Real Estate Vocabulary (Guide to Passing the PSI Real Estate Exam)

Acceleration clause - answer-A provision in a written mortgage, note, bond, or conditional sales contract that in the even of default, the whole amount of the principal and the interest may be declared due and payable at once. Accession - answer-Title to improvements or additions to real property is acquired as a result of the accretion of alluvial deposits along the banks of streams or as a result of the annexation of fixtures. Accretion - answer-Increase or addition to land by the deposit of sand or soil washed up naturally from a river, lake, or sea. Accrued depreciation - answer-The actual depreciation that has occurred to a property at any given date, the difference between the cost of replacement new (as of the date of the appraisal) and the present appraised value. Acknowledgement - answer-A declaration made by a person to a notary public or other pubic official authorized to take acknowledgments that an instrument was executed by his or her as a free and voluntary act. Actual eviction - answer-The result of legal action originated by a lessor, by which a defaulted tenant is physically ousted from the rented property pursuant to a court order. Actual notice - answer-Express information or fact; that which is known; actual knowledge. Ad valorem tax - answer-A tax levied according to value; generally used to refer to real estate tax. Adjustable-rate mortgage (ARM) - answer-A mortgage in which the interest changes periodically, according to corresponding fluctuations in an index. All are tied to indexes. Adjustment date - answer-The date the interest rate changes on an adjustable-rate mortgage. Administrator - answer-The party appointed by the county court to settle the estate of a deceased person who died without leaving a will. Adverse possession - answer-The actual, visible, hostile, notorious, exclusive, and continuous possession of another's land under a claim to title. Affidavit - answer-A written statement signed and sworn to before a person authorized to administer an oath Agent - answer-One who represents or has the power to act for another (principal). The authorization may be express, implied, or apparent. A fiduciary relationship is created when a principal executes a listing agreement or management contract authorizing a real estate broker to be his or her agent. Agreement of sale - answer-A written agreement by which the purchaser agrees to buy certain real estate and the seller agrees to sell, on the terms and conditions set forth in the agreement. Air lot - answer-A designated airspace over a piece of land, like suface property, may be transferred. Air rights - answer-The right to use the open space above one's property. It can be sold to build a sky-walk or for the utility company to erect power lines, Alienation - answer-The act of transferring property to another. May be voluntary, such as by sale, or involuntary, such as through eminent domain. Alienation clause - answer-Clause in a mortgage instrument that does not allow the borrower to sell (without lender approval) on assumption or contract-for-deed. Alluvion - answer-The actual soil increase resulting from accretion. Amendments - answer-Changes to previously approved and adopted written agreements. Amenities - answer-Neighborhood facilities and services that enhance a property's value, outside of the property (swimming pools, three-car garages). Americans with Disabilities Act (ADA) - answer-A federal law (1992) designed to eliminate discrimination against individuals with disabilities. Amortization - answer-The liquidation of a financial burden by installment payments, which include principal and interest. The loan payment consists of a portion which will be applied to pay the accruing interest on a loan, with the remainder being applied to the principal. Over time, the interest portion decreases as the loan balance decreases, and the amount applied to principal increases so that the loan is paid off in the specified time. Amortized loan - answer-A loan in which the principal and interest are payable in monthly or other periodic installments over the term of the loan Amortization schedule - answer-A table which shows how much of each payment will be applied toward principal and how much toward interest over the life of the loan. It also shows the gradual decrease of the loan balance until it reaches zero. Annual percentage rate (APR) - answer-This is not the note rate on your loan. It is a value created according to a government formula intended to reflect the true annual cost of borrowing, expressed as a percentage. It works sort of like this, but not exactly, so only use this as a guideline: deduct the closing costs from your loan amount, then using your actual loan payment, calculate what the interest rate would be on this amount instead of your actual loan amount. Because you are using the same payment on a smaller amount, it is always higher than the actual not rate on your loan. Antitrust laws - answer-The laws designed to preserve the free enterprise of the open marketplace by making illegal certain private conspiracies and combinations formed to minimize competition. Violations: price fixing (set fixed compensation rates) or allocation of customers or markets (brokers agreeing to limit their trades to certain areas or properties. Application - answer-The form used to apply for a mortgage loan, containing information about a borrower's income, savings, assets, debts, and more. Appraisal - answer-A written justification of the price paid for a property, primarily based on an analysis of comparable sales of similar homes nearby. Appraised value - answer-An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property. Since an appraisal is based primarily on comparable sales, and the most recent sale is the one on the property in question, the appraisal usually comes out at the purchase price. Appraiser - answer-An individual qualified by education, training, and experience to estimate the value of real property and personal property. Although some work directly for mortgage lenders, most are independent. Appreciation - answer-The increase in the value of a property due to changes in market conditions, inflation, or other causes. Appurtenant - answer-Belonging to, incident to, annexed to. Examples: garage to a house. Passes with the land when the property is transferred. Assessed value - answer-The valuation placed on property by a public tax assessor for purposes of taxation. Assessment - answer-The placing of a value on property for the purpose of taxation. Assessor - answer-A public official who establishes the value of a property for taxation purposes. Asset - answer-Items of value owned by an individual. These include bank accounts, stocks, bonds, mutual funds, and so on. Others include real estate, personal property, and debts owed to an individual by others. Assignment - answer-Transfer in writing of rights or interest in a bond, mortgage, lease or other instrument. When ownership of your mortgage is transferred from one company or individual to another. Assumable mortgage - answer-A mortgage that can be assumed by the buyer when a home is sold. Usually, the borrower must "qualify" in order to assume the loan. Assumption - answer-The term applied when a buyer assumes the seller's mortgage. Avulsion - answer-A sudden tearing away of land by the action of natural forces. Balloon mortgage - answer-A mortgage loan that requires the remaining principal balance be paid at a specific point in time. For example, a loan may be amortized as if it would be paid over a thirty year period, but requires that at the end of the tenth year the entire remaining balance must be paid. Base line - answer-Set of imaginary lines running east and west used by surveyors under the rectangular survey system (or government survey method) of property description. Balloon payment - answer-The final lump sum payment that is due at the termination of a balloon mortgage. Bankruptcy - answer-By filing in federal bankruptcy court, an individual or individuals can restructure or relieve themselves of debts and liabilities. Benchmark - answer-A permanent reference mark or point established for use by surveyors when measuring differences in elevation. Bill of sale - answer-A written document that transfers title to personal property. For example, when selling an automobile to acquire funds which will be used as a source of down payment or for closing costs, the lender will usually require it (in addition to other items) to help document this source of funds. Biweekly mortgage - answer-A mortgage in which you make payments every two weeks instead of once a month. The basic result is that instead of making twelve monthly payments during the year, you make thirteen. The extra payment reduces the principal, substantially reducing the time it takes to pay off a thirty year mortgage. Bond market - answer-Usually refers to the daily buying and selling of thirty year treasury bonds. Lenders follow this market intensely because as the yields of bonds go up and down, fixed rate mortgages do approximately the same thing. The same factors that affect the Treasury Bond market also affect mortgage rates at the same time. That is why rates change daily, and in a volatile market can and do change during the day as well. Bilateral contract - answer-A contract in which each party promises to perform an act in exchange for the other party's promise to perform. Broker - answer-Usually refers to a company or individual that does not lend the money for the loans themselves, but broker loans to larger lenders or investors. As a normal definition, anyone who acts as an agent, bringing two parties together for any type of transaction and earns a fee for doing so. Blockbusting - answer-Illegal practice of inducing homeowners to sell their properties by making representations regarding the entry of minority persons into the neighborhood. Boycotting - answer-Two or more businesses conspire against other businesses to reduce competition. Breach of contract - answer-Failure, without legal excuse, of one of the parties to a contract to perform according to the contract. Buydown - answer-Usually refers to a fixed rate mortgage where the interest rate is "bought down" for a temporary period, usually one to three years. After that time and for the remainder of the term, the borrower's payment is calculated at the note rate. Brokerage - answer-The business of buying and selling for another for a commission. Broker/salesperson - answer-Person who has passed the broker's licensing exam but is licensed to work only on behalf of a licensed broker and who may be allowed to manage an office. Buffer zone - answer-A strip of land that separates one land use from another. Building code - answer-An ordinance specifying minimum standards of construction of buildings for the protection of public safety and health. Bundle of legal rights - answer-Theory that land ownership involves ownership of all legal rights to the land, such as possession, control within the law, and enjoyment, rather than ownership of the land itself. Blanket mortgage - answer-Mortgage that covers more than one parcel of real estate and provides for each parcel's partial release from the mortgage lien on repayment of a definite portion of the debt. Capital gain - answer-Profit earned from the sale of an asset. Capitalization - answer-The process of converting into present value a series of anticipated future periodic installments of net income. Capitalization rate - answer-Rate of return a property will produce on the owner's investment. Caveat emptor - answer-Latin phrase meaning "Let the buyer beware." Certificate of deposit - answer-A time deposit held in a bank which pays a certain amount of interest to the depositor. Certificate of eligibility - answer-A document issued by the Veterans Administration that certifies a veteran's eligibility for a VA loan. Certificate of reasonable value - answer-Once the appraisal has been performed on a property being bought with a VA loan, the Veterans Administration issues a CRV. Certificate of title - answer-Statement of opinion on the status of the title to a parcel of real property, based on an examination of specified public records. Chain of title - answer-An analysis of the transfers of title to a piece of property over the years. Chattels - answer-Personal property. City planning commission - answer-Local governmental organization designed to direct and control the development of land within a municipality. Clear title - answer-Is free of liens or legal questions as to ownership of the property. Closing - answer-This has different meanings in different states. In some states a real estate transaction is not consider "closed" until the documents record at the