Glossary of Real Estate Terms (Oregon) – A
Abandonment – The intentional relinquishment of a known right. For example, by vacating a home and turning the keys over to the lender with a written statement indicating that the owner is giving up all right, title and interest to the property.
Abstract of Title – A summary of the documents recorded on the public record pertaining to the “chain of title” to a particular property. The abstract of a title is then reviewed for accuracy by an attorney. This process is not used in Oregon to determine the marketability of title being transferred. In Oregon, title companies (see definition) provide the parties with a “preliminary title report” summarizing the matters appearing on the public records, and then upon closing, issue a policy of insurance guarantying the marketability of the title subject to certain stated exceptions in the policy.
Acceleration – The process of calling the entire principal balance of a loan due and payable, when a default has occurred and was not cured in time. Acceleration of the unpaid principal balance upon default cannot occur unless the loan documents, usually the promissory note, contain an acceleration clause.
Acceptance – The method of creating a legally binding contract. When an offer is “accepted” on the same terms as the offer and that acceptance has been communicated back to the person or entity making it, it is said there has been a “meeting of the minds” and a legally binding contract is created. The person or entity making the offer is the “offeror” and the recipient of the offer is the “offeree.” If the acceptance is made upon different terms than the offer (that is, it varies the terms of the offer) it is a rejection of the offer and constitutes a “counteroffer.”
Acknowledgment – A process for determining that the person signing a legal document is, in fact, that person and that they are signing the document voluntarily. The identity of the signer (“the declarant”) is verified at the time of signature by a licensed notary who then affixes an official seal or stamp to the document. In Oregon, notaries are required to verify the signer’s identity through a reliable means of authentication and keep detailed records of each notarization. In Oregon, all documents transferring an interest in real property must be notarized before it will be taken by the official clerk for recording in the public records.
Addendum – A document added to an agreement either at the time of execution (signing) by the parties, or thereafter. If properly prepared and signed, the addendum becomes a legal part of the original agreement. Multiple addendums to a document are sometimes collectively referred to as “addenda.”
Adjustable Rate Mortgage (“ARM”) – A loan in which the stated interest rate can “adjust” or change, usually based upon the rise or fall of an identified index that is widely used. ARMs are typically subject to “caps,” or limits, on the amount of any single interest rate adjustment and on the total interest rate change permissible over the life of the loan.
Administrator – A person appointed by the court to carry out the probate of the estate of a deceased person who died without a will (or if there was a will, no personal representative was identified).
Adverse Possession – A real estate concept holding that if a person meets certain necessary conditions (or “legal elements”) for a consecutive number of years, they will be deemed to have become the legal owner of the property. It requires, among other things, that the person holds the property “openly” as their own and to the exclusion of others, without the record owner’s consent, and for a statutorily fixed period of time (called “the statute of limitations”). The statutory period in Oregon is ten (10) years and all of the legal elements must co-exist for at least that period of time to claim title by adverse possession. [PCQ Note: Subject to certain requirements, Oregon law permits “tacking,” which allows one adverse possessor to “tack” or add, their time of possession to that of their immediate predecessor(s) in order to reach the ten year minimum holding period.] Oregon has a statute that became effective in 1990 which prohibits one from claiming title by adverse possession unless they reasonably believed they were the legal owner of the property in the first place. (See, ORS 105.620) [PCQ Note: This statute only deals with time periods running on and after January 1, 1990. The “reasonable belief” requirement does not apply to the time period before then. This means that prior to January 1, 1990, one could acquire title by adverse possession even though they knew the land was not legally theirs.] In order to claim title by adverse possession, or to resolve a dispute as to whether an adverse possessor’s claim has ripened into ownership, a party must initiate a legal proceeding against the other, sometimes called a “suit to quiet title.” (See, ORS 105.605) In Oregon, there is no attorney fee entitlement to the prevailing party in adverse possession claims. In order to prevail, proof of adverse possession must be established by clear and convincing evidence.
Affidavit – A written statement of facts sworn to be true by the person making it. That person is called the “Affiant.”
Agent – Designates a person or entity authorized to act for and on behalf of a third party (known as the “principal”). The law generally imposes certain “fiduciary duties” such as good faith, fair dealing, honesty, full disclosure, etc. on agents when acting on behalf of their principal. Oregon real estate law, like most states, imposes these fiduciary duties on real estate agents. (See, ORS 696.800-696.995 governing the fiduciary duties of real estate agents.)
ALTA – Acronym for the “American Land Title Association,” which is the national industry organization that establishes standards, guidelines and forms for title insurance companies.
Alt-A Loans – These loans were a staple of the lending industry during the easy credit years of 2004 – 2007. The term “Alt-A” refers to a category of mortgages that based upon risk of default, are somewhere between subprime (i.e. the highest potential for default) and prime (i.e. loans given to the most qualified borrowers). Similarly, the borrower’s interest rate, which is the primary indicator of perceived loan risk, is generally higher that prime rates, but lower than sub-prime.
Amenities – A general term usually referring to the overall beneficial features of a property, such as the landscaping, a pool, gardens, etc.
Amortization – The gradual reduction of the principal balance of a loan resulting from periodic payments by the borrower. Once the last payment is made, it is said that the loan has been “fully amortized.”
Anticipatory Breach – Under contract law, the words or conduct of one obligated under a contract indicating that they have no intention of honoring the contract in the future. Under certain circumstances, such a declaration or conduct can be deemed sufficient to permit the non-breaching party to bring legal action immediately, without waiting for the actual breach to occur.
APR – Acronym for “annual percentage rate,” meaning the yearly cost of a loan, stated as a percentage of the original amount of the principal. However, APR is more than just the simple interest charged for the loan and includes other costs, such as points paid and certain other fees and charges. Thus, it can be a useful tool for comparing loans, since the APR gives the borrower the ability to compare the loan cost between different lenders.
Appraisal – The process of establishing the fair market value of a property. There are three different methods of appraisal of real property. For residential, the “market data” approach is the most common and involves an analysis of recent comparable sales of similar properties. Lenders require appraisals of property in order to establish how much to lend. If the bank’s appraised value is less than the sale price, the bank will only loan against the appraised value. The standard statewide sale form in Oregon published by Oregon Real Estate Forms, LLC [PCQ Note: Hereafter, this company will be referred to as “OREF”] contains a buyer contingency saying that if the property does not appraise for at least the appraised amount, the buyer may withdraw from the transaction and recover back their earnest money deposit.
Appreciation – The increase in market value of a property. It is the opposite of “depreciation.”
Arbitration – The process of private dispute resolution whereby one or more arbitrators are appointed or selected to decide a legal dispute. There is no jury. Depending upon state statute and the rules of arbitration that the parties have agreed upon, the parties may or may not be able to appeal or otherwise contest the decision of the arbitrator(s). Arbitration is strongly favored by the courts and judges as it removes cases from their overburdened judicial system. In Oregon, as in most states, the disputants cannot be required to arbitrate unless both have contractually agreed to do so in writing. However, Oregon does require that money claims of $50,000 or less must first go into mandatory arbitration, and only then can they go into the court system if one of the parties does not like the arbitrator’s decision. Unless one of the parties seeks to have the award filed in court, the outcome of the arbitration is a private matter and does not appear on any public records. The arbitration hearing – contrary to a court hearing – is not open to the public.
AS-IS – A term used to mean that one is transferring property in its existing condition, with all defects, apparent or not apparent. In most parts of the country, including Oregon, an “AS-IS” sale does not mean that the seller may conceal known material defects from the buyer.
Assessed Value – The value placed on real property by an assessor, such as the tax assessor. The “assessed value” is not the same as the appraised value (which is frequently higher).
Assessment – A charge made against a property, usually by a governmental entity, for taxation purposes or to recover the cost of some expenditure, such as a public improvement. Assessments – or the right of assessment – frequently appear on the public record and are picked up in preliminary title reports that are issued at the inception of a real estate transaction.
Assessor – A governmental officer responsible for assessing property for tax purposes. The assessor may or may not be the same as the tax collector, depending upon the city or county.
Asset – Something of value. It is the opposite of a liability, which on a balance sheet represents a charge against assets.
Assignment – The act of transferring certain rights, duties and obligations to a third party. In order to be effective, the third party, known as the “assignee,” usually must agree to assume these rights, duties and obligations. Most assignments do not automatically relieve the person making the assignment, known as the “assignor,” from liability for the obligations assigned.
Assumable Loan – A loan made to a borrower that the lender may permit to be transferred and assumed by another party. Most conventional loans today are not assumable, and in fact, if the property upon which the loan is made is transferred, the lender typically may call the entire loan due and payable. This remedy is contained in a “due on sale” or similar clause, found in most loan documents today. In the 1970s many loans were assumable, but at the end of the decade, when interest rates had climbed to 18% or more, lenders discontinued the practice of permitting loan assumptions – or if they did, the assumable rate was readjusted to reflect the current rate.
Attorney-in Fact – One acting under a written power of attorney on behalf of another. The attorney-in-fact’s authority is limited exclusively to the powers enumerated in the written document.
Attornment – A provision frequently found in commercial leases providing that the tenant agrees in advance to continue to be bound under the lease to the landlord’s successor should the landlord voluntarily transfer ownership of the property or should it be involuntarily transferred to a third party through foreclosure.
Automated Underwriting – The process of evaluating and deciding upon whether to make a loan based upon a computerized evaluation of the borrower’s credit credentials, thus eliminating any personal bias or subjectivity in the loan approval process.