Real Estate Terms Explained
The Lingo Can Be Confusing So Here Is A Cheat Sheet!
ALTA – American Land Title Association, the national trade association for the title insurance industry. ALTA member companies include businesses that conduct your closing and issue you an Owner’s Policy of Title Insurance.
APPRAISAL – An estimate of value of property from analysis of facts about the property; an opinion of value.
BROKER – One who acts as an agent for another in negotiating sales or purchases in return for a fee or commission.
CLOSING – In some areas called a “settlement.” The process of completing a real estate transaction during which deeds, mortgages, leases and other required instruments are signed and/or delivered, an accounting between the parties is made, the money is disbursed, the papers are recorded, and all other details such as payment of outstanding liens and transfer of hazard insurance policies are attended to.
CLOSING DISCLOSURE – The five-page Closing Disclosure must be provided to the consumer three business days before they close on the loan. The Closing Disclosure details all of the costs associated with their mortgage transaction.
CLOSING STATEMENT – A summation, in the form of a balance sheet, made at a closing, showing the amounts of debits and credits to which each party to a real estate transaction is entitled.
COMMISSION – The amount due a real estate broker, mortgage loan broker or real estate professional for services performed in such capacity.
CONDITIONS – This refers to provisions in deeds and other real estate instruments that make a particular right contingent upon the occurrence of some future event.
CONTRACT – Same as “agreement,” but usually more formal.
DEED – A written document by which title to real estate is conveyed from one party to another.
DEFAULT – Failure to perform a promised task or to pay an obligation when due.
EARNEST MONEY – Down payment or a small part of the purchase price made by a purchaser as evidence of good faith.
ESCROW – Technically, this term strictly refers to a deed delivered to a third person to be held by him until the fulfillment or performance of some act or condition by the grantee. In the title industry, it means the depositing with an impartial third party (typically an escrow agent or title company) of anything pertaining to a real estate transaction including money and documents of all kinds. The money and documents are to be disbursed and delivered to the rightful parties by the escrow agent or title company when all conditions of the transaction have been met.
FEE SIMPLE – The highest degree of ownership that a person can have in real estate. An interest in real estate that gives the owner unqualified ownership and full power of disposition.
FORECLOSURE – A legal proceeding for the collection of real estate mortgages and other types of liens on real estate, which results in cutting off the right to redeem the mortgaged property and usually involves a judicial sale of the property to pay the mortgage debt.
GENERAL WARRANTY – A warranty provision in a deed or mortgage or other real estate instrument containing all of the common law items of warranty. Also known as a full warranty.
HAZARD INSURANCE – Real estate insurance protecting against fire, some natural causes, vandalism, etc., depending upon the policy. The buyer often adds liability insurance and extended coverage for personal property.
JOINT TENANTS – Two or more persons who hold title to real estate jointly, with equal rights to share in its enjoyment during their respective lives with the provision that upon the death of a joint tenant, his share in the property passes to the surviving tenants, and so on, until the full title is vested in the last survivor. A joint tenant cannot legally sell or encumber his interest without the consent or joinder of all of the other joint tenants.
LOAN ESTIMATE – A three-page Loan Estimate must be provided to the consumers no later than three business days after they submit a loan application for most mortgages. The Loan Estimate provides information about key features, costs and risks of the mortgage loan for which the consumer is applying.
MARKET VALUE – An average between 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.
MORTGAGE – A temporary conditional pledge of property to a creditor as security for the payment of a debt that may be cancelled by payment.
OWNER’S POLICY – This policy is purchased for a one-time fee and protects a homeowner’s investment in a property for as long as they or their heirs have an interest in the property. Only an owner’s policy protects the buyer should a covered title problem arise with the title that was not found during the title search. Possible hidden title problems can include errors or omissions in deeds, mistakes in examining records, forgery and undisclosed heirs.
POWER OF ATTORNEY – A legal instrument authorizing one to act as another’s agent or attorney.
PRELIMINARY TITLE REPORT – A report prepared prior to issuing a title insurance policy that shows the ownership of a specific parcel of land. It includes information about liens and encumbrances that will not be covered under a title insurance policy.
PREMIUM – The amount payable for an insurance policy.
PROMISSORY NOTE – A written promise to pay or repay a specified sum of money at a stated time, or on demand, to a named person. In addition to the payment of principal, a promissory note usually provides for the payment of interest.
PUBLIC RECORDS – The transcriptions in a recorder’s office of instruments that have been recorded, including the indexes pertaining to them.
REALTOR – A copyrighted trade name that can be legally used only by those belonging to the National Association of Realtors.
RECORD TITLE – The aspects of a title that appear in the public records as distinguished from unrecorded title aspects and interests.
SETTLEMENT – In some areas called a “closing.” The process of completing a real estate transaction during which deeds, mortgages, leases and other required instruments are signed and/or delivered, an accounting between the parties is made, the money is disbursed, the papers are recorded, and all other details such as payment of outstanding liens and transfer of hazard insurance policies are attended to.
SPECIAL WARRANTY DEED – A deed that warrants the title only with respect to acts of the seller and the interests of anyone claiming by, through, or under him.
SURVEY – (1) To determine the location, boundaries, area, or the elevations of land and structures upon the earth’s surface by means of courses in relation to the North Star, and the measuring of angles and distances by using the techniques of geometry and trigonometry. (2) The map or plat drawn by a surveyor that represents the property surveyed and shows the results of a survey.
TENANTS IN COMMON – Two or more persons in whom title to a single piece of real estate is vested in such a manner that they have a common or equal right to possession and enjoyment of the property, but each holds a separate individual interest or estate in the property. Each owner may sell or encumber his respective interest or dispose of it by will, and if he dies without leaving a will, his heirs inherit his undivided interest.
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 COMMITMENT – An offer to issue a title insurance policy. The title commitment will describe the various conditions, exclusions and exceptions that will apply to that particular policy.
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 – Insurance that protects purchasers of real estate and mortgages against loss from defective titles, liens and encumbrances.
UNDERWRITER – An insurance company that issues insurance policies either to the public or to another insurer.
VESTING – How ownership of title is taken. Common methods of holding title include sole ownership (such as a single man or woman) or co-ownership (such as community property, community property with right of survivorship, joint tenancy or tenancy in common).
WARRANTY DEED – A deed containing one or more title covenants. (See Title Covenants.)