Real Estate Terms and Definitions
ABSTRACT OF TITLE – A summary of research containing conveyance and transfer history from the original Grant Deed to include all recorded deeds, deeds of trust, mortgages, leases and other instruments affecting the title to a particular piece of land.
ABSTRACTING – The process of producing and compiling the abstract.
ABSTRACTOR – An individual or entity engaged in producing abstracts of documents and retrieval of documents recorded on microfilm with a county.
ADVERSE POSSESSION – The unauthorized occupation of property and or land titled to another party, or by an individual or entity who does not have the authorized consent of the owner. The “said” occupier is said to have and hold possession adversely to the rights as well as interests of the owner. In many states by law, title to the land may be vested (owned) by the occupier after a fixed number of years “by peaceful occupancy”.
ALL INCLUSIVE RATE – Regarding title insurance, an all inclusive rate is a rate that typically includes at least some portion cost of preforming the research of the title and/or the cost of underwriting the loan and the closing of the transaction.
ALTA – Stands for “American Land and Title Association”, a national trade association for U.S.title insurance industry.
ALTA is comprised of title companies in which process closings and issue “Owner’s Policy of Title Insurance”.
AMORTIZATION –Amortization is the process of a repayment on a debt over a fixed period of time, typically by monthly payments on mortgage loans and credit card balances.The amortization of a loan means that your payments must be large enough to not only pay the interest for the loan that has accrued but also to reduce the principal owed on the loan. The latin word amortizeitself means “to bring to death.”
APR – “Annual – Percentage – Rate”. The interest percentage of the loan based on a yearly basis, expressed by the actual rate of interest paid.
APPRAISAL – An estimation of a property’s value. Derived from analysis of facts in regard to the property, recent area sales for like for like comparisons. Also known as “an opinion of value”. There are two basic types of appraisals, the sales approach and the cost approach.
ATTORNEY’S OPINION – A statement by an attorney in writing, opining on the condition of the property’s title and what she believes to be the condition of the real estate title and in regard to potential clouds that would affect a Fee simple transfer or conveyance.
BROKER – An individual that acts as an agent for another when negotiating a sale or purchases, in return for a commission or fee.
BROKERAGE – A commission/fee paid to a broker.
CERTIFICATE OF TITLE – Typically in states where an attorney examines the abstracts or chains of title, also known as a written opinion, usually executed by the examining attorney, making the statement that the title is vested as stated within the abstract.
DEED – A contractual, written document in which title to land and real estate is conveyed or transferred from one vesting party to another.
DEED BOOK – A book of reference among county public records in which deeds are recorded.
DEFAULT – A failure by the grantee to perform a promised task or to pay an obligation within a agreed due date.
DEFECT – A cloud or blemish, also known as imperfection or deficiency. A defective title is one in which there is irregular and faulty issues.
DEPRECIATION – A loss in value caused by ordinary wear and tear; destructive act by of the elements or functional, “economic obsolescence”.
EARNEST MONEY – The down payment or portion of the purchase price made by the purchaser as of “good faith” payment.
EASEMENT – The right held by a person or persons to enjoy and/or make limited use of another party’s real property.
EGRESS – The conveyed right to a path or right of way over which a party may come or go away from their own real estate.
EJECTMENT – (A) An eviction or dispossession. B) A law suit or forcible detainer to regain access and possession of real estate held by another.
EMINENT DOMAIN – The governmental right take or acquire privately owned property for public works purposes by the use of condemnation proceedings usually upon payment of its reasonable value.
ENCROACHMENT – This is an extension of a structure from the real estate to which it belongs across a boundary line and on to an adjoining property.
ENCUMBRANCE – A right, claim or lien upon the title to property and real estate, involuntarily held by someone other than the real estate owner.
ESCROW – In technical terms this strictly refers to a vesting deed delivered to a third party or person to be held until the fulfillment or performance of some condition or act by the grantee. Parlance, in title industry means the depositing (always with an impartial third party) called an escrow agent of anything pertaining to a real estate transaction which includes money and documents which are to be disbursed and delivered to the rightful parties by the assigned escrow agent once all conditions of the transaction have been met.
ESCROW AGREEMENT – A written agreement typically made between a buyer, seller, and escrow agent, and sometimes only between one person and the escrow agent. This agreement sets forth the conditions that are to be performed incident to the object or money deposited in escrow, in which gives the escrow agent detailed instructions with respect to the disposition of the monies or object deposited.
ESTATE – (A) Usually a sizable piece of land typically with a large home(s) and other pretentious improvements. (B.) The entirety or whole of one’s possessions, especially of property, assets, debts and liabilities left by a deceased and or bankrupt person. (C) The nature and or extent of an owner’s rights to real estate and property.
EXAMINATION – In terms of title industry, this is the pursuit and study of instruments in a chain of title that determine their effect and condition in order to reach a reasonable conclusion as to the status of title.
FIRST MORTGAGE – A loan or mortgage having first priority as a lien holder over any other mortgage or lien on the subjec property.
FORECLOSURE – A court or legal proceeding for the sole purpose of a collecting real estate mortgages, loans and other types of collateral and liens on real estate, which usually results in impeding the right of redemption to the mortgaged property and usually involves a sheriff sale of the property to satisfy the mortgage debt.
EXAMINATION – The examination process by a title company and/or attorney to search public property records to insure that the buyer acquiring the home or land from the legal title owner, is assured that there are no liens and encumbrances, back or delinquent taxes owed, and other claims filed against the property that would adversely affect transfer of title. This fee can typically be included and covered by the title insurance policy by most lenders.
GENERAL WARRANTY – A warranty is a provision in a vesting deed, mortgage or other real estate instrument that contains all of the common law items of a warranty. Also known as a “full warranty”.
GOOD FAITH ESTIMATE – An estimation of closing costs that the lender is required (mandated by the Federal Real Estate Settlement Procedures Act) to provide the buyer within at least 3 days after applying for a mortgage loan. This is the lender’s estimate – it must be completely accurate in regards to the lender’s charges and is intended to be reasonably close to the charges the third-party providers that includes title insurers, title agents, attorneys, and surveyors, may change. You should however check with those third-party providers regarding how much they will charge if you should have any questions or concerns prior to the settlement.
HAZARD INSURANCE – This is an indemnification or real estate title insurance protecting against hazards like fire, natural disasters and other causes including vandalism, etc., depending upon the type of policy. The buyer can often add liability insurance and/or extended coverage for personal property items.
HEIR – A party or individual who inherits or who is entitled to inherit, property and real estate by provisions by way of law or under the provisions of a written will.
INGRESS – The lawful right or permission to access or enter. The place of entry such as a “right of way” across to adjoining land.
INTESTATE – An individuals death without leaving behind a legal will.
JOINT TENANTS – Two or more party’s or persons that jointly hold title to real estate which includes equal rights to share in its peaceful enjoyment during their respective lives, with a provision that upon death of a joint tenant, her or his share in the property will pass to the surviving tenants and so on. This is until Full title is vested in the last survivor. Note that a joint tenant cannot legally transfer, sell or encumber her interest without the sole consent or jointer of all of the other joint tenants named.
JUDGMENT – A final conclusion or determination by the courts of law, awarding the plaintiff payment or monies owned and/or relief of some kind to the named parties involved in the lawsuit.
LEASE – A binding agreement between two parties, granting the use or occupancy of property and land during a specific time period in exchange for payment (rent).
LIEN – The liability or collateral of property and real estate used as security for repayment of a debt. Said liability is usually created by a contract, typically a mortgage, and/or by operation of law, such as a H.O.A or mechanics lien.
LIS PENDENS – A pending judgment or lawsuit. A lis pendens notice is the legal or public notice to make public the fact that a lawsuit is pending.
LOAN POLICY – A title insurance policy issued to the mortgage lender, insuring against losses by means of defects such as liens against, or unmarketable of title.
MARKETABLE TITLE – A title in which the court of equity considers to appear to be so free of material defects and liens that it forces the title’s acceptance by questioning the purchaser. Also commonly known as a merchantable title.
MARKET VALUE – Typically an average value estimate of real estate dictated by the highest price and lowest price among current sales in a specific neighborhood or subdivision.
MECHANIC’S LIEN – A lien on real estate usually by means of contract, usually voluntary in nature and created by operation of law, which secures the payment of debt due to company or individual that performs labor or services and/or furnishes materials related to the construction of residential and commercial buildings and improvements on land and real estate.
METES AND BOUNDS – A parcel an land description in which boundaries are determined by directions, courses, distances and monuments.
MORTGAGE – A temporary conditional pledge of collateral and/or property in which a creditor uses as security for the payment of the debt which may be released by payment.
OPINION – In the title industry’s terms, also referred to as a “title opinion”. It is the conclusion and final judgement of a proficient authority as to the status of the condition of title,which is based upon a title examination.
OWNER’S POLICY – A title insurance policy typically insuring the owner of property or real estate against losses occasioned by defects in, encumbrances and liens against, or un marketability of an owner’s title.
OWNER CARRY CONTRACT – The term “owner carry contract” refers to a type of seller financing in which the seller carries the mortgage for a mutually agreed upon time frame that instead of the seller accepting cash in a sale transaction. With the new mortgage laws in laws in place (such as the Dodd-Frank act), and when mortgage guidelines tighten, borrowers will find it far more difficult to get approved through conventional financing. This includes when the sales markets are slow, sellers will look for ways to make the property more appealing to its potential buyers. Sometimes the offer to carry a first or second mortgage may the remedy that allows a homeowner to sell.
Many multifamily and commercial property owners use seller financing as it is makes the real estate more marketable especially to cash buyers that own multiple properties.
POWER OF ATTORNEY – A legal and binding instrument that authorizes a party or individual to act as ones agent and/or attorney.
PREMIUM – The monetary amount payable for an insurance policy or sum of monies/bonuses paid in addition to a regular price.
PROBATE – A legal process in which the validity and/or probity of a document for instance as a will, is proven.
PROMISSORY NOTE – A contractual and written promise to re pay a specified sum of money at with a due date or stated time frame, in some cases on demand, to a named person. Additionally to the payment of principal, a promissory note typically provides for the payment of interest.
PUBLIC RECORDS – Records that are made open to the public, or transcripts in a recorder’s office of all instruments that have been recorded which includes the indexes pertaining to them.
QUIET TITLE SUIT – This is lawsuit initiated by an owner of real estate for the purposes of wiping out or cancelling and placing a quietus upon a supposedly immaterial, unenforceable claims, inconsequential and interests which could potentially cloud title.
QUIT CLAIM DEED – A transfer deed of which does not imply that the grantor holds title but surrenders and gives the grantee any possible interest or rights that the grantor may have in the property.
REALTOR – This is the copy right trade name that can only be legally used by individuals belonging to the National Association of Realtors.
RECORD TITLE – The recorded person or personas in aspects of a title which appear in the public records, distinguished from un recorded title aspects and common interests.
REFINANCE RATE – When referencing title insurance, the refinance rate is usually the reduced rate on a Loan Policy processed and issued on the newly originated loan for a refinance transaction, of which the existing loan was previously insured, usually within some period of years.
REISSUE RATE – When referencing title insurance, a reissue rate is a reduced rate for an Owner’s Title Policy for title insurance issued on real estate and property which was previously insured for a specified period of years. In many states, this term is also used for the refinance rate.
RIGHT OF WAY – (A) The right enter or to pass over property that is owned by another party, usually written into an easement. (B) A pathway or thoroughfare on which passage is made. (C) Also known as a strip of land over which public facilities such as highways and railroads or power lines are built.
RIPARIAN RIGHTS – This is the many rights of a party or persons in, to and over the banks, shallows, bed, shore and water of a river, stream or body of water upon which her land borders.
RISK RATE – When referencing title insurance, the risk rate is the rate which does not include the cost of the research for the title or the cost of conducting the escrow and closing.
SEARCH – In the title industry terms, a expertly and careful research and exploration and perusal of records made available publicly in an effort to locate and find all recorded documents and instruments relating to a particular chain of title.
SECOND MORTGAGE – A junior mortgage, secondary ranking in priority and immediately below the first mortgage.
SELLER FINANCING – Seller financing is the seller of a property assisting in the financing of a real estate sale and transaction. This is when a second loan or note is carried by the seller or in most cases financing the entire purchase (only if the seller owns the home free and clear). In summary, the seller will assume the role as a banker and carry back the loan. In both instances, the buyer makes a promise to pay, provided by a promissory note and the property will serve as collateral for the loan. This usually occurs when when a buyer has difficulty qualifying for conventional financing, meeting the purchase price or perhaps a down market for sellers.
SETTLEMENT (CLOSING) – This is the date that is set during the pre negotiation phase and is usually several weeks after the buyers offer is formally accepted by the seller. On the closing date, the title ownership of the property is conveyed or transferred to the buyer. In some or most jurisdictions property ownership is officially transferred when the vesting deed from the seller is delivered to the buyer at closing. Lenders that provide the mortgage loan will usually require title service including title research, title insurance, appraisal, land surveys, for which attorneys are to be involved.
SIMULTANEOUS ISSUE RATE – When referring to the title insurance policy, in which the simultaneous issue rate is the reduced rate for a Loan Policy or Owner’s Policy of title insurance issued on that same property, or loan at the same time as another policy. The term usually refers to a Loan Policy issued at the same time as the Owner’s Title Policy when a property is purchased.
SPECIAL WARRANTY DEED – This is a deed that typically warrants the title only with respect to the acts of a seller and the interests of a person claiming by, through or under him.
SUBDIVISION – An area or tract of land laid out thus divided into blocks, lots, and building sites. Also in which public or commercial facilities are laid out including streets, alley ways, parks and easements for public utilities.
SURVEY – (A) The determination of the location, boundaries, area or the plated elevations of land and/or structures upon the lands surface by means of a course or courses in relation to the North Star and the measurement of angles and distances by the use of techniques of geometry & trigonometry. (B) A map or plat drawn by the surveyor of which represents the property surveyed and also shows the results of the survey.
TAX LIEN – A delinquent tax that is perfected and recorded as a lien which is attached to real estate by operation of a governmental law in which secures payment of real estate and property taxes.
TENANCY BY ENTIRETIES – This is an estate or in other words an interest in property and real estate predicated upon a legal fiction that husband and wife are by law one person. A conveyance, transfer or devise to them (unless a contrary intent is expressed) vested title in them as one unit or person. Most importantly upon the death of either wife or husband, full title and ownership passes to the survivor.
TENANT – (A) Typically the one who holds possession of property and real estate under a said lease. (B) In a broader perspective, one who holds and/or possesses land and tenements by any kind of a title.
TENANTS IN COMMON – Two or more parties or persons in which title to a single piece of property or real estate vested in such a manner that they there is a common or equal right to possession which includes quite enjoyment of the property, while each person holds a separate and individual interest or “estate” in the said property. In this scenario, each owner may sell, transfer or encumber his or hers respective interest or right to dispose of it by will. If he or she dies without leaving a will, their heirs will inherit their undivided interest.
THIRD PARTY – This term is usually applied to a party or persons that are not principal parties for a contract or other similar instrument, but do have some rights, interest and/or duty in which the contract or instrument can affect.
TITLE – (A) The combination of all elements that can constitute the highest, most legal right to possess, own, use, enjoy, control, enjoy and dispose of property and/or real estate or at time with an inheritable right of interest therein. (B) Also the rights of title ownership that is recognized and legally protected.
TITLE COVENANTS – Title covenants can ordinarily be inserted in conveyances and transfers of title from property and real estate for the sole purpose of providing protection to its purchaser and against any possible insufficiency for the title that has been received. A unit or composition of covenants also known as “the common law of covenants” which includes: (1) the covenants against all encumbrances; (2) the covenant for further assurances (basically to do whatever it is necessary to rectify any title deficiencies), (3) covenant of good right and authority to convey, (4) the covenant of said quiet enjoyment; (5) the covenant of seisin; (6) the covenant of a warranty.
TITLE DEFECT – (A) Any potential patented claim or rights outstanding in the chain of title that is adverse to the claim of title ownership. (B) Any potential material irregularities in the execution and/or effects of an instrument contained in the chain of title.
TITLE EXAMINATION – An title research examination process by an authority or title company (sometimes an attorney for some states) to research public records to insure that the buyer purchasing the home or land from the legal title owner, is assured that there are no present liens or encumbrances including back taxes, past due assessments, or other similar claims recorded that could adversely affect the conveyance and transfer of title. Fees may also be included and sometimes covered by the owners title insurance policy by some mortgage lenders.
TITLE INSURANCE – An indemnity for the loss resulting from clouds or title defects, liens and encumbrances upon a title.
TITLE PLANT – (A) A centralized data base or repository for indexed records and information online, AKA an Abstract Plant. (B) A geo location assemblage of recorded title information that can expedite and assist in title examinations, such as obtaining copies of deeds, previous opinions, abstracts of title, tax lien searches, and copies of recorded and indexed public records.
TITLE SEARCH – An executed search and perusal of public property records for recorded instruments that would potentially affect the title to a particular piece of real estate or land.
TITLE SEARCHER – An individual or company that specializes in title research and abstracting. One who searches property title to real estate and real land.
UNDERWRITER – A department or individual that works with an insurance or mortgage company that reviews loan applications and mortgage loans and issues approvals and insurance policies either to the public or to another insurer.
WAIVER – A voluntary, intentional relinquishment of a given or known right, claim and/or privilege.
WARRANTY DEED – A vesting deed that basically guarantees no clouds or claims against the title being transferred to the buyer which also can contain one or more title covenants.