to
produce
income.
Expense-stop
clause
Lease
provision
to pass
increases
in
building
maintenance
expenses
on to
tenants
on a
pro-rata
basis.
External
obsolescence
Loss
of value
from
forces
outside
the
building
or
property,
such as
changes
in
optimum
land
use,
legislative
enactment's
that
restrict
or
impair
property
rights
and
changes
in
supply-demand
relationships.
Externalities
The
principle
that
outside
influences
may have
a
positive
or
negative
effect
on
property
value.
F
Feasibility
study
An
analysis
of a
proposed
subject
or
property
with
emphasis
on the
attainable
income,
probable
expenses
and most
advantageous
use and
design.
The
purpose
of such
a study
is to
ascertain
the
probable
success
or
failure
of the
project
under
consideration.
Federal
Reserve
Bank
System
Central
bank of
the
United
States
established
to
regulate
the flow
of money
and the
cost of
borrowing.
Fee
simple
The
greatest
possible
estate
or right
of
ownership
of real
property,
continuing
without
time
limitation.
Sometimes
called
fee or
fee
simple
absolute.
Fee
simple
defeasible
Any
limitation
on
property
use that
could
result
in loss
of the
right of
ownership.
Fee
simple
qualified
Ownership
of
property
that is
limited
in some
way.
FHA
The
Federal
Housing
Administration
Insures
loans
made by
approved
lenders
in
accordance
with its
regulations.
Final
value
estimate
The
appraiser's
estimate
of the
defined
value of
the
subject
property,
arrived
at by
reconciling
(correlating)
the
estimates
of
values
derived
from the
sales
comparison,
cost and
income
approaches.
Financial
Institutions
Reform,
Recovery
and
Enforcement
Act of
1989 (FIRREA)
Federal
legislation
that
mandates
state
licensing
or
certification
for
appraisers
performing
appraisals
in
certain
federally
related
transactions.
First
mortgage
A
mortgage
that has
priority
as a
lien
over all
other
mortgages.
Fixed
expenses
Those
costs
that are
more or
less
permanent
and do
not vary
in
relation
to the
property's
occupancy
or
income,
such as
real
estate
taxes
and
insurance
for
fire,
theft
and
hazards
Fixed-rate
mortgage
(See
amortized
mortgage)
Fixture
Anything
affixed
to land,
including
personal
property
attached
permanently
to a
building
or to
land so
that it
becomes
part of
the real
estate
Foreclosure
A court
action
initiated
by a
mortgagee
or
lienor
for the
purpose
of
having
the
court
order
that the
debtor's
real
estate
be sold
to pay
the
mortgage
or other
lien
(mechanic's
lien or
judgment).
Form
appraisal
report
Any of
the
relatively
brief
standard
forms
prepared
by
agencies
such as
the
Federal
Home
Loan
Mortgage
Corporation
and
Federal
National
Mortgage
Association
and
others
for
routine
property
appraisals.
Freehold
An
estate
in land
in which
ownership
is for
an
indeterminate
length
of time.
Frequency
distribution
The
arrangement
of data
into
groups
according
to the
frequency
with
which
they
appear
in the
data
set.
Front
foot
A
standard
of
measurement,
being a
strip of
land one
foot
wide
fronting
on the
street
or
waterfront
and
extending
the
depth of
the lot
Value
may be
quoted
per
front
foot
Functional
obsolescence
Defects
in a
building
or
structure
that
detract
from its
value or
marketability,
usually
the
result
of
layout,
design
or other
features
that are
less
desirable
than
features
designed
for the
same
functions
in newer
property.
Functional
obsolescence-curable
Physical
or
design
features
that are
no
longer
considered
desirable
by
property
buyers
but
could be
replaced
or
redesigned
at
relatively
low
cost.
Functional
obsolescence-incurable
Currently
undesirable
physical
or
design
features
that are
not
easily
remedied
or
economically
justified.
G
GRI
Graduate
Realtors
Institute
The
symbol
is
recognized
nation
wide
It shows
clients
that the
holder
has a
solid
grasp of
real
estate
fundamentals.
GRI
consists
of
three,
five day
programs
Going
concern
value
The
value
existing
in an
established
business
property
compared
with the
value of
selling
the real
estate
and
other
assets
of a
concern
whose
business
is not
yet
established.
The term
takes
into
account
the
goodwill
and
earning
capacity
of a
business.
Grant
deed
A
type of
deed in
which
the
grantor
warrants
that he
or she
has not
previously
conveyed
the
estate
being
granted
to
another,
has not
encumbered
the
property
except
as noted
in the
deed,
and will
convey
to the
grantee
any
title to
the
property
the
grantor
may
later
acquire.
Grantee
A person
who
receives
a
conveyance
of real
property
from a
grantor.
Grantor
The
person
transferring
title to
or an
interest
in real
property
to a
grantee.
Gross
building
area
All
enclosed
floor
areas,
as
measured
along a
building's
outside
perimeter.
Gross
income
(See
potential
gross
income)
Gross
income
multiplier
A
figure
used as
a
multiplier
of the
gross
income
of a
property
to
produce
an
estimate
of the
property's
value.
Gross
leasable
area
Total
space
designed
for
occupancy
and
exclusive
use of
tenants,
measured
from
outside
wall
surfaces
to the
center
of
shared
interior
walls.
Gross
lease
A lease
of
property
under
the
terms of
which
the
lessee
pays a
fixed
rent and
the
lessor
pays all
property
charges
regularly
incurred
through
ownership
(repairs,
taxes,
insurance
and
operating
expenses).
Gross
living
area
Total
finished,
habitable,
above-grade
space,
measured
along
the
building's
outside
perimeter.
Gross
market
income
(See
potential
gross
income)
Gross
rent
multiplier
(See
gross
income
multi-Ground
lease.
A lease
of land
only on
which
the
lessee
usually
owns the
building
or is
required
to build
as
specified
by the
lease.
Such
leases
are
usually
long-term
net
leases;
the
lessee's
rights
and
obligations
continue
until
the
lease
expires
or is
terminated
for
default.
Ground
rent
Rent
paid for
the
right to
use and
occupy
land
according
to the
terms of
a ground
lease.
Growing
equity
mortgage
(GERI)
A type
of loan
that
rapidly
increases
the
equity
in a
property
by
increasing
the
monthly
payments
a
certain
percentage
each
year and
applying
those
increases
to the
principal.
H
Highest
and best
use
The
legally
and
physically
possible
use of
land
that is
likely
to
produce
the
highest
land (or
property)
value
It
considers
the
balance
between
site and
improvements
as well
as the
intensity
and
length
of uses.
Historical
cost
Actual
cost of
a
property
at the
time it
was
constructed.
Historical
rent
Scheduled
(or
contract)
rent
paid in
past
years.
Holdover
tenancy
A
tenancy
in which
the
lessee
retains
possession
of the
leased
premises
after
the
lease
has
expired
and the
landlord,
by
continuing
to
accept
rent
from the
tenant,
thereby
agrees
to the
tenant's
continued
occupancy.
Homeowners'
association
Organization
of
property
owners
in a
residential
condominium
or
subdivision
development,
usually
authorized
by a
declaration
of
restrictions
to
establish
property
design
and
maintenance
criteria,
collect
assessments
and
manage
common
areas.
HUD
Department
of
Housing
and
Urban
Development.
I
Improved
land
Real
property
made
suitable
for
building
by the
addition
of
utilities
and
publicly
owned
structures,
such as
a curb,
sidewalk,
street-lighting
system
and/or
sewer.
Improvements
Structures
of
whatever
nature,
usually
privately
rather
than
publicly
owned,
erected
on a
site to
enable
its
utilization,
e.g.,
buildings,
fences,
driveways
and
retaining
walls.
Income
capitalization
approach
The
process
of
estimating
the
value of
an
income-producing
property
by
capitalization
of the
annual
net
operating
income
expected
to be
produced
by the
property
during
its
remaining
economic
life.
Increasing
returns,
law of
The
situation
in which
property
improvements
increase
property
income
or
value.
Incurable
depreciation
A
depreciated
item
that
would be
impossible
or too
expensive
to
restore
or
replace.
Independent
contractor
A person
who
contracts
to do
work for
another
by using
his or
her own
methods
and
without
being
under
the
control
of the
other
person
regarding
how the
work
should
be done.
Unlike
an
employee,
an
independent
contractor
pays all
of his
or her
expenses,
personally
pays
income
and
social
security
taxes
and
receives
no
employee
benefits.
Many
real
estate
salespeople
are
independent
contractors.
Index
method
An
appraisal
technique
used to
estimate
reproduction
or
replacement
cost.
The
appraiser
multiplies
the
original
cost of
construction
by a
price
index
for the
geographic
area to
allow
for
price
changes.
Indirect
costs
Costs of
erecting
a new
building
not
involved
with
either
site
preparation
or
building
construction;
for
example,
building
permit,
land
survey,
overhead
expenses
such as
insurance
and
payroll
taxes,
and
builder's
profit.
Industrial
district
or park
A
controlled
development
zoned
for
industrial
use and
designed
to
accommodate
specific
types of
industry,
providing
public
utilities,
streets,
railroad
sidings
and
water
and
sewage
facilities.
Ingress
The way
to enter
a tract
of land
Often
used
interchangeably
with
access
(See
also
access).
Installment
contract
A
contract
for the
sale of
real
estate
by which
the
purchase
price is
paid in
installments
over an
extended
period
of time
by the
purchaser,
who is
in
possession,
with the
title
retained
by the
seller
until a
certain
number
of
payments
are made
The
purchaser's
payments
may be
forfeited
upon
default.
Insurable
value
The
highest
reasonable
value
that can
be
placed
on
property
for
insurance
purposes.
INTEREST
A
percentage
of the
principal
amount
of a
loan
charged
by a
lender
for its
use,
usually
expressed
as an
annual
rate.
Interest
rate
Return
on an
investment;
an
interest
rate is
composed
of four
component
rates:
safe
rate,
risk
rate,
non-liquidity
rate and
management
rate.
Management
rate
Compensation
to the
owner
for the
work
involved
in
managing
an
investment
and
reinvesting
the
funds
received
from the
property.
Interim
use
A
temporary
property
use
awaiting
transition
to its
highest
and best
use.
Intestate
Dying
without
a will
or
without
having
made a
valid
will
Title to
property
owned by
someone
who dies
intestate
will
pass to
his or
her
heirs as
provided
in the
law of
descent
of the
state in
which
the
property
is
located
investment
value.
The
worth of
investment
property
to a
specific
investor.
Inwood
annuity
table
A table
that
supplies
a factor
to be
multiplied
by the
desired
yearly
income
(based
on the
interest
rate and
length
of time
of the
investment)
to find
the
present
worth of
the
investment.
J
Joint
tenancy
Ownership
of real
estate
between
two or
more
parties
who have
been
named in
one
conveyance
as joint
tenants.
On the
death of
a joint
tenant,
the
decedent's
interest
passes
to the
surviving
joint
tenant(s)
by the
right of
survivorship.
Joint
venture
The
joining
of two
or more
people
to
conduct
a
specific
business
enterprise.
A joint
venture
is
similar
to a
partnership
in that
it must
be
created
by
agreement
between
the
parties
to share
in the
losses
and
profits
of the
venture.
It is
unlike a
partnership
in that
the
venture
is for
one
specific
project
only,
rather
than for
a
continuing
business
relationship.
K
L
Land
The
earth's
surface
in its
natural
condition,
extending
down to
the
center
of the
globe,
its
surface
and all
things
affixed
to it,
and the
airspace
above
the
surface.
Land
capitalization
rate
The rate
of
return,
including
interest,
on land
only.
Land
development
method
(See
subdivision
development
method)
Landlocked
parcel
A parcel
of land
without
any
access
to a
public
road or
way.
Landlord
One who
owns
property
and
leases
it to a
tenant .
Land
residual
technique
A method
of
capitalization
using
the net
income
remaining
to the
land
after
return
on and
recapture
of the
building
value
have
been
deducted.
Land
trust
A trust
originated
by the
owner of
real
property
in which
real
estate
is the
only
asset.
Because
the
interest
of a
beneficiary
is
considered
personal
property
and not
real
estate,
a
judgment
against
the
beneficiary
will not
create a
lien
against
the real
estate.
Thus
land
trusts
are
popular
when
there
are
multiple
owners
who seek
protection
against
the
effects
of
divorce,
judgments
or
bankruptcies
of each
other.
Latent
defect
Physical
deficiencies
or
construction
defects
not
readily
ascertainable
from a
reasonable
inspection
of the
property,
such as
a
defective
septic
tank or
underground
sewage
system,
or
improper
plumbing
or
electrical
wiring.
Lease
A
written
or oral
contract
for the
possession
and use
of real
property
for a
stipulated
period
of time,
in
consideration
for the
payment
of rent.
Leases
for more
than one
year
generally
must be
in
writing.
Leased
fee
The
lessor's
interest
and
rights
in the
real
estate
being
leased.
Leasehold
estate
The
lessee's
right to
possess
and use
real
estate
during
the term
of a
lease.
This is
generally
considered
a
personal
property
interest.
Legal
description
A
statement
identifying
land by
a system
prescribed
by law
(See
also lot
and
block
system,
metes
and
bounds
description
and
rectangular
survey
system).
Lessee
The
person
to whom
property
is
leased
by
another;
also
called a
tenant .
Lessee's
interest
An
interest
having
value
only if
the
agreed-on
rent is
less
than the
market
rent
Lessor
The
person
who
leases
property
to
another;
also
called a
landlord.
Lessor's
interest
The
value of
lease
rental
payments
plus the
remaining
property
value at
the end
of the
lease
period.
Letter
of
opinion
Report
of
property
value
that
states
the
appraiser's
conclusion
of value
or a
range of
values
and
provides
only a
brief
summary
of the
supporting
data and
appraiser's
analysis.
Letter
of
transmittal
First
page of
a
narrative
appraisal
report,
in which
the
report
is
formally
presented
to the
person
for whom
the
appraisal
was
made.
Levy
To
impose
or
assess a
tax on a
person
or
property;
the
amount
of taxes
to be
imposed
in a
given
district.
License
(1) The
revocable
permission
for a
temporary
use of
land--a
personal
right
that
cannot
be sold
(2)
Formal
permission
from a
constituted
authority
(such as
a state
agency)
to
engage
in a
certain
activity
or
business
(such as
real
estate
appraisal).
LID Land
improvement
district
Special
tax or
assessment
passed
on to
home
buyers
to pay
for
roadwork
and
improvements
can last
up to 17
years or
more,
can be
billed,
monthly,
quarterly,
or
annually.
Usually
becomes
lien on
property
and is
passed
down to
future
owners
until
paid
off.
Lien
A right
given by
law to
certain
creditors
to have
their
debts
paid out
of the
property
of a
defaulting
debtor,
usually
by means
of a
court
sale.
Life
estate
An
interest
in real
or
personal
property
that is
limited
in
duration
to the
lifetime
of its
owner or
some
other
designated
person
or
persons.
Living
trust
An
arrangement
in which
a
property
owner (truster)
transfers
assets
to a
trustee,
who
assumes
specified
duties
in
managing
the
asset.
After
the
payment
of
operating
expenses
and
trustee's
fees,
the
income
generated
by the
trust
property
is paid
to or
used for
the
benefit
of the
designated
beneficiary.
The
living
trust is
gaining
popularity
as a way
to hold
title
and
avoid
probate
of trust
assets.
Lot and
block
system
Method
of legal
description
of an
individual
parcel
of land
by
reference
to
tract,
block
and lot
numbers
and
other
information
by which
the
parcel
is
identified
in a
recorded
subdivision
map.
Also
called
lot,
block
and
tract
system
and
subdivision
system.
M
Maintenance
expenses
Costs
incurred
for
day-to-day
upkeep,
such as
management,
wages
and
benefits
of
building
employees,
fuel,
utility
services,
decorating
and
repairs.
Marital
property
(See
community
property
and
tenancy
by the
entirety)
Markers
(See
monuments)
Market
A place
or
condition
suitable
for
selling
and
buying.
Market
comparison
approach
(See
sales
comparison
approach)
Market
comparison
method
of
depreciation
(See
sales
comparison
method
of
depreciation)
Market
data
approach
(See
sales
comparison
approach)
Market
extraction
method
of
depreciation
(See
series
comparison
method
of
depreciation)
Market
price
(See
sales
price)
Market
rent
The
amount
for
which
the
competitive
rental
market
indicates
property
should
rent
An
estimate
of a
property's
rent
potential.
Market
value
The most
probable
price
real
estate
should
bring in
a sale
occurring
under
normal
market
conditions.
Mean
The
average
of all
items
included
within a
group,
calculated
by
dividing
the sum
of the
individual
items,
or
variates,
by the
number
of
variates.
Mechanic's
lien
A lien
created
by
statute
that
exists
in favor
of
contractors,
laborers
or
material
men who
have
performed
work or
furnished
materials
in the
erection
or
repair
of a
building
meridian
(See
principal
meridian).
Metes
and
bounds
description
A method
of legal
description
specifying
the
perimeter
of a
parcel
of land
by use
of
measured
distances
from a
point of
beginning
along
specified
boundaries,
or
bounds,
using
monuments,
or
markers,
as
points
of
reference.
Mile
A
measurement
of
distance,
being
1,760
yards or
5,280
feet.
Mobile
home
A
structure
transportable
in one
or more
sections,
designed
and
equipped
to
contain
not more
than two
dwelling
units to
be used
with or
without
a
foundation
system;
does not
include
a
recreational
vehicle
Also
called a
manufactured
home.
Monuments
Natural
or
artificial
objects
used to
define
the
perimeter
of a
parcel
of land
using
the
metes
and
bounds
method
of legal
description.
Mortgage
A
conditional
transfer
or
pledge
of real
property
as
security
for the
payment
of a
debt;
also,
the
document
used to
create a
mortgage
lien.
Mortgagee
The
lender
in a
loan
transaction
secured
by a
mortgage.
Mortgagor
An owner
of real
estate
who
borrows
money
and
conveys
his or
her
property
as
security
for the
loan.
N
NAR
National
Association
of
Realtors.
Narrative
appraisal
report
A
detailed
written
presentation
of the
facts
and
reasoning
behind
an
appraiser's
estimate
of
value.
Neighborhood
A
residential
or
commercial
area
with
similar
types of
properties,
buildings
of
similar
value or
age,
predominant
land-use
activities,
and
natural
or
fabricated
geographic
boundaries,
such as
highways
or
rivers.
Neighborhood
life
cycle
The
period
during
which
most of
the
properties
in a
neighborhood
undergo
the
stages
of
development,
equilibrium
and
decline
decline.
Properties
require
an
increasing
amount
of
upkeep
to
retain
their
original
utility
and
become
less
desirable
development
(growth)
Improvements
are
made,
and
properties
experience
a rising
demand
equilibrium
properties
undergo
little
change;
also
called
stability.
Net
income
ratio
The
ratio of
net
operating
income
to
effective
gross
income
Net
lease
A
lease
requiring
the
tenant
to pay
rent and
part or
all of
the
costs of
maintenance
including
taxes,
insurance,
repairs
and
other
expenses
of
ownership.
Sometimes
known as
an
absolute
net
lease,
triple
net
lease or
net,
net, net
lease.
Net
operating
income
Income
remaining
after
operating
expenses
are
deducted
from
effective
gross
income
Non-conforming
use
A once
lawful
property
use that
is
permitted
to
continue
after a
zoning
ordinance
prohibiting
it has
been
established
for the
area; a
use that
differs
sharply
from the
prevailing
uses in
a
neighborhood.
Non-liquidity
rate
A
penalty
charged
for the
time
needed
to
convert
real
estate
into
cash
risk
rate
An
addition
to the
safe
rate to
compensate
for the
hazards
that
accompany
investments
in real
estate.
O
Observed
condition
depreciation
A method
of
computing
depreciation
in which
the
appraiser
estimates
the loss
in value
for all
items of
depreciation
(See
also
incurable
depreciation
and
curable
depreciation).
Obsolescence
Lessening
of value
from
out-of-date
features
as a
result
of
current
changes
in
property
design,
construction
or use;
an
element
of
depreciation
(See
also
external
obsolescence
and
functional
obsolescence).
Occupancy
Possession
and use
of
property
as owner
or
tenant.
Occupancy
rate
The
percentage
of total
rental
units
occupied
and
producing
income.
Operating
expense
ratio
The
ratio of
total
operating
expenses
to
effective
gross
income.
Operating
expenses
The
cost of
all
goods
and
services
used or
consumed
in the
process
of
obtaining
and
maintaining
income
(See
also
fixed
expenses,
maintenance
expenses
and
reserves
for
replacement).
Operating
statement
The
written
record
of a
business's
gross
income,
expenses
and
resultant
net
income.
Operating
statement
ratio
Relationship
of a
property's
expenses
to
income,
found by
dividing
total
operating
expenses
by
effective
gross
income.
Opportunity
cost
The
value
differential
between
alternative
investments
with
differing
rates of
return.
Option
A
right
given
for a
valuable
consideration
to
purchase
or lease
property
at a
future
date,
for a
specified
price
and
terms
The
right
may or
may not
be
exercised
at the
option
holder's
(optionee's)
discretion.
Orientation
Positioning
a
structure
on its
lot with
regard
to
exposure
to the
sun,
prevailing
winds,
privacy
and
protection
from
noise.
Overage
rent
Rent
paid
over a
base
amount
in a
percentage
lease.
Overall
capitalization
rate
A rate
of
investment
return
derived
by
comparing
the net
income
and
sales
prices
of
comparable
properties.
Overall
rate
The
direct
ratio
between
a
property's
annual
net
income
and its
sales
price.
Over
improvement
An
improvement
to
property
that is
more
than
warranted
by the
property's
highest
and best
use and
thus not
likely
to
contribute
its cost
to the
total
market
value of
the
property.
Ownership
in
severalty
Individual
ownership
of real
estate,
not to
be
confused
with the
use of
the word
several
to mean
"more
than
one";
also
called
tenancy
in
severalty,
sole
tenancy
or
separate
ownership.
P
Paired
sales
analysis
A method
of
estimating
the
amount
of
adjustment
for the
presence
or
absence
of any
feature
by
pairing
the
sales
prices
of
otherwise
identical
properties
with and
without
the
feature
in
question.
A
sufficient
number
of sales
must be
found to
allow
the
appraiser
to
isolate
the
effect
on value
of the
pertinent
factor
(also
called
paired
data set
analysis
and
matched
pairs
analysis).
Parameter
A single
number
or
attribute
of the
individual
things,
persons
or other
entities
in
Population.
Partial
interest
Any
property
interest
that is
less
than
full
fee
simple
ownership
of the
entire
property.
Partnership
An
association
of two
or more
individuals
who
carry on
a
continuing
business
for
profit
as
co-owners.
Under
the law
a
partnership
is
regarded
as a
group of
individuals
rather
than as
a single
entity.
Percentage
lease
A lease
commonly
used for
commercial
property
that
provides
for a
rental
based on
the
tenant's
gross
sales at
the
premises.
It
generally
stipulates
a base
monthly
rental,
plus a
percentage
of any
gross
sales
exceeding
a
certain
amount.
Personal
property
Items
that are
tangible
and
movable
and do
not fit
the
definition
of
realty;
chattels.
Physical
deterioration-curable
Loss of
value
due to
neglected
repairs
or
maintenance
that are
economically
feasible
and, if
performed,
would
result
in an
increase
in
appraised
value
equal to
or
exceeding
their
cost.
Physical
deterioration-incurable
Loss
of value
due to
neglected
repairs
or
maintenance
of
short-lived
or
long-lived
building
components
that
would
not
contribute
comparable
value to
a
building
if
performed.
Physical
life
The
length
of time
a
structure
can be
considered
habitable,
without
regard
to its
economic
use.
Planned
unit
development
(PUD)
A
subdivision
consisting
of
individually
owned
residential
and/or
commercial
parcels
or lots
as well
as areas
owned in
common.
Plat
A map
representing
a parcel
of land
subdivided
into
lots,
showing
streets
and
other
details
or a
single
site.
Plottage
value
The
subsequent
increase
in the
unit
value of
a group
of
adjacent
properties
when
they are
combined
into one
property
in a
process
called
assemblage.
Point of
beginning
Place at
which a
legal
description
of land
using
the
metes
and
bounds
method
starts.
Police
power
The
right of
the
government
to
impose
laws,
statutes
and
ordinances
to
protect
the
public
health,
safety
and
welfare
Includes
zoning
ordinances
and
building
codes.
Possession
The
right of
the
owner to
occupy
property
When
property
is
occupied
by a
tenant,
the
owner
has
constructive
possession
by right
of
title.
Potential
gross
income
A
property's
total
potential
income
from all
sources
during a
specified
period
of time.
Prepaid
items of
expense
Expense
items,
such as
insurance
premiums
and tax
reserves,
that
have
been
paid in
advance
of the
time
that the
expense
is
incurred.
Prepaid
expenses
typically
are
prorated
and
credited
to the
seller
in the
preparation
of a
closing
statement.
Price
The
amount
of money
set or
paid as
the
consideration
in the
sale of
an item
at a
particular
time.
Principal
(1) A
sum lent
or
employed
as a
fund or
investment--as
distinguished
from its
income
or
profits;
(2) the
original
amount
(as of a
loan) of
the
total
due and
payable
at a
certain
date; or
(3) a
party to
a
transaction--as
distinguished
from an
agent .
Principal
meridian
One of
35 north
and
south
survey
lines
established
and
defined
as part
of the U
S
government
or
rectangular
survey
system.
Profit-and-loss
statement
(See
operating
statement)
Property
residual
technique
A method
of
capitalization
using
the net
income
remaining
to the
property
as a
whole.
Proration
The
adjustment
of
taxes,
interest,
insurance
and/or
other
costs on
a
pro-rata
basis as
of the
closing
of a
sale
(See
also
closing
statement).
Purchase
money
mortgage
A note
secured
by a
mortgage
or trust
deed
given by
the
buyer,
as
mortgagor,
to the
seller,
as
mortgagee,
as part
of the
purchase
price of
real
estate.
Q
Quantity
survey
method
A
method
for
finding
the
reproduction
cost of
a
building
in which
the
costs of
erecting
or
installing
all of
the
component
parts of
a new
building,
including
both
direct
and
indirect
costs,
are
added.
Quit
Claim
deed
A
conveyance
by which
the
grantor
transfers
whatever
interest
he or
she has
in the
land,
without
warranties
or
obligations.
R
Real
estate
Land; a
portion
of the
earth's
surface
extending
downward
to the
center
of the
earth
and
upward
into
space
including
fixtures
permanently
attached
thereto
by
nature
or by
man,
anything
incidental
or
appurtenant
to land
and
anything
immovable
by law;
freehold
estate
in land.
Real
estate
broker
Any
person,
partnership,
association
or
corporation
that,
for a
compensation
or
valuable
consideration,
sells or
offers
for
sale,
buys or
offers
to buy,
or
negotiates
the
purchase,
sale or
exchange
of real
estate,
or who
leases
or
offers
to
lease,
or rents
or
offers
for rent
any real
estate
or the
improvement
thereon
for
others.
Such a
broker
must
secure a
state
license.
For a
license
to be
issued
to a
firm, it
is
usually
required
that all
active
partners
or
officers
be
licensed
real
estate
brokers.
Real
estate
investment
trust (REIT)
Trust
ownership
of real
estate
by a
group of
individuals
who
purchase
certificates
of
ownership
in the
trust,
which in
turn
invests
the
money in
real
property
and
distributes
the
profits
to the
investors
free of
corporate
income
tax.
Real
estate
salesperson
Any
person
who, for
a
compensation
or
valuable
consideration,
is
employed
either
directly
or
indirectly
by a
real
estate
broker
to sell
or offer
to sell,
or to
buy or
offer to
buy, or
to
negotiate
the
purchase,
sale or
exchange
of real
estate,
or to
lease,
rent or
offer
for rent
any real
estate,
or to
negotiate
leases
thereof
or
improvements
thereon.
Such a
salesperson
must
secure a
state
license.
Real
property
The
rights
of
ownership
of real
estate,
often
called
the
bundle
of
rights;
for all
practical
purposes,
synonymous
with
real
estate.
Recapture
rate
The
percentage
of a
property's
original
cost
that is
returned
to the
owner as
income
during
the
remaining
economic
life of
the
investment.
Reconciliation
The
final
step in
the
appraisal
process,
in which
the
appraiser
reconciles
the
estimates
of value
received
from the
sales
comparison,
cost and
income
capitalization
approaches
to
arrive
at a
final
estimate
of
market
value
for the
subject
property
Reconstruction
of the
operating
statement
The
process
of
eliminating
the
inapplicable
expense
items
for
appraisal
purposes
and
adjusting
the
remaining
valid
expenses,
if
necessary.
Reconveyance
deed
A deed
used by
a
trustee
under a
deed of
trust to
return
title to
the
truster.
Rectangular
survey
system
A system
established
in 1785
by the
federal
government,
which
provides
for the
surveying
and
describing
of land
by
reference
to
principal
meridians
and base
lines;
also
called U
S
government
survey
system
and
section
and
township
system.
Regional
multipliers
Adjustment
factors
by which
standard
cost
figures
can be
multiplied
to allow
for
regional
price
differences.
Remainder
The
remnant
of an
estate
that has
been
conveyed
to take
effect
and be
enjoyed
after
the
termination
of a
prior
estate;
for
instance,
when an
owner
conveys
a life
estate
to one
party
and the
remainder
to
another
(For the
case in
which
the
owner
retains
the
residual
estate,
see
reversion).
Remainderman
The
party
designated
to
receive
a
remainder
estate.
There
are two
types:
vested
remainderman
(one who
is known
and
named)
and
contingent
remainderman
(one
whose
identity
is not
certain
or who
is to be
selected).
Remaining
economic
life
The
number
of years
of
useful
life
left to
a
building
from the
date of
appraisal.
Renewal
Option
Lease
provision
that
allows
the
lessee
to renew
the
lease
for the
same
term or
some
other
stated
period,
usually
with a
rent
increase
at a
stated
percentage
or based
on an
index or
other
formula.
Rent
Payment
under a
lease or
other
arrangement
for use
of a
property.
Rent
loss
method
of
depreciation
(See
capitalized
value
method
of
depreciation).
Replacement
cost
The
current
construction
cost of
a
building
having
exactly
the same
utility
as the
subject
property.
Reproduction
cost
The
current
construction
cost of
an exact
duplicate
of the
subject
building.
Reserves
for
replacement
Allowances
set up
for
replacement
of
building
and
equipment
items
that
have a
relatively
short
life
expectancy.
Residual
In
appraising,
the
value
remaining
after
all
deductions
have
been
made.
Resolution
trust
corporation
(RTC)
Federal
agency
created
by the
Financial
Institutions
Reform,
Recovery
and
Enforcement
Act of
1989 to
oversee
management
and
liquidation
of
assets
of
failed
savings
and loan
associations.
Reverse
annuity
mortgage
(RAM)
An
instrument
designed
to aid
elderly
homeowners
by
providing
them a
monthly
income
over a
period
of years
in
exchange
for
equity
they
have
acquired
in their
homes.
RAM
borrowers
typically
may
obtain
up to 80
percent
of the
appraised
value of
free-and-clear
property
Reversion
The
remnant
of an
estate
that the
grantor
(as
opposed
to a
third
party)
holds
after he
or she
has
granted
a
limited
estate
such as
a
leasehold
or life
estate
to
another
person
and that
will
return
or
revert
back to
the
grantor
(See
also
remainder).
Right-of-way
The
right
that one
has to
travel
over the
land of
another;
an
easement.
Riparian
rights
Rights
of an
owner of
land
that
borders
on or
includes
a
stream,
river,
lake or
sea.
These
rights
include
definition
of(and
limitations
on)
access
to and
use of
the
water,
ownership
of
streambed,
navigable
water
and
uninterrupted
flow and
drainage
(See
also
accretion)
Risk
rate
(See
interest
rate)
Rod
A
measure
of
length,
16 feet
S
Sales
comparison
approach
The
process
of
estimating
the
value of
property
through
examination
and
comparison
of
actual
sales of
comparable
properties;
also
called
the
direct
market
comparison
or
market
data
approach
.
Sales
comparison
method
of
depreciation
Way of
estimating
loss in
value
through
depreciation
by using
sales
prices
of
comparable
properties
to
derive
the
value of
a
depreciated
item.
Also
called
the
market
data
method
and the
market
extraction
method.
Salesperson
(See
real
estate
salesperson)
Sales
price
The
actual
price
that a
buyer
pays for
a
property.
Sandwich
lease
The
ownership
interest
of a
sublessee.
Scheduled
rent
Rent
paid by
agreement
between
lessor
and
lessee;
also
called
contract
rent.
Second
mortgage
A
mortgage
loan
secured
by real
estate
that has
previously
been
made
security
for an
existing
mortgage
loan.
Also
called a
junior
mortgage
or
junior
lien.
Selling
price
The
actual
price
that a
buyer
pays for
a
property
Settlement
The
process
of
closing
a real
estate
transaction
by
adjusting
and
prorating
the
required
credits
and
charges.
Shared
appreciation
mortgage
(SAM)
A
loan
designed
for
borrowers
whose
current
income
is too
low to
qualify
for
another
type of
mortgage.
The SAM
loan
makes
the
lender
and the
borrower
partners
by
permitting
the
lender
to share
in
property
appreciation
In
return,
the
borrower
receives
a lower
interest
rate.
Sheriffs
deed
Deed
given by
a court
to
effect
the sale
of
property
to
satisfy
a
judgment.
Sinking
fund
method
Use of a
factor
by which
a
property's
annual
net
income
may be
multiplied
to find
the
present
worth of
the
property
over a
given
period
at a
given
rate of
interest.
Site
Land
suitable
for
building
purposes,
usually
improved
by the
addition
of
utilities
or other
services.
Special
assessment
A charge
against
real
estate
made by
a unit
of
government
to cover
the
proportional
cost of
an
improvement,
such as
a street
or
sewer.
Special-purpose
property
Property
that has
unique
usage
requirements,
such as
a church
or a
museum,
making
it
difficult
to
convert
to other
uses.
Square-foot
method
A
method
for
finding
the
reproduction
cost of
a
building
in which
the cost
per
square
foot of
a
recently
built
comparable
structure
is
multiplied
by the
number
of
square
feet in
the
subject
property.
Standard
deviation
A
measure
of the
difference
between
individual
entities,
called
variates,
and an
entire
population,
in which
the
square
root of
the sum
of the
squared
differences
between
each
variate
and the
mean of
all the
variates
in the
population
is
divided
by the
number
of
variates
in the
population.
Statistics
The
science
of
collecting,
classifying
and
interpreting
information
based on
the
number
of
things.
Straight-line
method
of
depreciation
(See
economic
age-life
method
of
depreciation)
straight-line
recapture.
A method
of
capital
recapture
in which
total
accrued
depreciation
is
spread
over the
useful
life of
a
building
in equal
amounts.
Subdivision
A
tract of
land
divided
by the
owner
into
blocks,
building
lots and
streets
by a
recorded
subdivision
plat.
Compliance
with
local
regulations
is
required.
Subdivision
development
method
A
method
of
valuing
land to
be used
for
subdivision
development.
It
relies
on
accurate
forecasting
of
market
demand,
including
both
forecast
absorption
(the
rate at
which
properties
will
sell)
and
projected
gross
sales
(total
income
that the
project
will
produce);
also
called
the land
development
method.
Sub-leasehold
The
interest
of a
sublessee
under a
sandwich
lease.
Subletting
The
leasing
of
premises
by a
lessee
to a
third
party
for a
part of
the
lessee's
remaining
term.
Substitution,
principle
of
The
basic
appraisal
premise
that the
market
value of
real
estate
is
influenced
by the
cost of
acquiring
a
substitute
or
comparable
property.
Summation
method
Another
name for
the
cost
approach
to
appraising
Supply
and
demand,
principle
of
A
principle
that the
value of
a
commodity
will
rise as
demand
increases
and/or
supply
decreases.
Survey
The
process
of
measuring
land to
determine
its
size,
location
and
physical
description;
also,
the map
or plat
showing
the
results
of a
survey.
T
Tax deed
The
instrument
used to
convey
legal
title to
property
sold by
a
governmental
unit for
nonpayment
of
taxes.
Tax-stop
clause
A clause
in a
lease
providing
that the
lessee
will pay
any
increase
in taxes
over a
base or
an
initial
year's
taxes.
Tenancy
by the
entirety
The
joint
ownership,
recognized
in some
states,
of
property
acquired
by
husband
and wife
during
marriage.
On the
death of
one
spouse
the
survivor
becomes
the
owner of
the
property.
Tenant
One who
has
possession
of real
estate;
an
occupant,
not
necessarily
a
renter;
the
lessee
under a
lease.
The
estate
or
interest
held is
called a
tenancy.
Time-share
Estate
or use
interest
in real
property
for a
designated
time
period
each
year.
Title
The
evidence
of a
person's
right to
the
ownership
and
possession
of land.
Topography
Surface
features
of land;
elevation,
ridges,
slope,
contour.
Trade
fixtures
Articles
of
personal
property
installed
by a
commercial
tenant
under
the
terms of
a lease.
Trade
fixtures
are
removable
by the
tenant
before
the
lease
expires
and are
not true
fixtures.
Triple
net
lease
(See net
lease)
Trust
A
fiduciary
arrangement
whereby
property
is
conveyed
to a
person
or an
institution,
called a
trustee,
to be
held and
administered
on
behalf
of
another
person
or
entity,
called a
beneficiary.
The one
who
conveys
the
trust is
called
the
truster.
Trust
deed
An
instrument
used to
create a
mortgage
lien by
which
the
borrower
conveys
title to
a
trustee,
who
holds it
as
security
for the
benefit
of the
note
holder
(the
lender);
also
called a
deed of
trust.
Trustee
The
holder
of bare
legal
title in
a deed
of trust
loan
transaction.
Truster
The
borrower
in a
deed of
trust
loan
transaction.
U
Underimprovement
An
improvement
that is
less
than a
property's
highest
and best
use.
Uniform
Standards
Of
Professional
Appraisal
Practice
(USPAP)
Minimal
criteria
for
appraisal
competency
promulgated
by the
Appraisal
Foundation
at the
direction
of
Congress,
to be
applied
to
appraisals
that
require
the
services
of a
state-licensed
or
certified
appraiser.
Unit-in-place
method
A method
for
finding
the
reproduction
cost of
a
building
in which
the
construction
cost per
square
foot of
each
component
part of
the
subject
building
(including
material,
labor,
overhead
and
builder's
profit)
is
multiplied
by the
number
of
square
feet of
the
component
part in
the
subject
building.
Use-value
The
value of
a
property
designed
to fit
the
specific
requirements
of the
owner
but that
would
have
little
or no
use to
another
owner.
Also
referred
to as
value-in-use.
Usury
Charging
interest
in
excess
of the
maximum
legal
rate.
V
Vacancy
and
collection
losses
(See
allowance
for
vacancy
and
collection
losses)
Valuation
principles
Factors
that
affect
market
value,
such as
the
principle
of
substitution,
highest
and best
use,
supply
and
demand,
conformity,
contribution,
increasing
and
decreasing
returns,
competition,
change,
stage of
life
cycle,
anticipation,
externalities,
balance,
surplus
productivity,
opportunity
cost,
and
theory
of
distribution.
Value
The
power of
a good
or
service
to
command
other
goods or
services
in
exchange;
the
present
worth of
future
rights
to
income
and
benefits
arising
from
ownership.
Value in
exchange
The
value of
goods
and
services
in
exchange
for
other
goods
and
services,
or
money,
in the
marketplace;
an
economic
concept
of
market
value.
VA
mortgage
A
mortgage
loan on
approved
property
made to
a
qualified
veteran
by an
authorized
lender
and
guaranteed
by the
Department
of
Veterans
Affairs
to limit
possible
loss by
the
lender.
Variance
(See
zoning
variance)
Variate
In
statistics,
an
individual
thing,
person
or other
entity.
Vendee
Buyer
Vendor
Seller
W
Warranty
deed
A
deed in
which
the
grantor
fully
warrants
good
clear
title to
the
property.
X
Y
Yield
Income
produced
by an
investment
Usually
used to
refer to
equity
investments.
Yield
capitalization
Method
used to
estimate
value
from
annual
net
operating
income
by
applying
a
capitalization
rate
derived
by
analyzing
each of
the
rate's
component
parts to
provide
both
return
on and
return
of the
investment.
Z
Zoning
Municipal
or
county
regulation
of land
use
within
designated
districts
or
zones.
Zoning
is an
application
of a
state's
police
power to
regulate
private
activity
by
enacting
laws
that
benefit
the
public
health,
safety
and
general
welfare.
Zoning
may
affect
use of
the
land,
lot
sizes,
type of
structure
permitted,
building
heights,
setbacks
and
density.
Zoning
ordinance
Regulation
of the
character
and use
of
property
by a
municipality
or other
government
Entity
through
the
exercise
of its
police
power .
Zoning
variance
An
exemption
from a
zoning
ordinance
or
regulation
permitting
a
structure
or use
that
would
not
otherwise
be
allowed.
