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Abstract: A history of all transactions shown in the public records affecting a particular tract of land.
Abstract Plant: Also called “title plant” in some areas. A geographically filed assemblage of title information that helps in expediting title examinations, such as copies of previous attorneys’ opinions, abstracts, tax searches and copies or take-offs of the public records.
Adjustable Rate Mortgage (ARM): Mortgage loans under which the interest rate is periodically adjusted, in accordance with some market indicator, to more closely coincide with the current rates. The extent and number of these adjustments are agreed to at the inception of the loan.
Adverse Possession: The possession, by one person, of land belonging to another in a manner deemed adverse to the interest of the owner. In most states, by operation of law, title to the land becomes vested in such person after a fixed number of years if the owner fails to assert his or her rights.
Affidavit: A written statement made under oath before a notary public or other judicial officer.
Agreement: A legally binding contract made between two or more persons.
Allowable Fees/Closing Costs: Fees which are allowed to be charged to the buyer per FHA and VA guidelines.
ALTA (American Land Title Association): The trade association of the title insurance industry, which has adopted certain insurance policy forms to standardize coverage on a national basis.
Amortization: Payment to reduce the principal of a debt in regular, periodic installments.
Appraisal: A report from an independent third party detailing the estimated value of real estate.
Appurtenance: A right or privilege that is a part of the ownership of property, such as a right of way to a highway across the land of another. Water rights are also an example.
Assessment: (1) The valuation of real estate for purpose of taxes or special improvement charges. (2) The amount of taxes or special improvement charges. Special improvement charges are usually for the costs of streets, sidewalks, sewers, etc.
Assignment: (1) The act of transferring an interest, such as a loan secured by a mortgage, from one person to another. (2) The instrument or paper by which one person transfers such ownership to another.
Attorney’s Opinion: A statement by an attorney as to the validity of a title, arrived at after investigation of the history of the title as recorded in the public records.
Balloon Note: A form of promissory note that calls for the minimum payment of principal and the payment of interest at regular intervals. This type of note requires a substantial final payment, which represents all the principal.
Bankruptcy: A proceeding in U.S. District Court wherein assets of an insolvent debtor are protected and distributed in an equitable manner.
Binder: Sometimes called “preliminary certificate” or “commitment.” (1) A preliminary report as to the condition of a title and a commitment to issue a title insurance policy in a certain manner when certain conditions are met. (2) A deposit in escrow of a small part of the purchase price of real estate as evidence of good faith and to bind an agreement to purchase.
Chain: In real estate measurements (surveying), a chain is 66 feet long or 100 links, each link being 7.92 inches. The measurement may change when used in fields other than surveying.
Chain of Title: The successive ownerships or transfers in the history of title to a tract of land.
Claim: An adverse right or interest asserted by one party against another or against an insurer or indemnitor. Claims may arise from unpaid debts or taxes, as well as from hidden title defects such as fraud, forgery, missing heirs, etc.
Clear Title: Real property ownership free of liens, defects, encumbrances or claims.
Closing: Also called “settlement.” A meeting of all parties involved in a property transaction during which the transaction is consummated.
Clouded Title: An irregularity, possible claim or encumbrance that, if valid, would adversely affect or impair the title.
Coinsurance: Two or more policies of title insurance issued by different insurers, each covering a portion of the same risk, which together provide total coverage of the risk.
Commitment: Also called “binder.” A document issued by a title insurance company that contains the conditions under which a policy of title insurance will be issued.
Condemnation: (1) The taking of private property for a public purpose, with compensation to the owner under the right of eminent domain. Governmental units, railroads and utility companies have the right to condemn and take private property. (2) The destruction by government of private property that imperils the life, health or safety of the public.
Conventional Loan: A loan secured by a mortgage or deed of trust for which the loan-to-value ratio is within an acceptable range for a particular lending institution.
Conveyance: The transfer of title to property from one person to another.
Covenant: A formal agreement or contract between two parties in which one party gives the other certain promises and assurances, such as covenants of warranty in a warranty deed.
Credit Report: A report, compiled by a credit-reporting agency, used by lenders to determine the credit-worthiness of an applicant.
Dedication: The setting aside of certain land by the owner and declaring it to be for public use. Examples: streets, sidewalks and parks.
Deed: A document through which a conveyance of property is effected.
Deed of Trust: Some states do not record mortgages. Instead, for real estate, a deed of trust is used and recorded as security for repayment of a note.
Deed Restriction: A covenant contained in a deed imposing limits on the use or occupancy of the real estate or the type, size, purpose or location of improvements to be constructed on it.
Defect: A blemish, imperfection or deficiency. A defective title is one that is irregular and faulty.
Depreciation: Loss in value occasioned by ordinary wear and tear, destructive action of the elements, or functional or economic obsolescence.
Devise: A gift of real estate made by a will.
Document Preparation Fee: The fee charged by the lender for preparation of loan documents.
Dominant Estate: The property for the benefit of which a right-of-way easement exists across another’s adjoining piece of land is said to be the dominant estate. The land across which the easement runs is said to be the servient estate.
Down Payment: Cash portion of the total amount, paid at the time of purchase.
Earnest Money: A deposit of funds by the purchaser of a piece of real estate as evidence of good faith.
Easement: A right to use all or part of the land owned by another for a specific purpose. An easement may, for example, entitle its holder to install and maintain sewer or utility lines.
Eminent Domain: The right of a government to take privately owned property for public purposes under condemnation proceedings subject to payment of its fair market value.
Encroachment: Any building, improvement or structure located on one property (such as a wall, fence or driveway) that intrudes upon the property of another.
Encumbrance: Any interest, right, lien or liability attached to a parcel of land (such as unpaid taxes or an unsatisfied mortgage) that constitutes or represents a burden or charge upon the property.
Equity: The market value of real property, less the amount of existing liens.
Escheat: The reversion of property to the state when an owner dies leaving no legal heirs, devisees or claimants.
Escrow: A method of closing a real estate transaction in which all required documents and funds are placed with a third party for processing anddisbursement.
Estoppel: A legal restraint that stops or prevents a person from contradicting or reneging on his previous position or previous assertions or commitments.
Examination: The study of the instruments and muniments incident to a chain of title to determine their effect and condition in order to reach a conclusion as to the status of the title.
Exception: A provision in a title insurance binder or policy that excludes liability for a specific title defect or an outstanding lien or encumbrance.
Execute: To sign a legal instrument. A deed is said to be executed when it is signed, sealed, witnessed and delivered.
Fannie Mae (FNMA): Federal National Mortgage Association. A private corporation dealing in the purchase of first mortgages.
Fee Simple Deed: The absolute ownership of a parcel of land. The highest degree of ownership that a person can have in real estate, which gives the owner unqualified ownership and full power of disposition.
FHA (Federal Housing Administration): A federal agency that insures first mortgages, enabling lenders to lend a very high percentage of the sale price.
Fixed Rate Mortgage: A mortgage having a rate of interest that remains the same for the life of the mortgage.
Fixtures: Personal property that is attached to real property and is legally treated as real property while it is so attached. Examples: medicine cabinets, window blinds and chandeliers.
Foreclosure: A legal proceeding in which real estate secured by a mortgage or deed of trust is sold to satisfy the underlying debt.
Forgery: The fraudulent signing of another’s name to an instrument such as a deed, mortgage or check.
Freddie Mac (FHLMC): Federal Home Loan Mortgage Corporation. A federal agency that purchases both conventional and federally insured first mortgages from members of the Federal Reserve System and the Federal Home Loan Bank System.
Ginnie Mae (GNMA): Government National Mortgage Association. A federal association working with the FHA that offers special assistance in obtaining mortgages and purchases mortgages in the secondary market.
Grant: To bestow or confer, with or without compensation, a gift such as land or money by one having control or authority over the gift.
Grant Deed: A written instrument by which title to or an interest in real property is transferred from one person or legal entity to another.
Grantee: One to whom a grant is made.
Grantor: One who makes a grant.
Hereditaments: Any and all kinds of estates, interest and rights in real estate that can be inherited.
Homeowners Association: (1) An association of people who own homes in a given area, formed for the purpose of improving or maintaining the quality of the area. (2) An association formed by the builder of condominiums or planned developments, and required by statute in some states.
Homeowner Association Dues: Dues charged by the HOA for the purpose of improving or maintaining the development. (Usually a monthly charge)
- HOA Document Fee: Fee charged to the seller by the HOA for supplying copies of HOA documents, such as covenants, conditions & restriction, financials, etc.
- HOA Transfer Fee: Fee charged to the seller by the HOA, when a property is sold and title is transferred to a new owner.
- Homeowners Insurance: Real estate insurance protecting against loss caused by fire, some natural causes, vandalism, etc., depending on the terms of the policy. Also includes coverage such as personal liability and theft away from home.
Home Warranty: Private Insurance usually paid for by the seller, insuring a buyer against defects (usually plumbing, heating, and electrical) typically for a one year period.
HUD (Department of Housing and Urban Development): The federal department responsible for the major housing programs in the United states.
Impound Account: An account held in trust by the lender for thepurpose ofcollecting monthly deposits from the borrower for the payment of taxes, Insurance and other purposes.
- Fire Insurance Impounds: Money held by the lender for thepayment of Fire Insurance-an insurance policy that covers lossor damage by fire to a specific property (structure only).
- Flood Insurance Impounds: Money held by the lender for thepayment of insurance that compensates for physical propertydamage resulting from flooding.
- Mortgage Insurance Premium Impounds: Money held by thelender for thepayment of insurance that protects the lenderagainst loss caused by the borrower’s failure to make loanpayments.
- Property Tax Impounds: Money held by the lender for thepayment of property taxes levied on real property based on thevalue of the property.
Index: (1) An alphabetical listing in the public records of the names of parties to recorded real estate instruments together with the book and page number of the record. (2) The listing in abstract and title plants of recorded real estate instruments in groups according to land descriptions, known as a geographic index. (3) The alphabetical listing in abstract and title plants, by names of the parties, of all recorded instruments that affect but do not describe particular real estate, such as judgments, powers of attorney, wills and probate proceedings. Such indexes are known by various names, such as “general index,” “judgment index” and “name index.”
Instrument: Any written document having a legal effect.
Interest: The price paid for borrowing money, expressed as a percentage rate over a period of time.
Judgment: The determination of a court regarding the rights of parties in an action. A judgment of debt on a property owner can create a lien on all of that owner’s land within a certain jurisdiction.
Junior Mortgage: A mortgage lower in lien priority than another.
Leasehold: The right to possession and use of land for a fixed period of time. The lease is the agreement that creates the right.
Lessee: A tenant holding a leasehold.
Lessor: A landlord; one who gives a leasehold to a lessee.
License: Permission to go upon or use the land of another, the permission being a personal privilege and not constituting an interest in the land.
Lien: A monetary charge imposed on a property, usually arising from some debt or obligation.
Lien Waver: Also called “waiver of liens.” A waiver of mechanics’ lien rights, signed by contractors or subcontractors.
Link: In surveying, a length of 7.92 inches.
Lis Pendens: A legal notice intending to bind third parties of litigation claiming an interest in real estate.
LoanAmount:The principal sum of money a borrower receivesfrom a lender for the purchase of real estate.
Loan Origination Fee: A one-time setup fee charged by thelender.
Loan Policy: Also called “mortgage policy.” A title insurance policy insuring a mortgagee, or beneficiary under a deed of trust, against loss caused by invalidity or unenforceability of a lien, or loss of priority of the mortgage or deed of trust.
Lot: Generally, any portion or parcel of real property. Usually refers to a portion of a subdivision.
Market Value: The average of the highest price that a buyer, willing but not compelled to buy, would pay and the lowest price a seller, willing but not compelled to sell, would accept.
Mechanic’s Lien: A lien on real estate, created by operation of law, that secures the payment of debts due to persons who perform labor or services or furnish materials incident to the construction of buildings and improvements on the real estate.
Metes and Bounds: A land description in which boundaries are described by courses, directions, distances and monuments.
Mortgage: A conditioned pledge of property to a creditor as security for the payment of a debt.
Mortgage Insurance: Insurance written by an independent mortgage insurance company protecting the mortgage lender against loss incurred by a mortgage default, thus enabling the lender to lend a higher percentage of the sale price.
Mortgagee: The holder of a mortgage. The party to whom a mortgage is made, generally the lender.
Mortgagee Policy: Also called “loan policy.” A title insurance policy insuring a mortgagee, or beneficiary under a deed of trust, against loss caused by invalidity or unenforceability of a lien, or loss of priority of the mortgage or deed of trust.
Mortgagor: A person who mortgages property. A person who executes a mortgage, generally the property owner.
Multiple Listing: The pooling in a central bureau of listings of properties for sale. These listings are held individually by members of a group of real estate brokers, with the agreement that any member of the group may sell the properties and, in the case of a sale, the commission will be divided between the broker making the sale and the broker who filed the listing.
Non-Allowable Fees/Closing Costs: Charges or fees which cannot be charged to the buyer per FHA and VA guidelines. NonAllowablesare not the sarne for FHA and VA transactions.
Non-Recurring Closing Costs: Charges or fees which only occurone time; i.e., escrow fee, title insurance policy, recording fees,document preparation, notary fees, loan origination, loandiscount points, inspection fees, underwriting, or anything elsethat is a one-time fee and will not be paid again.
Notary: An individual who is authorized by the state or federalgovernment toadminister oaths, and to attest to the authenticityof signatures.
Note: Also called “promissory note.” A written promise to pay a sum of money, usually at a specified interest rate, at a stated time to a named payee.
Owner’s Policy: A policy of title insurance insuring an owner of real estate against loss occasioned by defects in, liens against or unmarketability of the owner’s title.
Payoff Statement/Demand: A statement from a lender showingthe remaining amount due on a loan.
Payoff Statement Fee/Demand Fee: Fee a lender charges toprovide a statement showing the amount due on a loan.
Plat: Also called “plat map.” A map dividing a parcel of land into lots, as in a subdivision. A plat book contains the plat maps for a given area.
Point: Also called “commission points” or “discount points.” One percent of the amount of the loan.
Premium: The amount payable for an insurance policy.
Prepayment Penalty: An agreement to pay a penalty for thepayment of a note before it actually becomes due.
Prescriptive Easement: A right to use another’s property that is not inconsistent with the owner’s rights and that is acquired by an open, notorious, adverse and continuous use for the statutory period, for example 20 years.
Principal: (1) A sum of money owed as a debt on which interest is payable. (2) A person who empowers another to act as his representative or agent. (3) The person having prime responsibility for an obligation as distinguished from one who acts as a surety or endorser.
Property Taxes: A tax levied on real property based on the valueof the property.
Prorations: The allocation of property taxes, interest, HOA dues,insurance premiums, rental income, etc., between buyer andseller proportionate to time of use.
- HOAProrations-Formula: monthly dues divided by 30 daysequals per day an1ount (per diem) tirnes the days that the partyowns the property.
- Property Tax Prorations-Formula: 6 months taxes divided by180 days equals per day amount (per diem) times the number ofdays the party owns the property.
- Rent Prorations-Formula: monthly rent divided by 30 days equals per day amount (per diem) times the days that the partyowns the property.
Purchase Money Mortgage: A mortgage given by a purchaser to a seller on the subject property to secure payment of a part of the purchase price
Quit Claim Deed: A deed that does not imply that the grantor holds title, but that surrenders and gives to the grantee any possible interest or rights that the grantor may have in the property.
Real Estate: Also called “real property.” (1) Land and anything permanently affixed to the land, such as building, fences and those things attached to the buildings, such as light fixtures, plumbing and heating fixtures, or other such items that would be personal property if not attached. (2) May refer to rights in real property as well as the property itself.
Real Estate Broker Fees (Commission): Broker compensation, typically paid by the seller, for services rendered.
Reconveyance: A reconveyance (also referred as a deed of reconveyance) is most commonly used upon payment in full of a deed of trust. This instrument transfers title from the trustee to the equitable owner when a property is has been released as collateral for a debt.
Recording: The noting in a public office of the details of a legal document – such as a deed or mortgage – affecting the title to real estate. When such an instrument is properly recorded, it is considered to be a matter of public record. Legally, that means that all subsequent purchasers are deemed to have constructive knowledge of that information.
Recording Fees: The amount paid to the county recorder’s office in order to make a document a matter of public record.
Reinsurance: A contractual relationship between two insurance companies under which one insurer assumes a portion of the risk of the insurance policy written by the other.
Release: (1) To relieve from debt or security or abandon a right, such as the release of a mortgage lien from a part or all of the land mortgaged. (2) The instrument effecting a release.>
Restrictions: Limitations on the use of property imposed or created by deeds or other documents in the chain of title. A restriction, for example, may prohibit the placement of trailer or the construction of a commercial structure on the property.
Riparian Rights: The rights of owners of lands bordering watercourses which relate to the water and its use.
Sale Agreement: A contract entered into between a buyer and seller, setting forth the terms, provisions and conditions of a sale of real estate.
Sale and Leaseback: The sale of an asset to a buyer who immediately leases it back to the seller.
Search: A careful exploration and perusal of the public records in an effort to find all recorded instruments relating to a particular chain of title.
Second Mortgage: A mortgage ranking in priority immediately below a first mortgage.
Starter: Called “base” in some areas, and “starter” in others. When titles previously have been examined up to a certain date by reliable examiners, title companies sometimes give subsequent examiners of such titles a commitment/policy that sets forth the condition of the title at the time of the previous examination and allows them to begin their subsequent examination with the terminal date of the previous examination.
Sub-Escrow Fee (Title Company Charge): Fee charged by thetitle company for handling loan funds and disbursing loanpayoffs.
Subordination: The act or process by which a person’s rights are ranked below the rights of others. For example, a second mortgagee’s rights are subordinate to those of the first mortgagee.
Surety: (1) A person who agrees to be responsible for a debt or obligation of another. (2) The pledge or agreement by which one undertakes responsibility for the debt or obligation of another.
Tax Service: Fee charged by the lender for a service that notifiesthe lender of property tax amounts and/or delinquencies.
Termite Completion: The document issued by the termitecompany showing that any required termite work listed on thetermite inspection has been completed on thebuilding.
Termite Inspection Report: An inspection required in certaintypes of sales of property todetermine if termites are presentwithin a building.
Title: (1) A combination of all the elements that constitute the highest legal right to own, possess, use, control, enjoy and dispose of real estate or an inheritable right or interest therein. (2) The rights of ownership recognized and protected by the law.
Title Covenants: Covenants ordinarily inserted in conveyances and in transfers of title to real estate for the purpose of giving protection to the purchaser against possible insufficiency of the title received. A group of such covenants known as “common law covenants” includes: covenants against encumbrances; covenants for further assurance (in other words, to do whatever is necessary to rectify title deficiencies); covenants of good right and authority to convey; covenants of quiet enjoyment; covenants of seisin; covenants of warranty. (See Warranty or Covenant.)
Title Defect: (1) Any possible or patent claim or right outstanding in a chain of title that is adverse to the claim of ownership. (2) Any material irregularity in the execution or effect of an instrument in the chain of title.
Title Insurance Policy: A contract of title insurance under which the insurer, in keeping with the terms of the policy, agrees to indemnify the insured against loss arising from claims against the insured interest.
- Owner’s Policy: A policy of title insurance insuring an owner of real estate against loss occasioned by defects in, liens against or unmarketability of the owner’s title.
- Loan Policy: Also called “mortgage policy.” A title insurance policy insuring a mortgagee, or beneficiary under a deed of trust, against loss caused by invalidity or unenforceability of a lien, or loss of priority of the mortgage or deed of trust.
- Title Endorsements: Additional title insurance coveragerequired by the lender, paid for by the buyer.
Title Plant: Also called “abstract plant” in some areas. A geographically filed assemblage of title information that helps in expediting title examinations, such as copies of previous attorneys’ opinions, abstracts, tax searches and copies or take-offs of the public records.
Transaction Coordinator Fee: Fee paid by the buyer, seller orboth, for a transaction coordinator to assist the real estate agent.The coordinator will make sure all broker-requireddocumentation for the broker’s file are complete. The coordinatormay also assist in ordering required inspections on the subjectproperty, such as termite inspection, home inspection, hazarddisclosure reports, appraisal, etc.
Underwriter: An insurance company that issues insurance policies to the public or to another insurer.
Variable Interest Rate: Also called “flexible interest rate.” An interest rate that fluctuates as the prevailing rate moves up or down. In mortgages, there are usually maximums as to the frequency and amount of fluctuation.
Veterans Administration (VA) Loans: Housing loans to veterans by banks, savings and loans, or other lenders that are guaranteed by the Veterans Administration, enabling veterans to buy a residence with little or no down payment.
Waiver: The voluntary and intentional relinquishment of a known right, claim or privilege.
Warranty: In a broad sense, an agreement or undertaking by a seller to be responsible for present or future losses of the purchaser occasioned by deficiency or defect in the quality, condition or quantity of the thing sold. In a stricter sense, the provision or provisions in a deed, lease or other instrument conveying or transferring an estate or interest in real estate under which the seller becomes liable to the purchaser for defects in or encumbrances on the title.
Will: A testamentary disposition of property, usually in a form prescribed by law, that takes effect upon death.