Use this searchable real estate glossary to quickly answer your questions about land, homes, commercial property, or lending terms.
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Abandonment: The voluntary relinquishment of rights of ownership or another interest(such as easement) by faliure to use the property, coupled with an intent to abandon (give up the interest).
Abatement: A reduction of decrease. Usually applies to a decrease of assessed valuation of ad valorem taxes after the assessment, and levy
Abstract: A summary.
Abstract of Judgement: A summary of money judgement obtained in court. (When this summary or abstract is recorded in the county recorder's office, in some states the judgement becomes a lien on the debtor's property, both presently owned or after-acquired.)
Abstract of Title: Summarized history of the legal title to property, shows changes of title, records of liens and encumbrances.
Acceleration Clause: Clause in a 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 faliure to pay interest or an installment of principal and interest
Accomodation 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-Policy.
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 acknowledgment 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 to be used as evidence without further proof. The certificate of acknowledgment is attached to the instrument or incorporated therein.
Adjustable Mortgage Loans (AML'S): Mortgage loans under which the interest rate is periodically adjusted to more closely coincide with current rates. The amounts and times of adjustment are agreed to at the inception of the loan. Also called: Adjustable Rate Loans, Adjustable Rate Mortgages (ARM'S), Flexible Rate Loans, Variable Rate Loans. (See also: Indexing, Rate Index).
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: A process of acquiring title to real property by possession for a certain (statutory) period of time, in addition to fulfilling other conditions.
Affidavit: A written statement or declaration, sworn to before an officer who has authority to administer an oath.
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 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 an 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.
ALTA: (American Land Title Association) Organization composed of title insurance firms which sets standards for the industry, including title insurance policy forms used on a national basis.
ALT-A: A type of mortgage which utilizes alternative credit for risk assessment.
ALTA Owners Policy: (American Land Title Association) An owner .s extended coverage policy that provides buyers and owners the same protection the ALTA policy gives to lenders.
ALTA Title Policy: A type of title insurance policy issued by title insurance companies which expands the risks normally insured against under the standard type policy to include unrecorded mechanics’ liens; unrecorded physical easements; facts a physical survey would show; water and mineral rights; and rights of parties in possession, such as tenants and buyers under unrecorded instruments.
Amendment: A change either to alter, add to, or correct part of an agreement without changing the principal idea or essence.
Amortization: The liquidation of a financial obligation on an installment basis; also, recovery over a period of cost or value.
Amortized Loan: A loan to be repaid, interest and principal, by a series of regular payments that are equal or nearly equal, without any special balloon payment prior to maturity. Also called a Level Payments Loan.
Annual Percentage Rate (A.P.R.): The relative cost of credit as determined in accordance with Regulation Z of the Board of Governors of the Federal Reserve System for implementing the Federal Truth in Lending Act.
Annuity: A sum of money received at fixed intervals, such as a series of assured equal or nearly equal payments to be made over a period of time, or it may be a lump sum payment to be made in the future. The installment payments due to the landlord under a lease is an annuity. So are the installment payments due to a lender.
Appraisal: An estimate of value of property resulting from analysis of facts about the property; an opinion of value.
Appriaser: One qualified by education, training and experience who is hired to estimate the value of real and personal property based on experience, judgment, facts, and use of formal appraisal processes.
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.
Assessed Valuation: A valuation placed upon a piece of property by a public authority as a basis for levying taxes on the property.
Assessment: The valuation of property for the purpose of levying a tax or the amount of the tax levied. Also, payments made to a common interest subdivision homeowners- association for maintenance and reserves.
Assessor: The official who has the responsibility of determining assessed values.
Assignment of Rents: A provision in a deed of trust (or mortgage) under which the beneficiary may, upon default by the trustor, take possession of the property, collect income from the property and apply it to the loan balance and the costs incurred by the beneficiary.
Assignment: A transfer to another of any property in possession or in action, or of any estate or right therein. A transfer by a person of that person’s rights under a contract.
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.
Back Title Letter or Certificate: See Starter.
Balloon Payment: An installment payment on a promissory note -usually the final one for discharging the debt - which is significantly larger than the other installment payments provided under the terms of the promissory note.
Bankruptcy: A special proceeding under federal, or in some instances state, laws by which the property of a debtor is protected by the court and may be divided among the debtor's creditors and the debtor.
Basis: (1) Cost Basis. The dollar amount assigned to property at the time of acquisition under provisions of the Internal Revenue Code for the purpose of determining gain, loss and depreciation in calculating the income tax to be paid upon the sale or exchange of the property. (2) Adjusted Cost Basis. The cost basis after the application of certain additions for improvements, etc., and deductions for depreciation, etc.
Beneficiary: See Deed of Trust.
Blanket 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: 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 First American Title Insurance 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.
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 payment to the lender from the seller, buyer, third party, or some combination of these, causing the lender to reduce the interest rate during the early years of a loan. The buydown is usually for the first one to five years of the loan. (See also: Certificate Backed Mortgage).
Buyer's Market: The condition which exists when a buyer is in a more commanding position as to price and terms because real property offered for sale is in plentiful supply in relation to demand.
Cal-Vet Program: A program administered by the State Department of Veterans Affairs for the direct financing of farm and home purchases by eligible California veterans of the armed forces.
Capital Gain: At resale of a capital item, the amount by which the net sale proceeds exceed the adjusted cost basis (book value). Used for income tax computations. Gains are called short or long term based upon length of holding period after acquisition. Usually taxed at lower rates than ordinary income.
Capitalization Rate (Cap Rate): The rate of interest which is considered a reasonable return on the investment, and used in the process of determining value based upon net income. It may also be described as the yield rate that is necessary to attract the money of the average investor to a particular kind of investment. In the case of land improvements which depreciate, to this yield rate is added a factor to take into consideration the annual amortization factor necessary to recapture the initial investment in improvements. This amortization factor can be determined in various ways. (1) straight-line depreciation method, (2) Inwood Tables and (3) Hoskold Tables. (To explore this subject in greater depth, the student should refer to current real estate appraisal texts.)
Capitalization: In appraising, determining value of property by considering net income and percentage of reasonable return on the investment. The value of an income property is determined by dividing annual net income by the Capitalization Rate.
CC&Rs: Covenants, conditions and restrictions. The basic rules establishing the rights and obligations of owners (and their successors in interest) of real property within a subdivision or other tract of land in relation to other owners within the same subdivision or tract and in relation to an association of owners organized or the purpose of operating and maintaining property commonly owned by the individual owners.
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: A history of conveyances and encumbrances affecting the title from the time the original patent was granted, or as far back as records are available, used to determine how title came to be vested in current owner.
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: The final procedure in the real estate sales process, where the sale and pertinent loan are completed by the execution of documents for recording. In some areas, this procedure is known as the closing of escrow.
Closing Costs: Charges paid at settlement to obtain a mortgage loan and transfer real estate title, usually in addition to the price of the home. Be sure your sales contract clearly states who-buyer or seller-will pay closing costs and what they will be.
Closing Day: The date on which the title to the property passes from the seller to the buyer and/or the date on which the borrower signs the mortgage loan agreement.
Closing Statement: An accounting of funds made to the buyer and seller separately. Required by law to be made at the completion of every real estate transaction.
Cloud on Title: An irregularity, possible claim, or encumbrance which, if valid, would adversely affect or impair the title.
Coinsurance: Ordinary coinsurance is defined as a transaction under which each of two or more insurers assumes a designated portion of the liability for the total risk and is liable for only such portion of any loss beginning at the first dollar of loss. (See Reinsurance.)
Collateral: By or at the side, additional or auxiliary. Mistakenly used to mean collateral security.
Collateral: Most commonly used to mean some security in addition to the personal obligation of the borrower. 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 company's requirements to insure the transaction. It also includes the standard exceptions from coverage that will appear in the policy.
Common Interest Subdivision: Subdivided lands which include a separate interest in real property combined with an interest in common with other owners. The interest in common may be through membership in an association. Examples are condominiums and stock cooperatives.
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 and/or wife during a marriage when not acquired as the separate property of either spouse. Each spouse has equal rights of management, alienation and testamentary disposition of community property.
Comparable Sales (Comps): Sales that have similar characteristics as the subject property, used for analysis in the appraisal. Commonly called "comps."
Comparison Approach: A real estate comparison method which compares a given property with similar or comparable surrounding properties; also called market comparison.
Condemnation: The taking of private property by the government for public use - as for a street or a storm drain - upon making just compensation to the owner. This right or power of government to take property for a necessary public use is called "eminent domain."
Condominium: An estate in real property wherein there is an undivided interest in common in a portion of real property coupled with a separate interest in space called a unit, the boundaries of which are described on a recorded final map, parcel map or condominium plan. The areas within the boundaries may be filled with air, earth, or water or any combination and need not be attached to land except by easements for access and support.
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.
Constructive Notice: Notice imparted by the public records of the county when documents entitled to recording are recorded.
Conventional Mortgagea: A mortgage securing a loan made by investors without governmental underwriting, i.e., which is not FHA insured or VA guaranteed. The type customarily made by a bank or savings and loan association.
Conveyance: An instrument in writing, such as a deed or trust deed, used to transfer (convey) 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.
Covenant: (1) A formal agreement or contract between two parties in which one party gives the other certain promises and assurances, such as the covenant 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.
Covenants, Conditions and Restrictions: Commonly called "CC & R's" the term usually refers to a written recorded declaration which sets forth certain covenants, 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.
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.
Deed: Written instrument which when properly executed and delivered conveys title to real property from one person (grantor) to another (grantee).
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.
Deed Restrictions: Limitations in the deed to a property that dictate certain uses that may or not be made of the property.
Default: Failure to fulfill a duty or promise or to discharge an obligation; omission or failure to perform any act.
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.
Deferred Maintenance: Existing but unfulfilled requirements for repairs and rehabilitation. Postponed or delayed maintenance causing decline in a building’s physical condition.
Demand Note: A note having no date for repayment, but due on demand of the lender.
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 of value of property brought about by age, physical deterioration or functional or economic obsolescence. The term is also used in accounting to identify the amount of the decrease in value of an asset that is allowed in computing the value of the property for tax purposes.
Description: The exact location of a piece of real property stated in terms of lot, block, tract, part lot, metes and bounds, recorded instruments, or U.S. Government survey (sectionalized). This is also referred to as legal description of property.
Disclosures: 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, a lender must disclose terms of a loan, etc..
Discount Points: The amount of money the borrower or seller must pay the lender to get a mortgage at a stated interest rate. This amount is equal to the difference between the principal balance on the note and the lesser amount which a purchaser of the note would pay the original lender for it under market conditions. A point equals one percent of the loan.
Document Package (Docs): Typically the set of documents which are prepared for a loan applicant to sign to finalize a loan agreement.
Dual Agency: An agency relationship in which the agent acts concurrently for both of the principals in a transaction.
Due on Sale Clause: An acceleration clause granting the lender the right to demand full payment of the mortgage upon a sale of the property.
Earnest Money: A sum paid by a potential buyer to demonstrate that the buyer is serious about buying. If a contract is executed, the earnest money is credited toward the purchase price at closing. Make sure you know the terms of your contract.
Earnest Money Deposit: Down payment made by a purchaser of real estate as evidence of good faith; a deposit or partial payment.
Easements: Rights of way granted to persons or companies authorizing access to or over the owner's land. For example, utility companies may have easement rights to install pipes or wire on or over your land.
Effective Demand: A qualifying term meaning the ability to pay as well as desire to buy.
Eminent Domain: The right of a government to take privately owned property for public purposes under condemnation proceedings upon payment of its reasonable value. See Condemnation.
Encroachment: An unlawful intrusion onto another’s adjacent property by improvements to real property, e.g. a swimming pool built across a property line.
Encumbrance: A right or claim upon real property (land) held by one other than the property owner. Encumbrances are divided into two classes, as follows:
a) Liens (mortgages, deeds of trust, mechanics' liens, local taxes, assessments, judgments, attachments, etc.).
b) Encumbrances other than liens which are limitations on the ownership of the land (such as conditions, restrictions, reservations, easements, etc.).
Endorsement: Addition to or modification of a title insurance policy which expands or changes coverage of the policy, fulfilling specific requirements of the insured.
Equity: (1) A legal doctrine based on fairness, rather than strict interpretation of the letter of the law. (2) The market value of real property, less the amount of existing liens. (3) Any ownership investment (stocks, real estate, etc.) as opposed to investing as a lender (bonds, mortgages, etc.).
Escheat: The reversion of property to the state when an owner dies leaving no legal heirs, devisees or claimants.
Escrow: An independent third party, such as First American Title, who acts as the agent for buyer and seller, or for borrower and lender, carrying out instructions of both and disbursing documents and funds. Escrow closes and the transfer of property or document is completed upon fulfillment of certain conditions specified in the written instructions, whereupon the necessary deeds and other instruments are recorded.
Estate: (1) The interest or nature of the interest which one has in property, such as a life estate, the estate of a decreased, real estate, etc. (2) A large house with substantial grounds surrounding it, giving the connotation of belonging to a wealthy person.
Exclusive Agency Listing: A listing agreement employing a broker as the sole agent for the seller of real property under the terms of which the broker is entitled to a commission if the property is sold through any other broker, but not if a sale is negotiated by the owner without the services of an agent.
Exlusive Right to Sell Listing: A listing agreement employing a broker to act as agent for the seller of real property under the terms of which the broker is entitled to a commission if the property is sold during the duration of the listing through another broker or by the owner without the services of an agent.
Execution: An order directing a sheriff, constable, marshal or court-appointed commissioner to enforce a money judgment against the property of a debtor. This officer, if necessary, may sell the property to satisfy the judgment.
Executor: A person appointed in a will and affirmed by the probate court to cause a distribution of the decedent's estate in accordance with the will. (The one who makes the will is called a "testator.") If a woman is appointed, she is referred to as the "executrix."
Fannie Mae: An acronymic nickname for Federal National Mortgage Association (FNMA), or Fannie Mae. A quasi-public agency converted into a private corporation whose primary function is to buy and sell FHA and VA mortgages in the secondary market.
Federal Home Loan Mortgage Corporation:. Aka Freddie Mac. An independent stock company which creates a secondary market in conventional residential loans and in FHA and VA loans by purchasing mortgages.
Federal Housing Administration (FHA): An agency of the federal government that insures private mortgage loans for financing of new and existing homes and home repairs.
Fee Simple: An estate under which the owner is entitled to unrestricted powers to dispose of the property, and which can be left by will or inherited. Commonly, a synonym for ownership.
FHA (Federal Housing Administration): This federal agency established by Congress in 1934, insures mortgage loans made by FHA-approved lenders on homes that meet FHA standards in order to make mortgages more desirable investments for lenders.
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.
Fixed Rate Mortgage: A mortgage having a rate of interest which remains the same for the life of the mortgage.
Fixtures: Appurtenances attached to the land or improvements, which usually cannot be removed without agreement as they become real property; examples. plumbing fixtures, store fixtures built into the property, etc.Foreclosure: The sale of property used as security for a debt after default in payment.
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.
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.
Good Faith Estimate: An estimate from a lender lends in good faith, that is, without notice of any existing problem, where value is paid or lent.
"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: A transfer of real estate, between individuals, by deed. A transfer of real estate from a sovereign is accomplished by patent or royal decree.
Grantee: See Deed.
Grantor: See Deed.
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.
Guardian: A person appointed by a court to manage the person and/or property of one who is legally incompetent to handle his/her own affairs.
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.
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. The Department of Housing and Urban Development, which is responsible for the implementation and administration of U.S. government housing and urban development programs.
Impounds: A trust type account established by lenders for the accumulation of borrowers funds to meet periodic payment of taxes, FHA mortgage insurance premiums, and/or future insurance policy premiums, required to protect their security. Impounds are usually collected with the note payment. The combined principal, interest, taxes and insurance payment is commonly termed a PITI payment.
Indemnity: Insurance against possible loss or damage. A title insurance policy is a contract of indemnity.
Interest Only Loan: A straight, non-amortizing loan in which the lender receives only interest during the term of the loan and principal is repaid in a lump sum at maturity.
Interest: The cost paid by a borrower for use of money borrowed to purchase a home.
Joint Tenancy: Undivided ownership of a property interest by two or more persons each of whom has a right to an equal share in the interest and a right of survivorship, i.e., the right to share equally with other surviving joint tenants in the interest of a deceased joint tenant.
Judgment Lien: A lien against the property of a judgment debtor. An involuntary lien.
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 paid 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 a specified consideration (rent).
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 mortgagees, and beneficiaries under deeds of trust.
Lien: An encumbrance against property for money, either voluntary or involuntary. All liens are encumbrances but all encumbrances are not liens.
Mechanics Lien: A lien created by statute for the purpose of securing priority of payment for the price or value of work performed and materials furnished in construction or repair of improvements to land, and which attaches to the land as well as the improvements.
Mortgage: (1) To hypothecate as security, real property for the payment of a debt. The borrower (mortgagor) retains possession and use of the property. (2) The instrument by which real estate is hypothecated as security for the repayment of a loan.Mortgage Commitment. A formal written communication by a lender agreeing to make a mortgage on specific property, specifying the loan's amount, length of time and conditions.
Mortgage / Deed of Trust. Pledge of property as security for the payment of debt.
Mortgagee. The lender who has agreed to lend money to the mortgagor.
Mortgagor. The homeowner (borrower), who has agreed to repay a mortgage loan to the mortgagee.
Negative Amortization. Occurs when monthly installment payments are insufficient to pay the interest accruing on the principal balance, so that the unpaid interest must be added to the principal due.
Note: A unilateral agreement containing an express and absolute promise of the signer to pay to a named person, or order, or bearer, a definite sum of money at a specified date or on demand. Usually provides for interest and, concerning real property, is secured by a mortgage or trust deed.
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 usually insuring an owner of real estate against loss occasioned by defects in, liens against or unmarketability of the owner's title.
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.
Payment Cap: With regard to an adjustable rate mortgage, this limits the amount of increase in the borrower’s monthly principal and interest at the payment adjustment date, if the principal and interest increase called for by the interest rate increase exceeds the payment cap percentage. This limitation is often at the borrower’s option and may result in negative amortization.
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.
Plat: A plan, map or chart of a tract or town site dividing a parcel of land into lots.
Points: A point is a charge of one percent of the mortgage value. Points are a one-time charge assessment by the lender to increase the interest yield from the mortgage loan to a position competitive with the interest yield from other types of investment. Points are usually paid by the buyer or seller or split between them. Points may be required by the lender, but these system arrangements vary from state to state, so check into practices in your area.
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.
Principal: This term is used to mean the employer of an agent; or the amount of money borrowed, or the amount of the loan. Also, one of the main parties in a real estate transaction, such as a buyer, borrower, seller, lessor.
Principle: Amount of money borrowed in mortgage loan, excluding interest and other charges.
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.
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.
Promissory Note: Following a loan commitment from the lender, the borrower signs a note, promising to repay the loan under stipulated terms. The promissory note establishes personal liability for its payment. The evidence of the debt.
Proration of Taxes: To divide or prorate the taxes equally or proportionately to time of use, usually between seller and buyer.
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.
Quitclaim Deed: A deed operating as a release; intended to pass any title, interest, or claim which the grantor may have in the property, but not containing any warranty of a valid interest or title in the grantor.
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.
Real Estate Settlement Procedures Act (RESPA): A federal law requiring the disclosure to borrowers of settlement (closing) procedures and costs by means of a pamphlet and forms prescribed by the United States Department of Housing and Urban Development.
Real Property (immovable): Land, from the center of the earth and extending above the surface indefinitely, including all inherent natural attributes and any man-made improvements of a permanent nature place thereon. For example: minerals, trees, buildings, appurtenant rights.
Recording: The process of placing a document on file with a designated public official for public notice. This public official is usually a county officer known as the County Recorder who designates the fact that a document has been presented for recording by placing a recording stamp upon it indicating the time of day and the date when it was officially placed on file. Documents filed with the Recorder are considered to be placed on open notice to the general public of that county. Claims against property usually are given a priority on the basis of the time and the date they are recorded with the most preferred claim going to the earliest one recorded and the next claim going to the next earliest one recorded, and so on. This type of notice is called. constructive notice or legal notice.
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: Filing documents affecting real property as a matter of public record, giving notice to future purchasers, creditors, or other interested parties. Recording is controlled by statute and usually requires the witnessing and notarizing of an instrument to be recorded.
Right of Survivorship: The right of a surviving tenant or tenants to succeed to the entire interest of the deceased tenant; the distinguishing feature of a joint tenancy.
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.
Restrictions: Often called restrictive covenants. Provisions in a deed or other instrument whereby an owner of land prohibits or restricts certain use, occupation or improvement of the land.
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.
Sale and Leaseback: 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.
Sales Contract: The contract between the buyer and seller. The contract should explain, in detail, exactly what your purchase includes, who is responsible for providing it, what guarantees there are, when you can move in, what the "closing costs" are, and what "outs" parties have in case the contract is not fulfilled or if you cannot get a mortgage commitment at the agreed-upon terms.
Search: In title industry parlance, a careful exploration and examination of the public records in an effort to find all recorded instruments relating to a particular chain of title.
Separate Property: Property owned by a married person in his or her own right outside of the community interest including property acquired by the spouse (1) before marriage, (2) by gift or inheritance, (3) from rents and profits on separate property, and (4) with the proceeds from other separate property.
Settlement Expense. This is different from closing costs, but also involves charges that a buyer or seller must pay in closing a deal on a house. Settlement costs include insurance, tax payments, special assessments for improvements to municipal facilities and sales commissions.
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 Improvement 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.
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 (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 survey may be required by a title insurance company whenever the company is requested to issue an ALTA Extended Coverage Policy.
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 a legal right to own, possess, use, control, enjoy and dispose of real estate or a right or interest therein. (2) The rights of ownership recognized and protected by the law.
Title Insurance: Insured statement of the condition of title or ownership of real property. For a one-time-only premium, the named insured and their heirs are protected against title defects, liens and encumbrances existing as of the date of the policy and not specifically excluded from it. In the event of a claim, the title company provides legal defense from the policyholder and pays any covered losses incurred as a result of such claim.
Title Report (See Prelim): A report which discloses condition of the title, made by a title company preliminary to issuance of title insurance policy.
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.
Title Search of Title Guaranty: Detailed review of title records, generally at the local courthouse, to assure that the property is bought from the legal owner and to determine if any liens, special assessments, other claims or outstanding restrictive covenants are on record.
Trust Deed: Just as with a mortgage this is a legal document by which a borrower pledges certain real property or collateral as guarantee for the repayment of a loan. However, it differs from the mortgage in a number of important respects. For example, instead of there being two parties to the transaction there are three. There is the borrower who signs the trust deed and who is called the trustor. There is the third, neutral party, to whom trustor deeds the property as security for the payment of the debt, who is called the trustee. And, finally, there is the lender who is called the beneficiary, the one who benefits from the pledge agreement in that in the event of a default the trustee can sell the property and transfer the money obtained at the sale to lender as payment of the debt.
Trustee: One who holds property in trust for another to secure the performance of an obligation. Third party under a deed of trust.
Trustor: One who borrows money from a trust deed lender, then deeds the real property securing the loan to a trustee to be held as security until trustor has performed the obligation to the lender under terms of a deed of trust.
Underwriter: The person who is responsible to assure that a person, property, and loan program involved in a transation all meet, or exceed, the eligibility requirements.
Underwritten Company: A title firm 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.
VA (Veterans Administration): A federal agency which in 1944 established a loan guaranteed program to encourage private lending agencies to give liberal mortgages to honorably-discharged veterans or their widows. Check your local Veterans' Administration office for information.
Variable Interest Rate: (VlRs or VMRs, Variable Mortgage Rates.) An interest rate in a real estate loan which by the terms of the note varies upward and downward over the term of the loan depending on money market conditions.
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.
Venue: Neighborhood; often used to refer to the county or place in which an acknowledgment is made before a notary; also refers to the county in which a lawsuit may be filed or tried.
Vesting: The names, status and manner in which title of ownership is held with a fixed or determinable interest in a particular parcel of real property; also that portion of a title report or policy setting forth the above.
Waive: To voluntarily and intentionally relinquish a known right, claim or privilege.
Warranty Deed: A deed used in many states to convey fee title to real property.
Wrap Around Mortgage: A financing device whereby a lender assumes payments on existing trust deeds of a borrower and takes from the borrower a junior trust deed with a face value in an amount equal to the amount outstanding on the old trust deeds and the additional amount of money borrowed.
Zoning: Classification or real property for varying uses. Act of city or county authorities specifying type of use to which property may be put in specific areas.
