Dictionary – Abandonment – Award

ABANDONMENT – The voluntary relinquishment of possession by the LESSEE or owner without the transfer of INTEREST. In these instances, the PROPERTY will generally revert to someone holding a prior interest or, in cases where no owner can be determined, to the state. The LESSEE who abandons this LEASED REAL PROPERTY is still, however, bound by the terms of the LEASE.

ABATEMENT – A reduction in the amount or the intensity.

ABSENTEE OWNER – An owner who does not manage or physically reside at PROPERTY owned.

ABSOLUTE AUCTION – An AUCTION in which the REAL PROPERTY is sold to the highest bidder without regard to the amount of the highest BID.

ABSORPTION RATE – An estimate of the annual sales or occupancy of a particular type of land usage.

ABSOLUTE LIABILITYLIABILITY for damages even though fault or NEGLIGENCE cannot be proven.

ABSTRACT – Also referred to as ABSTRACT OF TITLE – A chronological summation of every recorded instrument and proceeding that affects the title of the subject property.

ABSTRACT OF TITLE – Also referred to as ABSTRACT – A chronological summation of every recorded instrument and proceeding that affects the title of the subject PROPERTY.

ABSTRACT UPDATE – Making current an existing, however old, ABSTRACT OF TITLE by including with it copies of all the relevant documents that have been recorded since the last preparation or most recently done update of the existing ABSTRACT.

ABUT – Adjoining or meeting.

ACCELERATED COST RECOVERY SYSTEM (ACRS) – A method of DEPRECIATION introduced by the Economic Recovery Tax Act of 1981 and modified in 1984 and 1986.

ACCELERATED DEPRECIATION – Any DEPRECIATION schedule other than STRAIGHT-LINE DEPRECIATION. Chosen for income tax or accounting purposes, it offers greater deductions in early years.

ACCELERATION CLAUSE – The clause in a MORTGAGE or DEED OF TRUST giving the lender the right to call all sums owned immediately due and payable upon the happening of a certain event, such as default on a payment or destruction of the premises.

ACCEPTANCE – The act of agreeing to accept an offer.

ACCESSION – The right of an owner to any increases in the REAL PROPERTY, such as a buildup of land through ALLUVIAL deposits.

ACCESSORY APARTMENT – A separate living unit created within a single-family home and occupied by either a family member or a non-family tenant. Generally, local zoning and housing codes outlaw these units, although some cities conduct special programs to encourage such units for specific purposes.

ACCESS RIGHT – 1)  The right of owners to get to and from their property; 2) The right of an owner to have ingress to and from the real property, usually referring to an EASEMENT. INGRESS is the right to enter the land of another; EGRESS is the right to leave the land of another.

ACCIDENT – An event or occurrence which is unforeseen and unintended.

ACCIDENT AND HEALTH INSURANCE – A type of coverage that pays BENEFITS – sometimes including reimbursement for loss of income – in case of sickness, accidental injury, or accidental death.

ACCIDENT INSURANCE – A form of health insurance against loss by accidental bodily injury.

ACCIDENTAL BODILY INJURY – Injury to the body as the result of an accident.

ACCIDENTAL DEATH BENEFIT – A benefit in addition to the face amount of a life insurance policy, payable if the insured dies as the result of an accident. Sometimes referred to as

DOUBLE INDEMNITY.

ACCOMMODATION PARTY – Same as COSIGNER – One who has signed an agreement without receiving VALUE for it, for the purpose of lending his or her name so that another person can secure a necessary LOAN or other arrangement.

ACCOUNTING – The process of recording, summarizing, and allocating all items of income and expense of the company and analyzing, verifying, and reporting the results.

ACCRETION – The gradual addition of land by ALLUVIAL deposits of soil through natural causes, such as shoreline movement in rivers and the creation of deltas at the mouths of rivers.

ACCRUAL METHOD – A method of accounting that requires income or expense to be entered when the amount is earned or the obligation is payable. Distinguished from CASH METHOD in which amounts are posted when paid or received.

ACCRUED DEPRECIATION – The total DEPRECIATION existing in real property at a given time.  Same as ACCUMULATED DEPRECIATION.

ACCRUED INTEREST – Interest that has been earned but not paid.

ACCRUED ITEMS – On a closing statement, expenses that have been incurred but are not yet payable, such as the interest on a loan and real property taxes.

ACCUMULATED DEPRECIATION – In accounting, it is the amount of DEPRECIATION expense that has been claimed to date. Same as ACCRUED DEPRECIATION.

ACCUMULATION PERIOD – 1) The time between the first premium payment and the first benefit payout under a DEFERRED ANNUITY; 2) A specified period of time, such as ninety days, during which the insured person must incur eligible medical expenses at least equal to the deductible amount in order to establish a benefit period under a major medical expense or comprehensive medical expense policy.

ACCUMULATION UNITS – The mechanism used to account for your “deposits” in a VARIABLE ANNUITY CONTRACT during the premium-paying period. The number of units purchased depends upon the current VALUATION of a unit in dollars.

ACKNOWLEDGMENT – A declaration made before a notary public or an authorized officer of the court that a document was signed by the person as a voluntary act.

ACQUIRED IMMUNE DEFICIENCY SYNDROME (AIDS) – A fatal, incurable disease caused by a virus that can damage the brain and destroy the body’s ability to fight off illness.

ACQUISITION COST – 1) The price and all fees required to obtain a property; 2) the insurer’s cost of putting new business in force, including the agent’s commission, the cost of clerical work, fees for medical examinations and inspection reports, sales promotion expense,  etc.

ACQUISITION, DEVELOPMENT AND CONSTRUCTION LOAN (ADC LOAN) – Example:  a DEVELOPER owns LAND and wants to build a retail strip mall on the LAND.  Their first step is to get LEASES from future TENANTS,  then they must get a COMMITMENT for FINANCING, then they may secure an ADC LOAN.

ACQUISITION LOAN – Money borrowed for the purpose of purchasing a property.

ACRE – A two-dimensional measure of land equaling 160 square rods, ten square chains, 4,840 square yards, or 43,560 square feet.

ACRE FOOT – A unit of water measurement. The volume of water required to cover an acre of land one foot deep, or 43,560 cubic feet of water, or 325,851 gallons.

ACTIVE PARTICIPATION – Type of investor position that determines how rental income is taxed. An investor may have a manager for rental real estate and still be considered an active participant.

ACTIVE SOLAR HEATING – A system that uses energy from sunlight to heat a structure and/or provide hot water. Contrasted with PASSIVE SOLAR HEATING by the use of pumps or fans to move the energy- transporting medium through the system. Installation of active solar heating equipment is eligible for certain income tax credits.

ACTIVITIES OF DAILY LIVING – A list of activities – normally including mobility, dressing, bathing, toileting, transferring and eating – which are used to assess degree of impairment and determine eligibility for some types of INSURANCE benefits.

ACTUAL AGE – Also known as CHRONOLOGICAL AGE – The number of years since the improvements were built.

ACTUAL CASH VALUE (ACV) – 1) The cost of replacing or restoring property at prices prevailing at the time and place of the loss, less DEPRECIATION, however caused; 2) replacement cost minus DEPRECIATION.

ACTUAL EVICTION/ACTUALLY EVICTED – The result of a successful suit for possession by the LESSOR, in which the TENANT is physically ousted from the LEASED REAL PROPERTY.

ACTUAL NOTICE – Notice expressly given and received, or that which should have been known.

ACTUAL RENT – Also known as CONTRACT RENT and OBLIGATED RENT – The amount of consideration paid as RENT under the terms of a LEASE – in contrast to economic rent.

ACTUARIAL COST METHOD – One of several systems for determining either the contributions to be made under a retirement plan, or level of benefits when the contributions are fixed. In addition to forecasts of mortality, interest and expenses, some of the methods involve estimates of future labor turnover, salary scales and retirement rates.

ACTUARIAL EQUIVALENT – If the present values of two series of payments are equal, taking into account a given interest rate and mortality according to a given table, the two series are said to be actuarially equivalent on this basis. For example, a lifetime monthly benefit of $67.60 beginning at age sixty (on a given set of actuarial assumptions) can be said to be the actuarial equivalent of $100 a month beginning at age sixty-five. The actual benefit amounts are different but the present value of the two benefits, considering mortality and interest, is the same.  ADDENDUM – (plural: ADDENDA) something added as an attachment to a contract.

ADDITIONAL FIRST-YEAR DEPRECIATION (TAX) – Tax provision that allows up to $17,500 of depreciable personal property purchased each year to be expensed, rather than depreciated, provided that not more than $200,000 is purchased in a year. The $17,500 is phased out, dollar for dollar, when purchases exceed $200,000 in a year.

ADDITIONAL    INCOME     –    Also    known    as    INCIDENTAL,    ANCILLARY    and

SUPPLEMENTAL INCOMEINCOME derived from a business enterprise which is not inherent to the business. Examples would be the INCOME from the shoe rentals and concession stands in a bowling alley or the laundry and soda facilities in an APARTMENT complex.

ADD-ON INTERESTINTEREST that is added to the PRINCIPAL of a LOAN. The amount of INTEREST for all years is computed on the original amount borrowed.

ADHESION, CONTRACT OF – A CONTRACT that is drafted by one party and accepted or rejected by the other, with no opportunity to bargain with respect to its terms.

ADJACENT – Nearby but not necessarily adjoining.

ADJUSTABLE LIFE INSURANCE – A type of INSURANCE that allows the

POLICYHOLDER to change the plan of insurance, raise or lower the FACE AMOUNT of the policy, increase or decrease the PREMIUM and lengthen or shorten the protection period.

ADJUSTABLE MORTGAGE LOAN (AML) –  1) Any MORTGAGE that does not have a FIXED INTEREST RATE and a fixed PAYMENT for the TERM of the LOAN; 2) a loan that does not AMORTIZE to zero at the end of the set TERM when required PAYMENTS are made on time

ADJUSTABLE RATE MORTGAGE (ARM) – A MORTGAGE loan that allows the INTEREST RATE to be changed at specific intervals over the MATURITY of the loan.

ADJUSTED BASIS – The original cost of the REAL PROPERTY to the investor, plus the cost of any physical improvements made to the property, minus any DEPRECIATION taken against the property.

ADJUSTED GROSS ESTATE – 1) Approximately the NET WORTH of the deceased; 2) the beginning point for the computation of ESTATE TAXES.

ADJUSTED SALES PRICE– 1) In APPRAISAL, the indicated prices of a COMPARABLE PROPERTY after ADJUSTMENTS have been made to account for differences between comparable and SUBJECT PROPERTIES; 2) In income taxation, the selling price of a home less expenses of sale, less fixing-up expenses. When the purchase price of a new PRINCIPAL RESIDENCE, any gain on the sale of the former residence will be deferred.

ADJUSTED TAX BASIS – The original cost or other basis of PROPERTY reduced by DEPRECIATION deductions and increased by CAPITAL EXPENDITURES.

ADJUSTER – A person who investigates and settles losses for an INSURANCE carrier.

ADJUSTING – The process of investigating and settling losses with or by an INSURANCE carrier.

ADJUSTMENT BUREAU – Organization for adjusting insurance claims that is supported by INSURERS using the bureau’s services.

ADJUSTMENTS – Dollar value or percentage amounts that, when added to or subtracted from the sales price of a COMPARABLE, provide an indication of the value of a SUBJECT PROPERTY.

ADMINISTRATIVE SERVICES ONLY (ASO) PLAN – An arrangement under which an INSURANCE carrier or an independent organization will, for a fee, handle the administration of claims, benefits and other administrative functions for a self-insured group.

ADMINISTRATOR – A person appointed by a court to administer the ESTATE of a deceased person who left no will.

ADMINISTRATOR’S DEED – A DEED appointed by a court to administer the ESTATE of a deceased person who left no will.

ADOBE HOUSE – Also known as PUEBLO – An early twentieth-century house that is made of adobe brick or some other material made to look like adobe brick. The characteristic projecting roof beams are called VIGAS.

AD VALOREM – According to value.

AD VALOREM TAX – A tax based on the value of the item being taxed.

ADVANCE FUNDINGPENSION-funding method in which the employer systematically and periodically sets aside funds prior to the employee’s retirement.

ADVANCE PREMIUM MUTUALMUTUAL INSURANCE COMPANY owned by the POLICY OWNERS that does not issue assessable policies but charges PREMIUMS expected to be sufficient to pay all claims and expenses.

ADVERSE POSSESSION – The right of an OCCUPANT of land to acquire the TITLE from the owner, where the possession or use of the land by the occupant has been obvious, continuous and hostile and for a minimum time prescribed by law. Informally referred to as SQUATTER’S RIGHTS.

ADVERSE SELECTION – The tendency of persons who present a poorer-than-average RISK to apply for, or continue, INSURANCE to a greater extent than do persons with average or better-than-average expectations of loss.

AFFIDAVIT – A sworn written statement made before a NOTARY PUBLIC or an authorized OFFICER OF THE COURT.

AFFIDAVIT OF TITLE – A sworn statement by the seller that there are no TITLE DEFECTS or JUDGMENTS against the PROPERTY, and that he or she is still in POSSESSION of the property.

AFFIDAVIT OF REAL PROPERTY VALUE – Also known as AFFIDAVIT OF VALUE – A sworn statement made by the seller and the buyer (or their representatives) that must be attached to any DEED or LAND CONTRACTS which is to be recorded. The AFFIDAVIT is used by the county or parish ASSESSOR to monitor PROPERTY VALUES in that JURISDICTION (not used in all states).

AFFIDAVIT OF VALUE – Also known as AFFIDAVIT OF REAL PROPERTY VALUE – A sworn statement made by the seller and the buyer (or their representatives) that must be attached to any DEED or LAND CONTRACTS which is to be recorded. The AFFIDAVIT is used by the county or parish ASSESSOR to monitor PROPERTY VALUES in that JURISDICTION (not used in all states).

AFFIRM – To confirm; to ratify; to verify.

AFFORDABLE HOUSING – A general term applied to public and private sector efforts to help low and moderate income people purchase homes. Usually the programs offer lower cash down payments, eased loan qualifying rules and/or below market INTEREST RATES.

A-FRAME – A post World War II style house with a frame in the shape of one or more “A’s.”

AFTER-TAX CASH FLOW – Also known as AFTER-TAX INCOME and NET SPENDABLE INCOME: CASH FLOW from INCOME producing PROPERTY, less income taxes, if any, attributable to the property’s income. If there is a tax loss that can provide a tax saving from the shelter of INCOME earned outside the PROPERTY, that savings is added to the CASH FLOW that is earned by the PROPERTY.

AFTER-TAX EQUITY YIELD – The RATE OF RETURN on an EQUITY INTEREST in REAL ESTATE, taking into account FINANCING costs and income tax implications of the INVESTOR.

AFTER-TAX INCOME – Also known as AFTER-TAX CASH FLOW and NET SPENDABLE INCOMECASH FLOW from INCOME producing PROPERTY, less income taxes, if any, attributable to the property’s income. If there is a tax loss that can provide a tax saving from the shelter of INCOME earned outside the PROPERTY, that savings is added to the CASH FLOW that is earned by the PROPERTY.

AFTER-TAX PROCEEDS FROM RESALE – The amount of money left for the investor after all obligations of the transaction and after personal income taxes on the transaction.

AGE LIMITSSTIPULATED minimum and maximum ages below and above which the company will not accept applications or may not renew POLICIES.

AGENCY – The relationship created when one person, known as the PRINCIPAL, delegates the right to act on his or her behalf to another person, known as the AGENT.

AGENCY COUPLED WITH INTEREST – An AGENCY relationship in which the AGENT acquires an IRREVOCABLE INTEREST in the subject of the AGENCY.

AGENCY DISCLOSURE – A written explanation, to be signed by a prospective buyer or seller, explaining to the client the role that the BROKER plays in the transaction. The purpose of DISCLOSURE is to explain whether the BROKER represents the buyer or the seller or is a DUAL AGENT or a SUBAGENT. This allows the customer to understand to which party the broker owes loyalty.

AGENT – 1) Also known as FIDUCIARY – The person who is authorized to represent another person; 2) an INSURANCE COMPANY representative licensed by the state, who solicits,  negotiates or effects CONTRACTS of INSURANCE, and provides service to the POLICYHOLDER for the INSURER.

AGENT’S RESPONSIBILITIES TO PRINCIPAL – The five duties of an agent to a PRINCIPAL under a FIDUCIARY RELATIONSHIP are (1) Care, (2) Obedience, (3) Accounting, (4) Loyalty and (5) Notice. (“COAL-N“)

AGREEMENT– A CONTRACT duly executed  and legally binding.

AGREEMENT OF SALE – A written agreement between seller and purchaser in which the purchaser agrees to buy certain REAL ESTATE and the seller agrees to sell based upon terms of the agreement.

AGGREGATE DEDUCTIBLEDEDUCTIBLE in some PROPERTY and HEALTH INSURANCE contracts in which all COVERED LOSSES during a year are added together and the insurer pays only when the aggregate deductible amount is exceeded.

AGGREGATE INDEMNITY – The maximum dollar amount that may be collected for any DISABILITY or period of disability under the policy.

AIR RIGHTS – The rights to use, control, or occupy the air space over a designated PARCEL of REAL PROPERTY, without the right to use the surface of the property.

ALIENATION – The transfer of REAL PROPERTY ownership from one person to another.

ALIENATION CLAUSE – Also known as DUE ON SALE CLAUSE – The clause in a CONVENTIONAL LOAN, which allows the lender to call the entire loan balance due if the property is sold, or an interest in the property is transferred.

ALIEN INSURER – An INSURANCE COMPANY DOMICILED in another country.

ALLIED LINES – A term for forms of PROPERTY INSURANCE allied with fire INSURANCE, covering such perils as windstorm, hail, explosion, and riot.

ALLOCATED BENEFITSBENEFITS for which the maximum amount payable for specific services is itemized in the contract.

ALLOCATED LOSS EXPENSE  – Handling expenses, such as legal or independent adjuster fees, paid by an INSURANCE COMPANY in settling a CLAIM which can be definitely charged to that particular CLAIM.

ALLODIAL SYSTEM – The form of LAND ownership in the United States under which REAL PROPERTY is owned free from any continuing obligation (TENURE) to the government.

ALL-RISKS POLICYCOVERAGE by an INSURANCE CONTRACT that promises to cover all losses except those losses specifically excluded in the policy.  

ALLUVION – Soil deposited by ACCRETION – Usually considered to belong to the owner of the land to which it is added.

ALLUVIUM – Also known as ALLUVION – The soil deposited by ACCRETION.

ALTERNATE DELIVERY SYSTEMS – Health services provided in other than an inpatient, acute-care hospital. Examples include skilled and intermediary nursing facilities, hospice programs and home health care. Alternate delivery systems are designed to provide needed services in a more cost-effective manner.

ALTERNATIVE MINIMUM TAX (AMT) – A type of flat-rate tax that applies to taxpayers who have certain types of income. A twenty-six or twenty-eight percent rate applies to broadly based income of individuals. A twenty percent rate applies to corporations. If this tax exceeds the regular income tax, then the alternative minimum tax is to be paid instead of the regular income tax.

ALTERNATIVE MORTGAGE INSTRUMENT (AMI) – Any MORTGAGE other than a fixed interest rate, level payment AMORTIZING loan.

AMBULATORY CARE – Medical services that are provided on an outpatient (not hospitalized) basis. Services may include diagnosis, treatment, and rehabilitation.

AMENDMENT – A formal document changing the provisions of an INSURANCE REAL PROPERTY signed jointly by the INSURANCE COMPANY officer and the POLICY HOLDER or his authorized representative.

AMENITIES – In APPRAISAL, the no monetary benefits derived from property ownership, such as pride of home ownership.

AMERICAN AGENCY SYSTEM – Also known as the INDEPENDENT AGENCY SYSTEM – Type of PROPERTY and LIABILITY INSURANCE marketing system in which the AGENT is an independent businessperson representing several companies. The AGENCY owns the expirations or RENEWAL rights to the business and the AGENT is compensated by COMMISSIONS that vary by line of INSURANCE.

AMERICAN ASSOCIATION OF CERTIFIED APPRAISERS (AACA) – A professional appraisal organization.

AMERICAN BANKERS ASSOCIATION (ABA) – A trade organization for officers of commercial banks. Publishes the monthly ABA Banking Journal and several other specialized banking periodicals.

AMERICAN COUNCIL OF LIFE INSURANCE (ACLI) – A life insurance-related trade association that offers historical data on INTEREST RATES and loan terms for COMMERCIAL PROPERTY MORTGAGES.

AMERICAN INSTITUTE OF ARCHITECTS (AIA) – A professional organization of architects, designers, and developers. Publishes the monthly AIA Journal and other periodicals.

AMERICAN INSTITUTE OF REAL ESTATE APPRAISERS (AIREA) – Also known as THE INSTITUTE. A professional appraisal organization.

AMERICAN LAND TITLE ASSOCIATION (ALTA) – A national association of title companies, ABSTRACTORS, and attorneys established to standardize INSURANCE COVERAGE on a national basis.

AMERICAN MANSARD – Also known as SECOND EMPIRE STYLE – A nineteenth century style house whose main and distinguishing characteristic is the roof design. The MANSARD ROOF slopes gently back from the wall line and then is topped with an invisible section resembling a conventional hip roof. Multiple DORMERS protrude through the roof.

AMERICAN PLANNING ASSOCIATION (APA) – A professional organization of regional and urban planners for the purpose of promoting professional standards, research, and education. The merger of the American Institute of Planners (AIP) and the American Society of Planning Officials (ASPO) formed APA. APA publishes a monthly magazine, Planning, and a quarterly journal, Journal of the APA.

AMERICAN REAL ESTATE AND URBAN ECONOMICS ASSOCIATION (AREUEA) An organization of scholars, researchers, and practitioners concerned with economic analysis of real estate related problems. Publishes Real Estate Economics quarterly.

AMERICAN REAL ESTATE SOCIETY (ARES) – An organization of scholars, researchers, and practitioners who are mainly concerned with solving business problems related to REAL ESTATE. Publishes the Journal of Real Estate Research, Journal of Real Estate Literature and Journal of Real Estate Portfolio Management.

AMERICAN SOCIETY OF APPRAISERS (ASA) – A professional appraisal organization. ASA publishes the biannual journal Valuation.

AMERICAN SOCIETY OF FARM MANAGERS AND RURAL APPRAISERS (ASFMRA) – A professional appraisal organization.

AMERICAN SOCIETY OF REAL ESTATE COUNSELORS (ASREC).  – A professional organization of real estate investment counselors and consultants. Affiliated with the NATIONAL ASSOCIATION OF REALTORS. CER publishes the journal Real Estate Issues.

AMERICANS WITH DISABILITIES ACT (ADA) – Federal law that prohibits discrimination against individuals with physical handicaps, including hiring practices and design of buildings intended to serve the public.

AMORTIZATION – 1) A gradual paying off of a debt by periodic installments; the liquidation of a debt through regular payments of principal and interest.; 2) Paying an interest-bearing liability by gradual reduction through a series of installments, as opposed to one lump-sum payment.

AMORTIZATION OF DEFERRED CHARGES – A procedure that does for INTANGIBLE ASSETS what DEPRECIATION ACCOUNTING does for TANGIBLE ASSETS. Under GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP), the cost of an INTANGIBLE ASSET is to be AMORTIZED (written off), usually over the life of the ASSET. Typically applies to costs incurred to arrange loans and LEASES; these costs are written off over the term of the loan or LEASE.

AMORTIZATION SCHEDULE – A table that outlines the schedule for loan repayment. It lists the amount of PRINCIPAL and interest due for each payment and the unpaid balance of the loan after each payment.

AMORTIZATION TERM – The time it takes to retire a debt through periodic payments. Also known as the FULL AMORTIZATION TERM.

AMORTIZED LOAN – Any loan with at least some payments to PRINCIPAL.

ANCHOR TENANT – The principal tenant in a shopping center, usually a large department store, which produces the bulk of the rent and attracts satellite stores to the mall.

ANCILLARY   INCOME     –    Also    known    as    INCIDENTAL,    ADDITIONAL    and SUPPLEMENTAL INCOMEINCOME derived from a business enterprise which is not inherent to the business. Examples would be the INCOME from the shoe rentals and concession stands in a bowling alley or the laundry and soda facilities in an APARTMENT complex.

ANCILLARY SERVICES Auxiliary or supplemental services, such as diagnostic services, home health services, physical therapy and occupational therapy, used to support diagnosis and treatment of a patient’s condition.

ANNEXATION – The process by which an incorporated city expands its boundaries to include a specified area. The rules of annexation are  established by state law and generally require a public ballot within the city and the area to be annexed. Other incorporated areas are generally protected from annexation by an adjacent city.

ANNUAL CAP – A limit on the amount of ADJUSTMENT in the INTEREST RATE on an ADJUSTABLE RATE MORTGAGE over a twelve-month period.

ANNUAL DEBT SERVICE – Required annual PRINCIPAL and interest payments for a loan.

ANNUAL MORTGAGE CONSTANT – The amount of ANNUAL DEBT SERVICE compared to the PRINCIPAL expressed as a dollar amount.

ANNUAL PERCENTAGE RATE (APR) – The total cost of financing a loan per year, expressed as a percentage. It is the sum of the interest and all other credit fees, such as discount points, compared to the principal amount of the loan.

ANNUAL STATEMENT – The annual report, as of December 31st, of an INSURER to a state insurance department, showing ASSETS and LIABILITIES, receipts and disbursements, and other financial data.

ANNUITANT – The person during whose life an ANNUITY is payable, usually the person to receive the ANNUITY.

ANNUITY – 1) A series of equal or nearly equal periodic payments or receipts; 2) also known as INCOME STREAM, a series of regular payments, usually on an annual basis; 3) a contract that provides an income for a specified period of time, such as a number of years or for life.

ANNUITY CERTAIN – A CONTRACT that provides an income for a specified number of years, regardless of life or death.

ANNUITY CONSIDERATION – The payment, or one of the regular periodic payments, an ANNUITANT makes for an ANNUITY.

ANNUITY FACTOR – A mathematical figure that shows the present value of an INCOME STREAM that generates one dollar of income each period for a specified number of periods.

ANNUITY IN ADVANCE – A series of equal or nearly equal payments, each payable at the beginning of the period.

ANTICIPATION – The APPRAISAL principle, which maintains that the value of any REAL PROPERTY is created by the anticipation of future benefits by the buyer.

ANTI-SELECTION – The tendency of persons who present a poorer-than-average risk to apply for, or continue, INSURANCE to a greater extent than do persons with average or better-thanaverage expectations of loss.

ANTI-TRUST LAWS – Laws such as the SHERMAN ACT and the CLAYTON ACT, which promote private enterprise and competition by prohibiting MONOPOLIES, CARTELS, PRICEFIXING, and restraint of trade.

APARTMENT (BUILDING) – A dwelling unit within a multifamily structure, generally provided as rental housing. An apartment building is a structure with individual apartment units but a common entrance and hallway.

APPEALS BOARD – A body empowered with the ability to overturn decisions of the local government permitting agency and code enforcement agency based on appeal by the aggrieved petitioner.

APPLICATION – A signed statement of facts made by a person applying for life insurance and then used by the insurance company to decide whether or not to issue a policy. The application becomes part of the insurance contract when the policy is issued.

APPORTIONMENT – The prorating of property expenses, such as taxes and insurance, between buyer and seller; the partitioning of property into individual parcels by tenants in common.

APPRAISAL BY SUMMATION – Also known as COST APPROACH TO VALUE. The appraisal method of estimating the MARKET VALUE of the PROPERTY by determining the reproduction cost new, subtracting the ACCRUED DEPRECIATION and adding the VALUE of the LAND.

APPRAISAL – An estimate or opinion of value.

APPRAISAL APPROACH – One of three methods to estimate the VALUE of PROPERTY: COST APPROACH, INCOME APPROACH, and MARKET COMPARISON APPROACH.

APPRAISAL DATE – The date to which the value applies in an appraisal report,

APPRAISAL FOUNDATION – An organization that came into existence in the late 1980’s in an effort to encourage uniform requirements for APPRAISAL qualifications and reporting standards.

APPRAISAL INSTITUTE – An organization of professional appraisers that was formed in 1991 by the merger of the American Institute of Real Estate Appraisers and the Society of Real Estate Appraisers. It offers MAI and SENIOR RESIDENTIAL APPRAISER (SRA) is primarily qualified for residences. Both designations require high standards of education and experience for membership.

APPRAISAL REPORT – A written explanation of a PROPERTY’S value, including the data and reasoning used to derive that value. Nearly all appraisal reports are written: if a report is given orally, the APPRAISER needs to keep written accounts of the discussion and how he derived the value estimate.

APPRAISAL REVIEW – A report that comments on the completeness and apparent accuracy of an APPRAISAL REPORT. The principal purpose of some reviews is to ensure compliance with technical rules such as USPAP; other reviews focus on the VALUE estimate. The review may be presented as a narrative or a checklist.

APPRAISAL PROCESS – An orderly program for estimating the value of REAL PROPERTY.

APPRAISED VALUE – An estimate of the present worth of a PARCEL of REAL PROPERTY.

APPRAISER – One who performs APPRAISALS, usually qualified by education, training, and experience.

APPRECIATION – An increase in PROPERTY value from any cause, either under the owner’s control (EARNED INCREMENT) or from outside the property (UNEARNED INCREMENT).

APPROACHES TO VALUE – The three APPRAISAL methods used in estimating MARKET VALUE are: (1) the DIRECT SALES COMPARISON APPROACH, (2) the COST APPROACH, and (3) the INCOME APPROACH.

APPROPRIATION – Setting aside land for a public use.

APPURTENANCES – The rights and privileges which are attached to and transfer with the REAL ESTATE, such as EASEMENTS and RIGHTS-OF-WAY.

APPURTENANT EASEMENT – Also known as EASEMENT APPURTENANT – An EASEMENT, which benefits another PARCEL of REAL PROPERTY. The PARCEL to which the EASEMENT belongs is the DOMINANT TENEMENT, and the PARCEL over which the easement runs is the SERVIENT TENEMENT. This type of EASEMENT runs with the LAND, and will transfer form one owner to another.

ARBITRAGE – 1) Buying in one market, selling simultaneously in another to make a profit; 2) buying one type of SECURITY and selling an equivalent to make a profit.

ARBITRATION – A form of alternative dispute resolution where an unbiased person or panel renders an opinion as to responsibility for or extent of a loss.

ARCHITECTURE – the manner in which a building is constructed, including the layout, floor plan, style and appearance, materials used and the building technology used.

AREA – A two-dimensional space defined by boundaries such as floor area, area of a lot, and market area.

AREA PREFERENCE – Also known as SITUS – 1) The physical location of a PROPERTY; 2) the preference by people for a particular location.

ARGUS – A computer program widely used by institutional investors that allows an analyst to simulate expected PROPERTY PERFORMANCE, including that of multi-tenant office buildings and shopping centers.

ARM’S LENGTH TRANSACTION – A transaction among parties, each of whom acts in his or her own best interest.

ARREARS – 1) At the end of term; 2) sometimes used to signify default; 3) overdue in payment.

ARSON – The willful and malicious burning of, or attempt to burn, any structure or other PROPERTY, often with criminal or fraudulent intent.

ARTESIAN WELL – A deep-drilled shaft that reaches water that rises because of natural underground pressure.

ASBESTOS – Insulation material frequently used in older buildings as pipe wrap, boiler insulation, floor tile, and ceiling coating. Asbestos may become friable (brittle) with age. In that condition, it may crumble and release particles, which, like dust, become airborne. Breathing asbestos particles may cause several serious lung illnesses. Removed or ENCAPSULATION OF ASBESTOS in buildings is expensive but necessary to prevent illness. The discovery of asbestos in a building is likely to cause a significant value loss.

AS IS – Without guarantees as to condition, as in a sale. PREMISES are accepted by a buyer or TENANT as they are, including all physical defects.

ASKED – The amount a PROPERTY owner sets as a selling price for his PROPERTY.

ASKING PRICE – The list price that an owner would like to receive.

ASSEMBLAGE – Also known as PLOTTAGE – The creation of one large PARCEL of REAL PROPERTY through the acquisition and combination of many smaller ADJACENT PARCELS.

ASSESSED VALUATION – Also known as ASSESSED VALUE – The VALUATION placed on REAL PROPERTY by a government unit as a basis for taxation.

ASSESSED VALUE– Also known as ASSESSED VALUATION – The VALUATION placed on REAL PROPERTY by a government unit as a basis for taxation.

ASSESSMENT – 1) Also known as SPECIAL ASSESSMENT – Any charge against privately owned REAL PROPERTY for public improvements to the property, such as street paving, storm sewers, and streetlights; 2)  the amount of tax or special payment due to a municipality or association; 3) an owner’s or lessee’s proportionate share of a common expense.

ASSESSMENT ASSOCIATION – An insurer that does not charge a fixed premium for INSURANCE, but rather assesses its members periodically to pay its losses. Assessment insurers usually collect an advance PREMIUM, which is estimated to cover losses and expenses, but reserve the right to make additional ASSESSMENTS whenever the PREMIUM collected is insufficient.

ASSESSMENT MUTUALMUTUAL INSURANCE COMPANY that has the right to assess POLICY OWNERS for losses and expenses.

ASSESSMENT RATION – The ratio of ASSESSED VALUE to MARKET VALUE.

ASSESSMENT ROLL – A public record of the ASSESSED VALUE of PROPERTY in a taxing JURISDICTION.

ASSESSOR – An official who determines PROPERTY tax assessments.

ASSET DEPRECIATION RANGE (ADR) – Used to determine class lives for PROPERTY and equipment, a range of DEPRECIABLE lives allowed by the IRS for a particular ASSET.

ASSETS – 1) What a person owns; 2) all funds, PROPERTY, goods, SECURITIES, rights of action, or resources of any kind owned by an INSURANCE COMPANY. STATUTORY ACCOUNTING, however, excludes non-admitted ASSETS, such as deferred or overdue PREMIUMS, that would be considered assets under GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP). 

ASSIGNED RISK –  Now called AUTOMOBILE INSURANCE PLAN – One of several types of shared market mechanisms where persons who are unable to obtain such insurance in the VOLUNTARY MARKET are assigned to a particular company, usually at a higher rate than the VOLUNTARY MARKET..

ASSIGNEE – The person to whom an agreement or CONTRACT is sold or transferred.

ASSIGNMENT – 1) The transfer of a right or interest in any property from one person to another. The person transferring the rights is the ASSIGNOR and the person receiving the rights is the ASSIGNEE; 2) The legal transfer of one person’s INTEREST in an INSURANCE POLICY to another person.

ASSIGNMENT OF LEASE – The transfer of rights to use LEASED PROPERTY. The ASSIGNEE acquires the same rights and privileges as the ASSIGNOR.

ASSIGNOR – A party who assigns or transfers an AGREEMENT or CONTRACT to another.

ASSOCIATE BROKER – In some states, a licensed BROKER whose license is held by another broker; in Alabama, a REAL ESTATE licensee whose status is the same as that of a salesperson in other states.

ASSOCIATION CAPTIVE – Type of CAPTIVE INSURER owned by members of a sponsoring organization or group, such as a trade association.  See also CAPTIVE INSURER; PURE CAPTIVE.

ASSOCIATION GROUP – A group formed from members of a trade or a professional association for GROUP INSURANCE under one MASTER HEALTH INSURANCE CONTRACT.

ASSOCIATION GROUP PLAN – Health insurance plans designed for members of a professional association or trade association. Members may be protected under a group health insurance policy or by individual FRANCHISE POLICIES.

ASSUMABLE LOAN – A MORTGAGE loan that allows a new home purchaser to undertake the obligation of the loan with no change in loan terms. This is generally true of loans without DUE-ON-SALE CLAUSES.

ASSUMPTION CERTIFICATE – An ENDORSEMENT to an INSURANCE CONTRACT stating that REINSURANCE proceeds will be paid directly to the named payee in the event of an insurer’s INSOLVENCY.

ASSUMPTION FEE – 1) A CHARGE levied by a LENDER on a buyer who assumes the existing LOAN on the subject PROPERTY; 2) the CHARGE made by the LENDER for altering his records to show the assumption of the LOAN LIABILITY by a THIRD PARTY.

ASSUMPTION OF MORTGAGE – An agreement by a buyer to assume the liability for the repayment of an existing note SECURED by a MORTGAGE or DEED OF TRUST. Unless the lender agrees to release the seller form the obligation, the seller also remains liable.

ASSUMPTION OF RISK DOCTRINE – Defense against a negligence claim that bars recovery for damages if a person understands and recognizes the danger inherent in a particular activity or occupation.

ASSUMPTIONS – Conditions and rules underlying the calculation of a PENSION BENEFIT, including expected INTEREST, MORTALITY and TURNOVER.

ASSURANCE/INSURANCE – These terms are today generally accepted as synonymous, although not originally so. The term “assurance” is used more commonly in Canada and Great Britain than in the United States.

AT-RISK RULES – Tax laws that limit the amount of tax losses an INVESTOR can claim. Atrisk rules were extended to REAL ESTATE by the 1986 tax act, and apply to PROPERTY placed in service after 1986. This means that losses on real estate INVESTMENTS will be DEDUCTIBLE only to the extent of money the EQUITY investor stands to lose.

ATTACHMENT – The taking of REAL or PERSONAL PROPERTY, under a court order, from a DEFENDANT in a lawsuit, and IMPOUNDING THE PROPERTY as satisfaction for a possible judgment.

ATTACHMENT POINT – The dollar amount of loss where INSURANCE begins to provide COVERAGE.

ATTEST – To witness by observation and signature.

ATTORNEY IN FACT – An individual authorized to perform certain acts for another (the PRINCIPAL) under a POWER OF ATTORNEY.

ATTORNEY AT LAW – An individual licensed to practice law for the general public.

ATTORNEY’S LIEN – A LIEN created by law in the proceeds of a judgment when an attorney has successfully obtained an AWARD on behalf of the client.

ATTORNEY’S OPINION OF TITLE – A written statement by an attorney that, after examination of public records and/or ABSTRACTS OF TITLE, in his or her judgment the TITLE to a particular PROPERTY is good.

ATTORNMENT – A TENANT’S formal agreement to be a tenant of a new LANDLORD.

ATTRACTIVE NUISANCE – 1) Condition that can attract and injure children. OCCUPANTS of land on which such a condition exists are LIABLE for injuries to children; 2) an appealing but potentially hazardous feature or characteristic of a piece of REAL ESTATE that may lure TRESPASSERS who could suffer harm; in law, the owner of an attractive nuisance must take extraordinary precautions to avoid LIABILITY for harm to TRESPASSERS.

AUCTION – A way of marketing property to the highest bidder. BIDS are taken verbally or simultaneously through mail or telegrams, and the PROPERTY is sold to the highest bidder. Auctioning REAL ESTATE may require both an auctioneer’s license and a REAL ESTATE license.

AUCTIONEER – One who conducts an AUCTION.

AUTOMATIC PREMIUM LOAN – Cash borrowed from a LIFE INSURANCE policy’s cash value to pay an overdue premium after the grace period for paying the premium has expired.

AUTOMATIC REINSURANCE – An agreement that the INSURER must CEDE and the REINSURER must accept all RISKS within certain explicitly defined limits. The REINSURER undertakes in advance to grant REINSURANCE to the extent specified in the agreement in every case where the CEDING company accepts the application and retains its own limit.

AUTOMOBILE INSURANCE PLAN – One of several types of SHARED MARKET MECHANISMS where persons who are unable to obtain such insurance in the VOLUNTARY MARKET are assigned to a particular company, usually at a higher rate than the VOLUNTARY MARKET. Formerly called ASSIGNED RISK.

AUTOMOBILE LIABILITY INSURANCE – Protection for the INSURED against financial loss because of legal LIABILITY for car-related injuries to others or damage to their PROPERTY.

AUTOMOBILE PHYSICAL DAMAGE INSURANCE – Coverage to pay for damage to or loss of an insured automobile resulting from collision, fire, theft, or other perils.

AUTOMOBILE REINSURANCE FACILITY – One of several types of SHARED MARKET mechanisms used to make automobile insurance available to persons who are unable to obtain such INSURANCE in the VOLUNTARY MARKET.

AUTOMOBILE SHARED MARKET – A program in which all automobile insurers in each state and the District of Columbia participate to make COVERAGE available to car owners who are unable to obtain auto insurance in the VOLUNTARY MARKET. Except in Maryland, which operates a state-funded mechanism whose losses are subsidized by private insurers, each state uses one of three systems (an AUTOMOBILE INSURANCE PLAN, a JOINT UNDERWRITING ASSOCIATION, or a REINSURANCE FACILITY) to guarantee the availability of automobile INSURANCE.

AVERAGE INDEXED MONTHLY EARNINGS (AIME) – Under the OASDI program, the person’s actual earnings are INDEXED to determine his or her primary INSURANCE amount (PIA). 

AVIATION INSURANCE – Aircraft INSURANCE including coverage of aircraft or their contents, the owner’s LIABILITY, and accident insurance on the passengers.

AVOIDANCE – Also known as LOSS AVOIDANCE – A RISK management technique whereby a situation or activity that may result in a loss for a firm is avoided or abandoned.

AVULSION – The violent EROSION or tearing away of land through natural causes, such as flooding, which may remove topsoil or cave in the banks of a river.

AWARD  – 1) The decision of an arbitrator or commissioner (or any non-judicial arbiter) of a controversy;  2)  to give a judgment of money to a party to a lawsuit, ARBITRATION or administrative claim.

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