AL Real Estate key terms

A legal description that begins at a known point of beginning and follows compass bearings and measured distances around the boundary, returning to the start; common in Alabama for irregular parcels.

A right one person holds to use another's land for a limited purpose, such as access or utilities; it burdens the servient parcel and does not transfer ownership of it.

Personal property that has been so attached to or integrated with real property that it becomes part of the realty and normally transfers with the land unless the agreement says otherwise.

A use that lawfully existed before current zoning took effect but no longer complies with the ordinance; it may usually continue but cannot be expanded or restarted after abandonment.

The legal, physically possible, financially feasible use of a property that produces the highest value; it must be reasonably probable rather than speculative and frames the appraisal.

Co-ownership in which each owner holds a separate undivided interest with no right of survivorship; interests may be unequal and may be sold, mortgaged, or willed without the others' consent.

Co-ownership with right of survivorship: when one owner dies, that share passes automatically to the survivors. Unity of time, title, interest, and possession is required, along with equal shares.

Ownership measured by a person's lifetime rather than by a set number of years; the life tenant may possess and use the property but cannot commit waste, and the remainder passes to the remainderman at death.

Fee simple ownership of an individual unit combined with an undivided share of the common elements, governed by recorded declarations and usually administered by an owners' association.

A way to acquire title by possessing another's land openly, notoriously, exclusively, hostilely, and continuously for the statutory period, with tax payment where state law requires it.

A deed with broad covenants in which the grantor promises to defend title against defects arising before and during the grantor's ownership; the strongest deed form for a buyer.

A deed that conveys whatever interest the grantor may have with no warranties of title; often used to clear clouds on title or to transfer interests between family members.

A one-time-premium policy protecting an owner or lender against losses from title defects existing before the policy date, such as forgery, undisclosed heirs, or recording mistakes.

A statutory claim filed by contractors, subcontractors, or suppliers who were not paid for labor or materials that improved the property; it attaches to the real estate and clouds title.

A settlement document listing the debits and credits to buyer and seller, including price, loan charges, prorated items, and the cash each party must bring or receives.

The most probable price a property should bring in an open, competitive market where buyer and seller are typically motivated, well informed, and acting without undue pressure.

Estimating value by analyzing recent sales of similar properties and adjusting their prices for differences in location, size, condition, and terms; used most often for residential property.

Estimating value by adding the current cost to build or replace the improvements, minus accrued depreciation, to the land value; most reliable for new or unusual buildings.

A rate that converts a property's net operating income into an estimate of value; value equals net operating income divided by the capitalization rate.

A rough valuation shortcut equal to sale price divided by gross rent; the resulting multiplier is applied to a subject property's rent to estimate its price.

The two required elements of a real estate contract: a definite proposal by one party and unqualified agreement to it by the other, communicated back to the offeror.

A buyer's good-faith deposit held in trust and credited toward the purchase price at closing; it may be forfeited if the buyer defaults without a contractual excuse.

A contract provision making a party's duty conditional on a stated event, such as loan approval, inspection, or appraisal; if the condition fails, that party may cancel.

A state law requiring contracts for the sale of land, and leases longer than one year, to be in writing and signed by the party to be bound.

A written employment contract in which a seller authorizes a broker to find a buyer; it sets the term, the type of authority granted, and how compensation is earned.

A written contract engaging a broker to represent a buyer, defining the term, the duties owed, the properties covered, and how the broker will be paid.

The heightened duties a licensee owes a client: loyalty, obedience, disclosure, confidentiality, reasonable care and diligence, accounting for money, and not exceeding authority.

One licensee representing both buyer and seller in the same transaction; it requires informed written consent and limits the duties owed to each side.

The four parts of a typical monthly mortgage payment: principal, interest, property taxes, and hazard insurance. Lenders use PITI to qualify borrowers and to set escrow amounts.

The loan amount divided by the property's sale price or appraised value, expressed as a percentage; higher ratios generally require mortgage insurance and cost more.

The scheduled repayment of a loan through periodic payments that pay interest first, with the remainder reducing principal, so the balance falls over the loan term.

Interest prepaid at closing to obtain a lower note rate; one point equals one percent of the loan amount, and points may be paid by buyer or seller as negotiated.

A lease in which the tenant pays base rent plus some or all of the property's operating costs, such as taxes, insurance, or maintenance, shifting those expenses from the landlord.

Money a tenant gives the landlord to secure performance under the lease; it is held for the tenant and returned after lawful deductions when the tenancy ends.

A separate bank account in which a broker holds other people's money, such as earnest money or deposits; records must be accurate and the account reconciled regularly.

A written notice an Alabama licensee gives a consumer explaining the agency relationships available and whom the licensee represents, so the consumer can make an informed choice.

The federal categories protected from housing discrimination: race, color, religion, sex, national origin, familial status, and disability. Alabama's fair housing law is substantially similar.

The state agency that licenses brokers and salespersons, enforces Alabama license law and its rules, investigates complaints, and administers the Recovery Fund.

A fund held by the Alabama Real Estate Commission, financed by license fees, that may pay consumers who obtain a judgment against a licensee for fraud or dishonest dealing, within statutory limits.

Splitting an expense such as property taxes or rent between buyer and seller at closing based on the number of days each owned the property in the period the expense covers.