Glossary - A

An abstract denotes a brief digest of the most important points included in the public records and is related to the deed of a specific plot of land. Professionals such as an attorney or a title insurance firm to appraise an abstract of a deed or title to ascertain if there is any imperfection or shortcoming in the title of the land that needs to be vacated before a buyer is able to purchase free, saleable and insurable land deed.
In real estate business, mortgage acceleration denotes a practice whereby a mortgagor pays off a mortgage loan secured by him or her before it is due as per the terms mentioned in the mortgage contract. This practice is advantageous for the mortgagors as an early payment of the loan lessens the period required to repay the loan in full and evade an amount of compounded interest that is associated with a mortgage loan.
Acceleration clause
Acceleration clause is a explicit stipulation in a mortgage agreement that enables a lender to demand the payment of the entire outstanding balance or other collateral under specific circumstances, including the mortgagor's failure to make payments, missing a monthly payment, non-payment of taxes on the mortgaged property, bankruptcy, sell the property or in the case of breaking any of the promised terms of the mortgage agreement.
This term denotes the documents, clauses, statements or any information attached or added to a contract with a view to elucidate, alter or endorse the information in the original document of written work in some way or the other. In order to implement the addenda, they need to be signed or initialled by the buyer and the seller as well as be undoubtedly mentioned in the main text of contract. For instance, a contract may mention an addendum by stating that "An addendum is added to and made a section of this agreement."
Adjustable-rate mortgage (ARM)
ARM or adjustable rate mortgage denotes a mortgage with an interest rate and monthly payment amount that is liable to change all through its existence, usually in accordance with the alterations in the Treasury Bill rate or the prime rate. The primary objective of making the interest rate adjustable is to bring the interest rate on the mortgage in sequence with the prevailing market rates. In this case, the mortgage holder is secluded by a minimum interest rate that is also known as a ceiling. Normally, ARMs begin with an abnormally low interest rate which rises steadily with the passage of time. On the whole, if the interest rate falls, as calculated by an assortment of indexes, normally the interest rate of an adjustable rate mortgage also follows suit. Contrarily, if the interest rate goes up in the market, the interest rates as well as the monthly payment amount of the ARMs too rise. Although the amount that the interest rate can swing is restrained by caps, prior to consenting to and adjustable rate mortgage, it is essential for the mortgagor to ascertain if he or she will be able to manage to pay for the highest payments that may occur if the interest rate on their mortgage rose to the permissible upper limit.
Adjustment period
In matters pertaining to real estate, adjustment period refers to the length of time between interest rate modifications on an adjustable rate mortgage (ARM). In other words, the term denotes the length of time during which on an ARM. Depending on the index, the interest rate is amended usually twice every year. For instance, a mortgage loan with an adjustment period of a single year is known as a one-year ARM, denoting that it is able to amend the interest rate once a year.
In simple words adjustments denote deductions made to charge off a loss, as may be the case of a bad debt. While re-selling a home, adjustment includes items that have been paid for in advance of the closing date by the seller and this benefit the purchaser following the closing date that are pro-rated. In this case, the seller is given a credit as an alteration on closing. For instance, closing adjustments on a resale home include payment of taxes on real estate in advance, fees for condominium paid in advance provided the property has been bought in a condominium as well as the fuel oil provided the home has furnace run by oil.
Adverse Possession
The term adverse possession denotes the occupancy of land belonging to one person by another person in a way that is considered to be undesirable on the part of the original owner of the property. An individual may claim adverse possession for a real estate asset that has been deserted or in opposition of the rights of its legal owner who doesn't dispute its possession by the applicant. Adverse possession the ownership of the land becomes vested in the name of the occupant by operation of law after a fixed period, usually 12 to 20 years. In other words, adverse possession signifies acquiring legal ownership of a real estate property by means of the real, direct, aggressive and permanent occupancy in the absence of its actual owner for a period of time as stipulated by the law. Normally, personal or private property may be obtained by adverse possession. In a number of ways, adverse possession is akin to prescription, a different way to get hold of the ownership of a real estate asset by means of occupying for a specific period. Nevertheless, prescription is also distinct from adverse possession in some aspects because the ownership acquired in this manner is assumed to have occurred from a lost grant. This is contrary to the manner of acquiring a real estate asset where the property is owned by occupant following the expiry of certain legal time limit.
The term agency denotes a credible association between two parties in which one party, the agent, is under the control of the other, the principal. In another words, agency denotes an understanding whereby an agent intermediates between buyers and sellers in lieu of a commission. Although the agent buys or sells on behalf of his client or principal, the risks involved with the transactions lie with the client and not the agent. The legal definition of an agency states a relationship where one party operating as an agent on behalf may assume the charge of the other concerned individual as a result of employing the rule influencing the dealing with the third parties. It may be mentioned here that the genesis of the term agency lies in the primeval master-servant relationship. Engaging an agency in transactions is regarded as a legal matter when the agent harms or commits any wrongful act against the third party. In the Anglo-American law the rules engaged in the business are bound by and accountable for the actions of agents such as business agents, stock brokers, real estate agents, contractors, lawyers, private detectives, union delegates and managing partners. Presently, agencies have a crucial role to perform in the field of trade and commerce.
The term agent generally denotes an individual or firm that performs or possesses the authority to perform or execute a task on behalf of another called the principal. It is important to note that unlike a dealer, an agent does not take on any financial risk for his or her actions. In the context of real estate, the term agent has two connotations. Firstly, generally speaking, an agent here denotes a person who operates for another person usually in return for a fee, like a real estate broker or lawyer. Secondly, an agent is a form of real estate licensee who servers under the authorization of a real estate broker.
Agreement of sale
The term agreement of sales is known by different names, including contract of purchase, sales agreement or purchase agreement depending on the location or jurisdiction. The term denotes a contract whereby the seller, known as vendor, is eager to sell and the buyer, called vendee, willing to buy as per specific stipulation elucidated in writing and signed by both parties. In the context of real estate, it denotes a written agreement between a seller and a buyer whereby the purchaser concurs to buy a particular real property and the owner agrees to sell it upon specific terms and conditions of the agreement.
Alienation clause
In matters pertaining to the lending industry, the expression alienation clause refers to a provision in a loan agreement whereby the advance ought to be reimbursed in full if the ownership of the mortgaged property needs to transferred or alienated to an entity other than the borrower or mortgagor. This clause actually stops the borrower from assigning the debt without the approval or the lender or mortgagee and hence it is also called due-on-sale clause. Usually, almost all mortgage agreements incorporate the alienation clause.
In simple words, amortization denotes the gradual elimination of a liability, like in the case of a mortgage, by making regular payments over a particular time period. It is important to note that the payments made by the mortgagor should include both the principal amount as well as the interest on it. For instance, if the amortization period is high, the amount of monthly payments will be low, but the mortgagor will have to pay more in terms of interest on the whole. While the usual amortization period of a mortgage is 25 years, it is possible to negotiate it to be a minimum of five years or a maximum of 40 years.
Annuity denotes a long-standing contract sold by an insurance firm or a financial institution and is intended to make interest payments to the holder at particular intervals, normally after the retirement of the holder. It may be noted that all annuities are tax-deferred payments denoting that the earnings from savings in these accounts continue to increase tax-deferred till the holder decides to withdraw the funds from the account. Basically there are two types of annuities - fixed and variable. While fixed annuities assure a certain amount of interest at specific intervals, variable annuities guarantee nothing like this. Nonetheless, both types of annuities are comparatively safe investments, but low-yielding.
Appraisal or evaluation denotes seeking an expert's opinion regarding the prevailing market value of a house that one desires to purchase or already own provided they are refinancing their home loan. In fact, the mortgagor has to pay to the mortgagee for hiring the services of an appraiser as the opinion of the appraiser aids to safeguard the lender from lending the money on a home that may not be worth much. Again, in the instance of the borrower turning out to be a defaulter, the lender or mortgagee is able to foreclose on the property against which the loan was granted.
An appraiser is a professional who is accustomed to the neighbourhood real estate values and evaluates the value of specific properties. The payment for the appraiser's services cannot be associated to any particular approximation of worth. At the same time, the appraiser should not have any secret interest in the property he or she has been hired to evaluate.
In real estate transactions, appreciation denotes the enhancement in the worth of a property or item over a period of time. In other words, appreciation is just the opposite of depreciation of a real estate.
"AS IS" agreements
The term 'as is' is broadly defined as 'with all faults'. This term is incorporated in sales deals to inform the purchaser that no direct or indirect assurance is being offered. Hence, the buyer acquired the merchandise or property at his or her personal risk with no remedy against the seller for their state or functioning. In the context of real estate, this means a situation where a land or home is sold without any assurance and is in whatsoever state it is at the time of signing the sale agreement. It is advisable that both buyers and sellers ensure the provincial and local rulings and warranties regarding if and how 'as is' sales are influenced by the relevant laws.
Assessed value
In matters pertaining to real estate, the term assessed value refers to the to the dollar value designated to a land or home with the objective of evaluating taxes on it. In fact, the assessed value of a property is decided by an appraiser that shows the worth of the real estate asset and, if not laid off, is made use of to calculate a tax liability in terms of a dollar by increasing it by a tax rate. Usually, the assessed value of a property is seldom utilized as a base for evaluating the value of a property.
Broadly speaking, the term assignment denotes the transfer of the title of a land or home or benefits, accountabilities, rights in an agreement, like in an insurance policy, by one entity called assignor to another entity called assignee by signing a certificate known as the deed of assignment. In other words, the tem assignment, 'cessio' in Latin, is used with comparable connotations in the law of contract as well as in the law of real estate. In both instances, the term has the same meaning - transfer of rights held by the assignor to the assignee. The legal form of the assignment decided on a few added rights and accountabilities that go together with the law.
Assessing unit
The term assessing unit refers to a city, town, or a province having a county department of evaluation with the authority to evaluate real estate assets for taxation purpose. An assessing unit may also include a village, if not the village has passed a local bylaw to end its status as an assessing entity.
Assumability refers to a situation when the buyer permitted to take over or assume the seller's mortgage that already exists on the property. In majority of the instances, assumability does not occur mechanically, but the lender must deem the buyer to be eligible to take over the mortgage. Explicitly speaking, the term assumibility refers to a situation where the seller may be able to transfer the mortgage to a new buyer after a home is sold. Usually, lenders need a credit review of the new borrower and may even impose a payment for the assumption of the mortgage. It may be mentioned here that a number of mortgages include a due-on-sale clause preventing the borrower from transferring the mortgage loan on to a new buyer or borrower. In such cases, the lender would want the mortgagor to pay off the total loan balance due to him or her before selling the home. The advantage of assumability is that it may facilitate the sale of the home by attracting new prospective buyers.
In matters pertaining to real estate, the expression assumption denotes a mortgage that enable a new owner to take over or assume payments, while the original borrower continues to be accountable on the mortgage document. In other words, assumption refers to a contract between a seller and a buyer in which the buyer takes over the payments or assumes the imbursements from the seller on a mortgage that is already in place. In this case it is essential to inform the lender or mortgagee about the assumption and seek his approval before the buyer takes over the payments. The advantage of assuming a loan is that one can save substantial money on the deal as the buyer does not have to pay the majority of the closing expenses.
Assumable mortgage
In the context of real estate, the phrase assumption of mortgage, also called assumable mortgage, refers to acquiring the ownership of a real property on which a mortgage is already in place and concurring to be individually accountable for the terms and conditions of the mortgage - inclusive of paying the periodic instalments. In other words, the term assumption of mortgage denotes the purchase of a mortgaged property whereby the buyer agrees to the debt liabilities existing on the property concerned. On the other hand, the seller continues to be liable to the lender but for the lender concurring to release him or her. An assumption of mortgage can only take place with the consent of the lender.
Attached home
In terms of real estate, the term attached home denotes a residential property that adjoins another home by means of common walls on one or more sides. In other words, attached home refers to a type of multi-unit housing where the houses have common walls with other houses. Condominiums are the best examples of attached home as they have lined up houses.
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