A

Abatement:

A reduction or decrease. Usually applies to a decrease of assessed valuation of ad valorem taxes after the assessment, and levy.

Abstract:

A history of all transactions shown in the public records affecting a particular tract of land.

Abstract of Judgment:

A summary of money judgment obtained in court. (When this summary or abstract is recorded in the county’s recorder’s office, in some states the judgment becomes a lien on the debtor’s property, both presently owned or after-acquired.)

Abstract of Title:

A summary prepared by a licensed abstractor of all documents recorded in the public records of the political subdivision where the land is located. An abstract in some states or areas is reviewed by an attorney or other experienced title examiner to determine the status of a title. Virtually every abstractor today provides actual copies of the records rather than an abstract of each document.

Acceleration Clause:

Clause in deed of trust or mortgage, which accelerates, or hastens, the time when the indebtedness becomes due. For example, some deeds of trust contain a provision (an acceleration clause) stating that the note shall become due immediately upon the sale of the land or upon failure to pay interest or an installment of principal and interest.

Accommodation Recording:

Recording of instruments with the county recorder by a title company merely as a convenience to a customer and without assumption of responsibility for correctness or validity.

Acknowledgement:

A formal declaration before a duly authorized officer (such as a notary public) by a person who has executed an instrument that such execution is his own act and deed. An acknowledgement is necessary to entitle an instrument (with certain specific exceptions) to be recorded, to impart constructive notice of its contents and to entitle the instrument used as evidence without further proof. The certificate of acknowledgement is attached to the instrument or incorporated therein.

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.

Administrator:

A person appointed by the probate court to carry out the administration of a decedent’s estate when the decedent has left no will. If a woman is appointed, she is called an administratrix.

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.

Agency:

A relationship created when one person (the principal) delegates to another (the agent) the right to act on his or her behalf in business transactions.

Agent:

One who has authorization, either expressed or implied, to act for or represent another party, usually in business matters, such as issuing title insurance policies on behalf of a title insurer for a portion of the premium.

Agreement:

A legally binding contract made between two or more persons.

Agreement of Sale:

A written contract entered into between the seller (vendor) and buyer (vendee) for sale of real property (land) on an installment or deferred payment plan. It is also known as agreement to convey, a long form Security Agreement or a real estate installment contract.

All-Inclusive Rate:

Rate which includes charges for title insurance, searching or abstract fees and examination fees.

All-Inclusive Trust Deed (Wrap-Around Mortgage):

A financing technique which involves the creation of a new trust deed which includes the balance due on the existing note plus any new funds advanced.

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.

Amendment:

Changes to alter, adds to, or correct part of an agreement without changing the principal idea or essence.

Amortization:

Payment to reduce the principal of a debt in regular, periodic installments.

Amortized Loan:

A loan that is paid off, both interest and principal, by regular payments that are equal or nearly equal.

Annual Percentage Rate (A.P.R.):

The yearly interest percentage of a loan, as expressed by the actual rate of interest paid. For example: 6% add-on interest would be much more than 6% simple interest, even though both would say 6%. The A.P.R. is disclosed as a requirement of federal truth in lending statues.

Appraisal:

An estimate of value of property resulting from analysis of facts about the property; an opinion of value.

Approved Attorney:

An attorney whose opinion is acceptable to a title company as the basis for issuance of a title insurance policy by the insurer. The insurer, rather than the attorney, executes the policy.

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.

Assessed Valuation:

The value that a taxing authority places upon real or personal property for the purpose of taxation.

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.

Assumable:

A mortgage loan which can be transferred to another person without a change in the terms of the loan.

Assumption:

The act of conveying real property; taking title to a property with the Buyer assuming liability for paying an existing note secured by a deed of trust against the property.

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.

 

B

Back Title Letter or Certificate:

See Starter

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.

Balloon Payment:

The unpaid principal amount of a loan due on a specific date in the future. Usually the amount that must be paid in a lump sum at the end of the term.

Bankruptcy:

A proceeding in U.S. District Court wherein assets of an insolvent debtor are protected and distributed in an equitable manner.

Beneficiary:

The person who is entitled to receive funds or property under the terms and provisions of a will, trust, insurance policy or security instrument. In connection with a mortgage loan the beneficiary is the lender.

Beneficiary’s Statement:

The statement of a lender which gives the remaining principal balance due on a note and other information concerning the loan. It is usually obtained in escrow when the owner wishes to sell or refinance.

Bill of Sale:

An instrument by which title to personal property is transferred or conveyed.

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.

Blanket Mortgage or Trust Deed:

A mortgage or trust deed that covers more than one lot or parcel of real property, and often an entire subdivision. As individual lots are sold, a partial reconveyance from the blanket mortgage is ordinarily obtained.

Bona Fide Purchaser (BFP):

One who buys property in good faith, for fair value, and without notice of any adverse claim or right of third parties.

Branch:

A subordinate or division office of ABC Company, as opposed to an affiliate, agent, subsidiary or underwritten firm associated with the Company.

Breach of Contract:

Failure to perform a contract, in whole or part, without legal excuse.

Broker:

A person licensed to act as an agent for another in negotiating the sale, purchase, of real property in return for a fee or commission.

Building Contract:

An agreement between an owner or lessee and a building contractor, setting forth terms relative to the construction of a proposed structure.

Buydown:

A financing technique used to reduce the monthly payment for the home buying borrower during the initial years of ownership. Under some buydown plans, a residential developer, builder, or the seller will make subsidy payments (in form the of points) to the lender that “buydown,” or lower, the effective interest rate paid by the home buyer, thus reducing monthly payments for a set period of time.

 

C

California Land Title Association (CLTA):

A statewide association of title insurers and underwritten title companies. The association adopts standard title policy forms.

Cap:

The maximum which an adjustable rate mortgage may increase, regardless of index changes.

Capitalization Rate:

The percentage (acceptable to an average buyer) used to determine the value of income property through capitalization.

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:

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:

A chronological list of recorded instruments tracing title to land, from the original owner to the present owner.

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.

Close of Escrow:

The date the documents are recorded and title passes from Seller to Buyer. On this date, the Buyer becomes the legal owner, and title insurance becomes effective.

Closing:

Also called "settlement." A meeting of all parties involved in a property transaction during which the transaction is consummated.

Closing Costs:

Expenses, beyond the selling price, such as loan fees, title fees, etc. Paid when documents are executed and/or recorded and the sale is complete.

Closing Service Letter:

Also known as Closing Protection Letter. A letter of authorization from a Title Company, for an individual or agency conducting a settlement on behalf of the Title Company and lender which includes the execution of all documents and disbursements of funds.

Closing Statements:

A summary, in the form of a balance sheet, showing the amounts of debits and credits to which each party to a real estate transaction is entitled upon closing.

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.

Collateral:

By or at the side, additional or auxiliary. Mistakenly used to mean collateral security.

Collateral Security:

Most commonly used to mean some security in addition to the personal obligation of the borrower.

Commission:

Compensation due a real estate broker for acting on behalf of the principal.

Commitment:

A binding contract with a title company to issue a specific title policy, showing only those exceptions contained in the commitment and any intervening matters after the date of the commitment and prior to the effective date of the policy. The commitment contains all information included in the preliminary title report, plus a list of the title’s company’s requirements to insure the transaction. It also includes the standard exceptions from coverage that will appear in the policy.

Community Driveway:

A driveway which is jointly owned, used and maintained by two or more persons. Usually, a portion of each owner’s property is burdened by the driveway.

Community Property:

Property acquired by husband, wife or both during marriage which gives each spouse an interest in the property whether each appears in title or not.

Comparable Sales:

Sales that have similar characteristics as the subject property, used for analysis in the appraisal. Commonly called “comps”.

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.

Conservator:

A person appointed by the court to care for the person and/or property of an incompetent adult or an adult unable to care for their person or property because of health.

Consideration:

A required element in all contracts by which something of value, including a promise, is exchanged for the act or promise of another.

Constructive Notice:

Notice imparted by the public records of the county when documents entitled to recording are recorded.

Contingency:

Action conditioned upon a certain event. Acceptance of the terms of a contract based on something else happening or certain conditions being met.

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.

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. (2) Agreements or promises contained in deeds and other instruments for performance or nonperformance of certain acts, or use or nonuse of property in a certain manner.

Convenants, Conditions, and Restrictions:

Commonly called CC & R’s the term usually refers to a written recorded declaration which sets forth certain convenants, conditions, restrictions, rules or regulations established by a subdivider or other landowner to create uniformity of buildings and use within tracts of land or groups of lots. The restrictions also can be established by deed. CC & R’s are sometimes referred to as private zoning.

Conveyance:

The transfer of title to property from one person to another.

Corporation:

An entity authorized by law and established by a group of people, the stockholders, which is endowed with certain rights, privileges and duties similar to an individual.

 

D

Debt:

Money owing from one person to another.

Debtor:

One who owes a debt.

Decree of Distribution:

A probate court decree which determines how the estate of a decedent shall be distributed.

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 written document by which an estate or interest in real property is transferred from one person to another. The person who transfers the interest is called the “grantor”. The one who acquires the interest is called the “grantee.” Examples of deed are grant deeds, administrator’s deeds, executor’s deeds, quitclaim deeds, etc. The deed to use depends on the language of the deed, the legal capacity of the grantor and other circumstances.

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.

Deed of Trust or Trust Deed:

A written document by which the title to land is conveyed as security for the repayment of a loan or other obligation. It is a form of mortgage. The landowner or debtor is called the “trustor.” The party to whom the legal title is conveyed (and who may be called on to conduct a sale thereof if the loan is not paid) is the “trustee.” The lender is the “beneficiary.” When the loan is paid off, the trustee is asked by the beneficiary to issue a “recon” or reconveyance. This reconveyance corresponds to the release that the holder of a mortgage executes when the mortgage is paid off.

Defect:

A blemish, imperfection or deficiency. A defective title is one that is irregular and faulty.

Defective title:

(1) Title to a negotiable instrument obtained by fraud.

(2) Title to real property which lacks some of the elements necessary to transfer good title.

Demand:

The lender’s statement of the amount due to pay off loan.

Deposit:

(1) Money given by the buyer with an offer to purchase. Shows good faith. Also called earnest money.

(2) A natural accumulation of resources (oil, gold, etc.) which may be commercially recovered and marketed.

Depreciation:

Loss in value occasioned by ordinary wear and tear, destructive action of the elements, or functional or economic obsolescence.

Description:

The exact location of a piece of property stated in terms of lot, block, tract, part lot, metes and bounds, recorded instruments, or U.S. Government survey (sectionalized). This is alos referred to as legal description of property.

Devise:

A gift of real estate made by a will.

Documentary Transfer Tax:

The tax, based on sales price, less loans which are being assumed, which is charged by the city and /or county on the transfer of real property.

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.

Due-On-Sale-Clause:

A clause in a mortgage loan which gives the lender the right to demand payment in full when the property changes ownership. Not applicable to FHA or VA loans.

 

E

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.

Endorsement:

A rider attached to an insurance policy to expand or limit coverage.

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 and disbursement.

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.

 

F

Fair Market Value:

An appraisal term for the price which a property would bring in a competitive market given a willing seller and willing buyer, each of whom has a reasonable knowledge of all pertinent facts, with neither being under any compulsion to buy or sell.

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.

Federal Home Loan Mortgage Corporation (FHLMC, FreddieMac):

A quasi-governmental agency that puchases conventional mortgages in the secondary mortgage market from depository institutions and Department of Housing and Urban Development (HUD) approved mortgage bankers.

FHA (Federal Housing Administration):

A federal agency that insures first mortgages, enabling lenders to lend a very high percentage of the sale price.

Federal National Mortgage Housing Association (Fnma, Fannie Mae):

A tax paying corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by FHA or guaranteed by VA as well as conventional home mortgages.

File and Use:

In most states, title insurers file rate schedules, title insurance policies and endorsement forms with the State Insurance Department or other state agency and then may use such items or rates starting within a specified period of time after filing. Rates so filed usually are mandatory.

Finance Charge:

A total of all costs imposed directly or indirectly by the creditor and payable either directly or indirectly by the customer, as defined by the federal Truth-in-Lending laws.

First Mortgage:

A mortgage on property that is superior in right to any other mortgage.

Fixed Rate Loan:

A loan on which the same rate of interest is charged for the life of the loan.

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.

Forfeiture of Title:

A common penalty for the violation of conditions or restrictions imposed by the seller upon the buyer in a deed or other proper document. For example, a deed may be granted upon the condition that if liquor is sold on the land, the title to the land will be forfeited (that is, lost) by the buyer (or some later owner) and will revert to the seller.

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.

Full Disclosure:

In real estate, revealing all the known facts which may affect the decision of a buyer or tenant. A broker must disclose known defects in the property for sale or lease.

 

G

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.

“Good Faith or Mortgage Savings” Clause:

A clause in CC & R’s which provides that “a violation thereof shall not defeat or render invalid the lien of any mortgage or deed of trust made in good faith and for value.”

Good Faith Purchaser or Mortgagee:

A person who buys or lends in good faith, that is, without notice of any existing problem, where value is paid or lent.

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:

One of the many types of deeds used to transfer real property. Contains warranties against prior conveyances or encumbrances. When title insurance is purchased, warranties in a deed are of little practical significance.

Grantee:

One to whom a grant is made. The purchaser of real property.

Grantor:

One who makes a grant. The seller of real property.

Guardian:

A person appointed by a court to manage the person and/or property of the one who is legally incompetent to handle his/her own affairs.

 

H

Hazard Insurance:

Real estate insurance protecting against fire, some natural causes, vandalism, etc., depending upon the policy. Buyer often adds liability insurance and extended coverage for personal property.

Hereditaments:

Any and all kinds of estates, interest and rights in real estate that can be inherited.

Hidden Defect:

An encumbrance on a title that is not apparent in the public records; for example, unknown heirs, secret marriages and forged instruments.

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.

Homestead:

A statutory protection from execution or the establishment of title by occupation of real property in accordance with the laws of various states or the Federal Government.

HUD (Department of Housing and Urban Development):

The federal department responsible for the major housing programs in the United States.

I

Impound Account:

An account held by a lender for the payment of taxes, insurance or other periodic debts against real property.

Impounds:

A trust type of account established by lenders for the accumulation of borrower’s funds to meet periodic payments of taxes, mortgage insurance premiums, and/or future insurance policy premiums, required to protect their security.

Indemnity:

Insurance against possible loss or damage. A title insurance policy is a contract of indemnity.

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.

Intestate:

Without leaving a will, or leaving an invalid will so that the property of the estate passes by the laws of succession rather than by the direction of the decreased.

 

J

Joint Tenancy:

A means of ownership in which two or more persons own equal shares in real property. Upon the death of one tenant, his/her share passes to the remaining tenant(s) until title is vested in the last survivor.

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.

Judgment Lien:

A lien against the property of a judgment debtor. An involuntary lien.

Junior Mortgage:

A mortgage lower in lien priority than another.

 

L

Land Contract:

An installment contract for the sale of land whereby the seller (vendor) holds legal title and the buyer (vendee) has equitable title until the sales price is aid in full.

Lease:

An agreement by which an owner of real property (lessor) gives the right of possession to another (lessee), for a specified period of time (term) and for specified consideration (rent).

Leasehold:

The right to possession and use of land for a fixed period of time. The lease is the agreement that creates the right.

Legal Description:

A description of land recognized by law, based on government surveys, spelling out the exact boundaries of the entire piece of land. It should so thoroughly identify a parcel of land that it cannot be confused with any other.

Lender:

Any person or entity advancing funds which are to be repaid. A general term encompassing all mortgages, and beneficiaries under deeds of trust.

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 recorded document which claims an interest in real property as security for a debt owned. Such liability may be created by contract, such as a deed of trust, or by a court judgment.

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:

Legal notice that a lawsuit is pending. Also called a notice of action.

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.

Loan-To-Value Ratio:

The ratio of the mortgage loan’s principal to the property’s appraised value or its sales price, whichever is lower.

Lot:

Generally, any portion or parcel of real property. Usually refers to a portion of a subdivision.

 

M

Marketable Title:

Title which is free from defects which would allow a purchaser to be released from his obligation to purchase.

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:

See Loan Policy.

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.

Muniments of Title:

Written evidence (documents) that an owner possesses to prove his or her title to property.

 

N

Notarization:

The certification by a Notary Public that a person signing a document has been properly identified. Notarization does not certify the content of a document, only validity of signature.

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.

 

O

Obligee:

One to whom an obligation (promise) is owned.

Obligor:

One who legally binds (obligates) oneself, such as the maker of a promissory note.

Original Cost:

The purchase price of property, paid by the present owner. The present owner may or may not be the first owner.

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

 

P

Parcel:

Any area of land contained within a single description.

Partnership:

An association of two or more persons who have contracted to join in business and share the profits.

Party Wall:

A wall generally erected on a property boundary or between two lots for the common benefit and use of the property owners on either side.

Patent:

A conveyance of title to land by the Federal or State Government.

Perfecting Title:

Process involving the elimination of any adverse claims against a title.

Personal Property (movable):

Any property that is not designated by law as real property (i.e., money, goods, evidences of debt, rights of action, furniture, automobiles).

"P.I.Q.":

A title term referring to Property In Question.

Piti:

A payment that combines Principal, Interest, Taxes, and Insurance.

Piti Ratio:

The principal, interest, tax and insurance payment to income ratio. Used in mortgage lending decisions.

Plat:

A plan, map or chart of a tract or town site dividing a parcel of land into lots.

Power of Attorney:

A document by which one person (called the "principal") authorizes another person (called the "attorney-in-fact") to act for him/her in a specific manner in designated transactions.

"Pre," "Prelim"or Preliminary Report:

A written report issued by a title company, preliminary to issuing title insurance, which shows the recorded condition of title of the property in question. See Commitment.

Priority:

The order of preference, rank or position of the various liens and encumbrances affecting the title to a particular parcel of land. Usually, the date and time of recording determine the relative priority between documents.

Private Mortgage Insurance (PMI):

Insurance written by a private mortgage insurance company protecting the mortgage lender against loss occasioned by a mortgage default and foreclosure.

Proration:

The method used in dividing charges into that portion which applies only to a party's ownership up to a particular date.

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.

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.

Priority Inspection:

A title term referring to the type of inspection made in connection with insuring a new construction loan. In making the inspection of the property, the Title Company must be assured that the work of improvement had not yet begun when the lender's deed of trust was recorded.

Public Domain:

Land owned by the government and belonging to the community at large.

Public Records:

The transcriptions in a recorder's office of instruments which have been recorded, including the indexes pertaining to them.

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.

 

Q

Qualification:

The process of reviewing a prospective borrower's credit and payment capacity prior to approving a loan.

Quiet Title:

To free the title to a piece of land from the claims of other persons by means of a court action called a "quiet title" action. The court decree obtained is a "quiet title" decree.

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.

 

R

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 Settlement Procedures Act (RESPA):

A federal statute requiring disclosure of certain costs in the sale of residential, improved property which is to be financed by a federally insured lender.

Reconveyance:

The conveyance to the landowner of the title, held by a trustee under a deed of trust, when the performance of the debt is satisfied.

Recordation:

Involves filing for record in the office of the county recorder for the purpose of giving constructive notice of title, claim or interest in real property.

Record Owner:

The owner of property as shown by an examination of the public record.

Reconveyance:

An instrument used to transfer title from a trustee to the equitable owner of real estate, when title is held as collateral security for a debt. Most commonly used upon payment in full of a trust deed. Also called a deed of reconveyance or release.

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.

Reinsurance:

A contract which one insurer makes with another to protect the first insurer, wholly or partially, against loss or liability by reason of a risk under a separate and distinct contract as insurer of a third party. Reinsurance differs from coinsurance in that, in the case of reinsurance, only one insurer has a direct contractual relationship with the insured, and that insurer (commonly referred to as the "lead insurer") purchases reinsurance in order to lessen or spread the risk. The "lead insurer" will assume a risk up to a limit (the amount of which is referred to as the "retention") and any loss which exceeds this limit would be borne by the reinsurers. In the case of coinsurance, each coinsurer has a direct contractual relationship with the insured, and the risk is shared in agreed-upon proportions from the first dollar of loss.

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.

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 rights of owners of lands bordering watercourses which relate to the water and its use.

 

S

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 Lease Back:

A situation in which the grantor in a deed to a parcel of property sells it and retains possession by simultaneously leasing it from the grantee.

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.

Separate Property:

Real property owned by one spouse exclusive of any interest of the other spouse.

Squatter:

One who settles upon unoccupied land without legal claim or authority. (See Adverse Possession.)

Starter:

A copy of the last policy or report issued by a title insurer which described the title to land upon which a new search is to be made. In some states, this is called a back title letter or back title certificate.

Street Improvements Bonds:

Interest-bearing bonds issued, usually by a city or county, to secure the payment of assessments levied against land to pay for street improvements. The property owner may pay off the particular assessment against the property, or may allow the assessment to "go to bond" and pay installments of principal and interest over a period of years, usually at the city or county treasurer's office. The holder of a bond received payments from these offices.

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.

Statement of Information (SI):

A confidential information statement completed by the buyer, seller and borrower in every transaction where a policy or policies of title insurance are requested. Allows the title company to competently search documents affecting the property to be insured, documents which may not refer to said property. Allows title companies to differentiate between parties with similar names when searching matters such as liens and court decrees.

“Subject to Clause”:

A clause in a contract of sale setting forth any contingencies or special conditions of purchase and sale, such as an offer made and accepted subject to financing, securing certain zoning or similar requirements.

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.

Subordination Agreement:

An agreement by which one encumbrance (for example, a mortgage) is made subject to another encumbrance (for example, a mortgage) is made subject to another encumbrance (perhaps a lease). To "subordinate" is to "make subject to," or to make of lower priority.

Surface Rights:

Rights to enter upon and use the surface of a parcel of land, usually in connection with an oil and gas lease or other mineral lease. They may be "implied" by the language of the lease.

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. (no explicit reservation or exception of the surface rights) or "explicitly" set forth.

Survey:

The measurement by a surveyor of real property which delineates the boundaries of a parcel of land. An ALTA survey additionally delineates the exact location of all improvements, encroachments, easements and other matters affecting the title to the property in question. A title insurance company may require a survey whenever the company is requested to issue an ALTA Extended Coverage Policy.

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.

 

T

Tax Deed:

A deed executed by the tax collector to the state, county or city when no redemption is made from a tax sale.

Tax Sale:

Property on which current county taxes have not been paid is "sold to the state." No actual sale takes place - the title is transferred to the state and the owner may redeem it by paying taxes, penalties and costs. If it has not been redeemed within five years, the property (referred to as "tax sold property") is actually deeded to the state. (Similar "sales" to cities take place for unpaid city taxes.)

Testate:

Leaving a legally valid will at death. See Intestate.

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.

Title Plant:

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.

Title Report:

See Preliminary Report.

Title Search:

A review of all recorded documents affecting a specific parcel of land to determine the present condition of title. An experienced title officer or attorney reviews and analyzes all material relating to the search, then determines the sufficiency and status of title for insurance of a title insurance policy.

Trustee:

A person who holds title in trust for the benefit of another. In a deed of trust, the trustee is the person named to hold title in trust for the benefit of the lender until the loan is paid off.

Trustor:

The borrower under a deed of trust. One who deeds their property to a trustee as security for repayment of a loan.

 

U

Underwriter:

An insurance company that issues insurance policies to the public or to another insurer.

Underwritten Company/Agency:

A title firm (agency) which conducts title searches but is not qualified to insure, and therefore issues policies of a qualified title insurer (underwriter) in return for a portion of the premium.

Uniform Settlement Statement:

The standard HUD Form 1 required to be given to the borrower, lender and seller at, or prior to, settlement.

Unmarkable Title:

Title which contains defects that would allow a purchaser to be released from his obligation to purchase.

 

V

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.

Vendee:

See Agreement of Sale.

Vendor:

See Agreement of Sale.

Vendor’s Lien:

An implied lien given by law to a vendor for the remaining unpaid and unsecured part of a purchase price.

Vesting:

Denotes the manner in which title is held. Examples of common vestings are: Community Property, Joint Tenancy and Tenancy in Common.

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.

 

W

Waiver:

The voluntary and intentional relinquishment of a known right, claim or privilege.

Warrant:

To legally assure that the title conveyed is good and possession will be undisturbed.

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. (See Title Covenants.)

Will:

A testamentary disposition of property, usually in a form prescribed by law, that takes effect upon death.

 

Z

Zoning:

Laws passed by local governments regulating the size, type, structure, nature and use of land or buildings.