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acceptance An offeree's consent to enter into a contract and be bound by the terms of the offer. accretion An addition to land through natural causes. acknowledgment A declaration made by a person to a notary public, or other public official authorized to take acknowledgments, that the instrument was executed by him and that it was his free and voluntary act. acre A measure of land equal to 43,560 square feet. ad valorem Designates an assessment of taxes against property. Literally, according to value. additional principal payment A payment by a borrower of more than the scheduled principal amount due in order to reduce the remaining balance on the loan. adjustable rate mortgage (ARM) A mortgage loan whose interest rate fluctuates according to the movements of an assigned index or a designated market indicator--such as the weekly average of one-year U.S. Treasury Bills--over the life of the loan. To avoid constant and drastic fluctuations, ARMs typically limit how often and by how much the interest rate can vary. adjusted basis The original cost of a property plus the value of any capital expenditures for improvements to the property minus any depreciation taken. adjustment date The date on which the interest rate changes for an adjustable-rate mortgage (ARM). adjustment period The period that elapses between the adjustment dates for an adjustable-rate mortgage (ARM). adjustments Money that the buyer and sellers credit each other at the time of closing. Often includes taxes and down payment. administrator/administratrix A man/woman appointed by a court to settle the estate of a deceased person when there is no will. Contrast with executor/executrix. adverse possession The right of an occupant of land to acquire title against the real owner, where possession has been actual, continuous, hostile, visible, and distinct for the statutory period. The requirements for adversely possessing property vary between states, but usually include continuous and open use for a period of five or more years and paying taxes on the property in question. affidavit Written statement signed and sworn to before some person authorized to take an oath. agency The legal relationship between a principal and an agent. In real estate transactions, usually the seller is the principal, and the broker is the agent: however, a buyer represented by a broker (i.e., buyer as principal is a growing trend. In an agency relationship, the principal delegates to the agent the right to act on his or her behalf in business transactions and to exercise some discretion while so acting. The agent has a fiduciary relationship with the principal and owes to that principal the duties of accounting, care, loyalty, and obedience. Also see buyer's broker. agent A person authorized to act for and under the direction of another person when dealing with third parties. The person who appoints an agent is called the principal. An agent can enter into binding agreements on the principal's behalf and may even create liability for the principal if the agent causes harm while carrying out his or her duties. See also attorney-in-fact. alienation Clause A clause in a mortgage, which gives the lender the right to call the entire loan balance due if the property is sold; due-on-sale clause. amenities Non monetary benefits and satisfactions derived from property ownership, such as a pleasant view, pride in home ownership, etc. ammendment A modification to an existing contract, mutually agreed to by all parties. Examples might include a change in the pruchase price due to a low appraisal, or a change in the closing date. amortization The operation of paying off indebtedness, such as a mortgage, by installments. The conventional amortization periods are15 or 30 years. (See term) amortized mortgage A mortgage requiring periodic payments that include both interest and principal. Also see self amortized loan. annual membership The amount that is charged annually for having a line of credit available. Often charged regardless of whether or not you use the line. antitrust laws Federal and state laws prohibiting, among other things, monopolies, monopolistic practices, restraint of trade, and price fixing. application An initial statement of personal and financial information, which is required to approve your loan. application fee Fees that are paid upon application. Charges for property appraisal and a credit report are usually included in the application fee. appraisal A determination of the value of something, such as a house, jewelry or stock. A professional appraiser--a qualified, disinterested expert--makes an estimate by examining the property, and looking at the initial purchase price and comparing it with recent sales of similar property. Courts commonly order appraisals in probate, condemnation, bankruptcy or foreclosure proceedings in order to determine the fair market value of property. Banks and real estate companies use appraisals to ascertain the worth of real estate for lending purposes. And insurance companies require appraisals to determine the amount of damage done to covered property before settling insurance claims. appraised value An estimate of the present worth. appreciation An increase in value or worth of property. Opposite of depreciation. asking (list) price The price placed on property for sale. assessor A local government official who determines the value of the property for taxation purposes. assignee A person to whom a property right is transferred. For example, an assignee may take over a lease from a tenant who wants to permanently move out before the lease expires. The assignee takes control of the property and assumes all the legal rights and responsibilities of the tenant, including payment of rent. However, the original tenant remains legally responsible if the assignee fails to pay the rent. assignment A transfer of property rights from one person to another, called the assignee. assumable mortgage An existing mortgage that can be taken over by the buyer on the same terms given to the original borrower. assumption of mortgage The transfer of title to property to a grantee wherein he assumes liability for payment of an existing note secured by a mortgage against the property; should the mortgage be foreclosed and the property sold for a lesser amount than that due, the grantee-purchaser who has assumed and agreed to pay the debt secured by the mortgage is personally liable for the deficiency. Before a seller may be relieved of liability under the existing mortgage, the lender must accept the transfer of liability for payment of the note. Also known as simple assumption. Contrast withsubject to mortgage. attachment Method by which a debtor's property is placed in the custody of the law and held as security pending outcome of a creditor's suit. attorney's opinion of title An instrument written and signed by the attorney who examines the abstracts of title, stating his opinion as to whether a seller may convey good title. attractive nuisance Something on a piece of property that attracts children but also endangers their safety. For example, unfenced swimming pools, open pits, farm equipment and abandoned refrigerators have all qualified as attractive nuisances. auction A public sale of property to the highest bidder.
Consumer Credit Counseling Service (CCCS) A national non-profit agency that, at no cost, helps debtors plan budgets and repay their debts. One major criticism of CCCS is that each office is primarily funded by voluntary donations from the creditors that receive payments from debtors repaying their debts through that office. The goal of CCCS is to insure that consumers repay the debts that they owe. CCCS may arrange easy payment plans that increase the chances for repayment, but harm a consumer's credit in the process. Agreeing to a payment plan and following it to the letter may not stop creditors from reporting delinquent repayment information to credit bureaus for each month the payment falls short of the previous minimum amount. contingency A provision in a contract stating that some or all of the terms of the contract will be altered or voided by the occurrence of a specific event. A common example is a Buyer who enters into the purchase of another home before his current home is sold. The Buyer will usually ask for the Seller to make the sale contingent upon the sale of the Buyer's current home. If the Seller receives another offer for the property, the first Buyer must either agree to buy the home without any contingency, or step aside and let someone else purchase the home. contract A legally enforceable agreement to do, or not to do, a particular thing for a consideration. contract for deed A contract for the sale of real estate where the deed (title) of the property is transferred only after all the payments have been made. Also known as a land contract, agreement of sale, conditional sales contract, or installment contract. Buyers should be wary of this type of contract, since they can lose their entire investment if the owner declares brankruptcy, before the deed has been transferred. contract for exchange of real estate A contract for the sale of real estate in which the consideration is paid wholly or partly in real property instead of cash. contract of sale The agreement between the buyer and seller on the purchase price, terms, and conditions necessary to both parties to convey the title to the buyer. conventional loan A real estate loan, which is not insured by the FHA or guaranteed by the VA. conveyance Written instrument, such as a deed or lease, that evidences transfer of some ownership interest in real property from one person to another. cooperative housing (1) A form of real estate, usually a dwelling in which residents own shares, but do not directly own the space they inhabit. Rather, owning a share of the building entitles the shareholder with the right to inhabit a certain space within the dwelling, such as an apartment. Shares are usually proportional to the amount of space in each apartment. (2) A living arrangement in which residents must perform certain duties or chores to benefit the entire residence, in addition to paying room and board. A common form of dormitory living. cooperative sale A sale of property in which the buyer is brought to the transaction by a real estate agent who works for a different real estate broker than the listing agent. Both brokers/companies have agreed to cooperate in closing the property, and typically, splitting the commission. Offers of cooperation and compensation are commonly found in the MLS property listings. cost approach to value An estimate of value based on current construction costs, less depreciation, plus land value. Contrast with the income approach to value and the market data approach to value. counter offer The rejection of an offer to buy or sell that simultaneously makes a different offer, changing the terms in some way. For example, if a Buyer offers $160,000 for a home, and the Seller replies that he wants $175,000, the Seller has rejected the Buyer's offer of $160,000 and made a counteroffer to sell at $175,000. The legal significance of a counteroffer is that it completely voids the original offer, so that if the Seller decided to sell for $160,000 the next day, the Buyer would be under no legal obligation to pay that amount for the property. covenant A restriction on the use of real estate that governs its use, such as a requirement that the property will be used only for residential purposes. Covenants are found in deeds or in documents that bind everyone who owns land in a particular development. See Covenants, Conditions & Restrictions. covenants, conditions & restrictions (CC&Rs) The restrictions governing the use of real estate, usually enforced by a homeowners' association and passed on to the new owners of property. For example, CC&Rs may tell you how big your house can be, how you must landscape your yard or whether you can have pets. If property is subject to CC&Rs, buyers must be notified before the sale takes place. credit bureau A private, profit-making company that collects and sells information about a person's credit history. Typical clients include banks, mortgage lenders and credit card companies that use the information to screen applicants for loans and credit cards. There are three major credit bureaus, Equifax, Experian and Trans Union, and they are regulated by the federal Fair Credit Reporting Act. credit file See credit report. credit insurance Insurance a lender offers or requires a borrower to purchase to cover the loan. If the borrower dies or becomes disabled before paying off the loan, the policy will pay off the remaining balance. Federal and state consumer protection laws require the lender to disclose to existing and potential borrowers the terms and costs of obtaining credit insurance because it can affect the terms of the loan. credit limit The maximum amount that you can borrow under a home equity plan. credit report An account of your credit history, prepared by a credit bureau. A credit report will contain both credit history, such as what you owe to whom and whether you make the payments on time, as well as personal history, such as your former addresses, employment record and lawsuits in which you have been involved. An estimated 50% of all credit reports contain errors, such as accounts that don't belong to you, an incorrect account status or information reported that is older than seven years (ten years in the case of a bankruptcy). credit score In the mortgage lending world, credit scores either make or break you when it comes to obtaining a home mortgage or getting the best rate you can. There are three different scores available to a mortgage lender each being generated by the three different credit agencies. The most popular, known as a Fico score is from Experian (formally TRW), then there is a Beacon score from Equifax, and finally a Emperica score from Trans Union. This is the "mortgage scoring" system used to get a conventional mortgage. Simply, credit scores are numbers calculated based upon your credit history. The better your credit, the higher your number or score will be - the worse your credit, the lower the score. The number of inquiries or times your credit has been pulled in the past 90 days will also lower your "score". In some instances, lack of credit results in "no score" on your report requiring you to provide "alternative credit" via your rental, utility or telephone payment histories. There's plenty you can do to improve your score if you know how the system works. Just don't expect much help from your lender--most consider the actual formulas a trade secret and don't want people angling for an advantage. Congress is currently working on legislation to provide consumers with access to their credit scores and the formulas used to calculate these scores. There are some lenders that do not rely on credit scores to the degree that most do. Some times, credit reports contain inaccuracies that lower your score, this is when a lender has to use a common sense approach to approving your loan. In some instances you may have to correct your credit report, wait for your score to improve, then reapply for the loan. Talk with your mortgage broker or lender to understand what your options are. creditor A person or entity (such as a bank) to whom a debt is owed. cul-de-sac A dead end street which widens sufficiently at the end to permit an automobile to make a "U" turn.