The Transaction Closing Process
Closing Process
Closing Costs
Explained
The Alphabetical List of Real
Estate Terms
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ABSTRACT
- An abbreviation of the cardinal aspects of all recorded deeds,
mortgages, leases and other instruments affecting the title to a
particular piece of land.
ABSTRACTING - The process of making
and compiling an abstract.
ABSTRACTER - The person or company
engaged in making abstracts.
ADVERSE
POSSESSION - The unauthorized occupation of land belonging
to another, by a person who does not have the consent of the owner.
Said occupier is said to hold possession adversely to the rights and
interests of the owner. In most states, by operation of law, title
to the land becomes vested in such occupier after a fixed number of
years of peaceful occupancy.
ALL-INCLUSIVE
RATE - When referring to title insurance, an all-inclusive
rate is a rate that includes at least some part of the cost of
researching the title or the cost of conducting the closing.
ALTA -
American Land Title Association, the national trade association for
the title insurance industry. ALTA is made up of title firms that
conduct your closing and issue you an Owner's Policy of Title
Insurance.
AMORTIZATION - This term has developed
through French and Old English from the Latin words "mors" or "mort"
meaning death or dead. It is the killing off of an existing debt by
regular partial payments. The word "mortgage" is also derived from
the same Latin root.
APR -
Annual Percentage Rate. The yearly interest percentage of a loan as
expressed by the actual rate of interest paid.
APPRAISAL
- An estimate of value of property from analysis of facts about the
property; an opinion of value.
ATTORNEY'S
OPINION - The written statement of an attorney setting
forth what he believes to be the condition of a real estate
title.
BROKER -
One who acts as an agent for another in negotiating sales or
purchases in return for a fee or commission.
BROKERAGE
- The office of a broker that can employ other agents to transact real estate and
other related deals.
CERTIFICATE OF
TITLE - In areas where attorneys examine abstracts or
chains of title, a written opinion, executed by the examining
attorney stating that title is vested as stated in the abstract.
CHAIN OF
TITLE - Beginning with a conveyance out of an original
source of title such as a government, each succeeding deed, will or
other medium which conveys and transfers the title to succeeding
owners constitutes a link in the chain of title. The chain of title
is the composite of all such links.
CLAIM -
A right to assert, or the assertion of, a demand for payment of
money due; or the surrender or delivery of possession of property or
the recognition or some right. A demand for something as one's
rightful due.
CLOSING
- In some areas called a "settlement." The process of completing a
real estate transaction during which deeds, mortgages, leases and
other required instruments are signed and/or delivered, an
accounting between the parties is made, the money is disbursed, the
papers are recorded, and all other details such as payment of
outstanding liens and transfer of hazard insurance policies are
attended to.
CLOSING
STATEMENT - A summation, in the form of a balance sheet,
made at a closing, showing the amounts of debits and credits to
which each party to a real estate transaction is entitled.
CLOUD ON
TITLE - An irregularity, possible claim, or encumbrance
which, if valid, would adversely affect or impair the title.
COMMISSION - The amount due a real
estate broker, mortgage loan broker, or real estate professional for
services performed in such capacity.
CONDITIONS - This term is first
cousin to restrictions and reservations. It refers to provisions in
deeds and other real estate instruments which provisions make a
particular right contingent upon the occurrence of some future
event.
CONTRACT
- Same as "agreement," but usually more formal.
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.
DEED - A
written document by which title to real estate is conveyed from one
party to another.
DEED
BOOK - A book among the public records in which deeds are
recorded.
DEFAULT
- Failure to perform a promised task or to pay an obligation when
due.
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.
EARNEST
MONEY - Initial
deposit or a small part of the purchase price made by a
purchaser as evidence of good faith presented with the purchase
offer.
EASEMENT - A right held by a person to
enjoy or make limited use of another's real property.
EGRESS - The right to a path or
right-of-way over which a person may leave or go away from his own
real estate.
EJECTMENT - (1) Eviction or
dispossession. (2) A law suit to regain possession of real estate
held by another.
EMINENT
DOMAIN - The right of a
government to take privately owned property for public purposes
under condemnation proceedings upon payment of its reasonable value.
ENCROACHMENT - The extension of a
structure from the real estate to which it belongs across a boundary
line and onto adjoining property.
ENCUMBRANCE - A claim, right, or lien
upon the title to real estate, held by someone other than the real
estate owner.
ENDORSEMENT - Addition to or
modification of a title insurance policy which expands or changes
coverage of the policy, fulfilling specific requirements of the
insured.
ESCROW - Technically, this term
strictly refers to a deed delivered to a third person to be held by
him until the fulfillment or performance of some act or condition by
the grantee. In title industry parlance it means the depositing with
an impartial third party called the escrow agent (usually the title
company) of anything pertaining to a real estate transaction
including money and documents of all kinds which are to be disbursed
and delivered to the rightful parties by the escrow agent when all
conditions of the transaction have been met.
ESCROW
AGREEMENT - A written agreement
usually made between buyer, seller, and escrow agent, but sometimes
only between one person and the escrow agent. It sets forth the
conditions to be performed incident to the object deposited in
escrow, and gives the escrow agent instructions with respect to the
disposition of the object so deposited.
ESTATE - (1) A sizable piece of rural
land usually with a large house and other pretentious improvements.
(2) The whole of one's possessions, especially all of the property,
assets, debts, and liabilities left by a deceased or bankrupt
person. (3) The nature and extent of an owner's rights in real
estate.
EXAMINATION - In title industry terms,
to peruse and study the instruments in a chain of title and to
determine their effect and condition in order to reach a conclusion
as to the status of the title.
EXAMINER - Usually referred to, in
title industry terms, as title examiner. One who examines and
determines the condition and status of real estate titles.
FEE
SIMPLE - The highest degree of ownership which a person can
have in real estate. An interest in real estate which gives the
owner unqualified ownership and full power of disposition.
FIRST
MORTGAGE - A mortgage having priority as a lien over any
other mortgage or lien on the same property.
FORECLOSURE - A legal proceeding for
the collection of real estate mortgages and other
types of liens on real estate, which results in cutting off the
right to redeem the mortgaged property and usually involves a judicial sale
of the property to pay the mortgage debt. (See Notice
of Default, Notice of Trustee's Sale)
GENERAL
WARRANTY - A warranty provision in a deed or mortgage or
other real estate instrument containing all of the common law items
of warranty. Also known as a full warranty.
GOOD FAITH
ESTIMATE - An estimate of closing costs the lender is
required (under the federal Real Estate Settlement Procedures Act)
to give to the buyer within at least three days of applying for a
mortgage loan. This is the lender's estimate - it must be completely
accurate regarding the lender's own charges and is supposed to be
reasonably close to the charges third-party providers such as title
insurers/agents, attorneys, surveyors, etc., may change. You should
check with those third-party providers, however, regarding how much
they will charge if you have any questions or concerns prior to
settlement.
HAZARD
INSURANCE - Real estate insurance protecting against fire,
some natural causes, vandalism, etc., depending upon the policy. The
buyer often adds liability insurance and extended coverage for
personal property.
HEIR - A
person who inherits or who is entitled to inherit real estate by
provisions of law or under the provisions of a will.
INGRESS
- The right or permission to enter; also the means or place of entry
such as a right-of-way across adjoining land.
INTESTATE - Dying without leaving a
legal will.
JOINT
TENANTS - Two or more persons who hold title to real estate
jointly, with equal rights to share in its enjoyment during their
respective lives with the provision that upon the death of a joint
tenant, his share in the property passes to the surviving tenants,
and so on, until the full title is vested in the last survivor. A
joint tenant cannot legally sell or encumber his interest without
the consent or joinder of all of the other joint tenants.
JUDGMENT
- A conclusion or determination by a court of law usually awarding
the payment of money or relief of some kind to one of the parties to
a lawsuit.
LEASE -
An agreement granting the use or occupancy of land during a
specified period in exchange for rent.
LIEN -
The liability of real estate as security for payment of a debt. Such
liability may be created by contract, such as a mortgage, or by
operation of law, such as a mechanics lien.
LIS
PENDENS - A pending lawsuit. A lis pendens notice is legal
notice to the world that a lawsuit is pending against real property.
LOAN
POLICY - A policy of title insurance issued to the mortgage
lender insuring against loss by defects in, liens against, or
unmarketability of title.
MARKETABLE
TITLE - A title which a court of equity considers to be so
free of material defects and liens that it will force the title's
acceptance by questioning purchaser. Also known as a merchantable
title.
MARKET
VALUE - An average between the highest price which 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,
which 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 temporary conditional pledge of property to a creditor as
security for the payment of a debt which may be cancelled by
payment.
NOTICE OF
DEFAULT - A 90 day period during which no payments on
the loan have been made and
the trustee of the loan company can file a "Notice of
Default" in the newspaper as public record that it is planning on selling
the property at a "Trustee's Sale".
NOTICE OF
TRUSTEE'S
SALE - After the 90 day period the trustee of the
loan company can if directed file a "Notice of Trustee's Sale"
in the newspaper at least once per week for 21 days. After
that time a date will be set up where the trustee will
sell the property for cash on the open courthouse steps or
somewhere in front of a pre-determined courthouse. If the property does not sell for the minimum bid
it will become property of the bank and title will change
to the bank as owner. See (REO).
OPINION
- In title industry terms, referred to as title opinion. The
conclusion and judgement of a skilled person as to the status of a
title, based upon a title examination.
OWNER'S
POLICY - A policy of title insurance usually insuring an
owner of real estate against loss occasioned by defects in, liens
against, or unmarketability of the owner's title.
POWER OF
ATTORNEY - A legal instrument authorizing one to act as
another's agent or attorney.
PREMIUM
- (1) The amount payable for an insurance policy. (2) A sum of money
or bonus paid in addition to the regular price.
PROBATE
- A legal procedure in which the validity and probity of a document,
such as a will, is proven.
PROMISSORY
NOTE - A written promise to pay or repay a specified sum of
money at a stated time, or on demand, to a named person. In addition
to the payment of principal, a promissory note usually provides for
the payment of interest.
PUBLIC
RECORDS - The transcriptions in a recorder's office of
instruments which have been recorded, including the indexes
pertaining to them.
QUIET TITLE
SUIT - A lawsuit brought by an owner of real estate for the
purpose of cancelling, wiping out, and putting a quietus upon
supposedly immaterial, inconsequential, and unenforceable claims and
interests which cloud his title.
QUIT CLAIM
DEED - A deed which does not imply that the grantor holds
title, but which surrenders and gives to the grantee any possible
interest or rights which the grantor may have in the
property.
REALTOR
- A copyrighted trade name which can be legally used only by those
persons belonging to the National Association of Realtors.
RECORD
TITLE - The aspects of a title which appear in the public
records as distinguished from unrecorded title aspects and
interests.
R.E.O. (REAL
ESTATE
OWNED) - The result of a foreclosure sale where
there was no bid high enough for the property to be
purchased from the bank. Therefore the bank becomes the owner
of the property. There is usually a R.E.O. department but they are
not easily located. The banks do not want investors knowing that
they have a surplus of properties in default and will keep it as
quiet as possible. Investors will get spooked about the banks
solvency if they are aware of any excess properties owned by the
bank. The investors will withdraw their cash and create an even larger problem and possible collapse of the bank. This happened
during the 2008 financial crisis as we all
know.
REFINANCE
RATE - When referring to title insurance, the refinance
rate is the reduced rate for a Loan Policy issued on the new loan in
a refinance transaction, in which the original loan was previously
insured within some period of years.
REISSUE
RATE - When referring to title insurance, the reissue rate
is the reduced rate for an Owner's Policy of title insurance issued
on a property which was previously insured within some period of
years. In some states, the term is also used for a refinance rate.
RIGHT OF
WAY - (1) The right to pass over property owned by another,
usually based upon an easement. (2) A path or thoroughfare over
which passage is made. (3) A strip of land over which facilities
such as highways, railroads, or power lines are built.
RIPARIAN
RIGHTS - The many rights of a person in, to, and over the
banks, bed, shallows, shore, and water of a stream or body of water
upon which his land borders.
RISK
RATE - When referring to title insurance, the risk rate is
a rate that does not include the cost of researching the title or
the cost of conducting the closing.
SEARCH -
In title industry terms, 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.
SETTLEMENT - (See Closing.)
SHORT SALE - A sale whereby the bank agrees
to accept less than what is currently owed on the loan. Usually the loan has to be in arrears
before the bank will even discuss the option.
SIMULTANEOUS
ISSUE RATE - When referring to title insurance, the
simultaneous issue rate is the reduced rate for a Loan Policy or
Owner’s Policy of title insurance issued on the 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 an Owner's Policy when a
property is purchased.
SPECIAL WARRANTY
DEED - A deed which warrants the title only with respect to
acts of the seller and the interests of anyone claiming by, through,
or under him.
SUBDIVISION - An area of land laid
out and divided into lots, blocks, and building sites, and in which
public facilities are laid out, such as streets, alleys, parks, and
easements for public utilities.
SURVEY -
(1) To determine the location, boundaries, area, or the elevations
of land and structures upon the earth's surface by means of courses
in relation to the North Star, and the measuring of angles and
distances by using the techniques of geometry and trigonometry. (2)
The map or plat drawn by a surveyor which represents the property
surveyed and shows the results of a survey.
TAX LIEN
- The lien which is imposed upon real estate by operation of law
which secures the payment of real estate taxes.
TENANCY BY
ENTIRETIES - An estate or interest in real estate
predicated upon the legal fiction that a husband and wife are one
person. A conveyance or devise to them (unless contrary intent is
expressed) vests title in them as one person. Upon the death of
either husband or wife, full title passes to the survivor.
TENANT -
(1) Usually one who holds possession of real estate under a lease.
(2) In a broader sense, one who holds or possesses lands and
tenements by any kind of title.
TENANTS IN
COMMON - Two or more persons in whom title to a single
piece of real estate is vested in such a manner that they have a
common or equal right to possession and enjoyment of the property,
but each holds a separate individual interest or estate in the
property. Each owner may sell or encumber his respective interest or
dispose of it by will, and if he dies without leaving a will, his
heirs inherit his undivided interest.
THIRD
PARTY - A term usually applied to persons who are not
principal parties to a contract or other instrument, but who have
some right, interest or duty which such contract or instrument
affects. For example, where a sale contract between buyer and seller
of real estate provides that the money and documents involved in the
transaction will be deposited with a title company pending the
closing of the deal, the title company becomes a third party to the
transaction.
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: (a) covenants against encumbrances; (b)
covenant for further assurance (in other words, to do whatever is
necessary to rectify title deficiencies); (c) covenant of good right
and authority to convey; (d) covenant of quiet enjoyment; (e)
covenant of seisin; (f) covenant of warranty.
TITLE
DEFECT - (1) Any possible or patent claim or right
outstanding in a chain of title which 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
EXAMINATION - (See Examination.)
TITLE
INSURANCE - Indemnity against loss resulting from defects
in or liens upon a title.
TITLE
PLANT - (1) In many areas, synonymous with Abstract Plant.
(2) A geographically filed assemblage of title information which is
to help in expediting title examinations, such as copies of previous
attorneys' opinions, abstracts, tax searches, and copies or
take-offs of the public records.
TITLE
SEARCH - A search and perusal of the public records for
recorded instruments which affect the title to a particular piece of
land. (See also Abstract and Examination.)
TITLE
SEARCHER - One who searches titles.
UNDERWRITER - An insurance company
which issues insurance policies either to the public or to another
insurer.
WAIVER -
The voluntary and intentional relinquishment of a known right,
claim, or privilege.
WARRANTY
DEED - A deed containing one or more title covenants. (See
Title Covenants.)