This dictionary has been designed to be introductory and educational only. Because of the constant changes inherent in the title insurance and escrow industries, particularly in regard to state and regional differences, it is not to be construed as a statement of duties, liabilities or coverages.
ACCELERATION CLAUSE: Clause in a Note and Trust Deed, permits the payee or beneficiary to declare the entire unpaid balance immediately due and payable when a given condition occurs. Such a condition can be the sale of the land. This clause is sometimes called an “alienation clause.”
ADJUSTABLE RATE MORTGAGE (ARM): A mortgage in which the interest changes periodically, according to corresponding fluctuations in an index. All ARMs are tied to indexes.
AD VALOREM: Literally, “according to value.” Usually references to real property taxes which are assessed according to value, i.e., ad valorem.
ALL INCLUSIVE TRUST DEED (AITD/WRAP-AROUND): A junior Deed of Trust securing a promissory note, the face amount of which is the sum of the liability secured by prior Trust Deeds, plus the cash or equity advanced by the AITD lender.
AMORTIZATION: Provision for the payment of a debt as to both principal and interest in equal installments over a period of time.
ANNUAL PERCENTAGE RATE (APR): This is not the Note rate for a loan. It is a value created according to a government formula intended to reflect the true annual cost of borrowing, expressed as a percentage.
APPRAISAL: An opinion as to the fair market value of land and the improvements on that land.
APPRAISER: An individual qualified by education, training, and experience to estimate the value of real property and personal property. Some appraisers work directly for mortgage lenders, and some are independent.
APPRECIATION: The increase in the value of a property due to changes in market conditions, inflation, or other causes.
ASSESSED VALUE: The value placed on land and improvements as a basis for taxation. This is usually accomplished by the county assessor’s office.
ASSESSMENTS: Special and local levies upon property in the immediate vicinity of improvement. Assessments can be imposed by such entities as flood control districts, street lighting districts and air pollution control districts which serve an area.
ASSESSOR: A public official who establishes the value of a property for taxation purposes.
ASSIGNEE: One to whom a transfer of interest is made. For example, the assignee of a Deed of Trust or contract.
ASSIGNMENT: The transfer, in writing, of a person’s interest to another person or entity in an asset, such as an assignment of stock, a Deed of Trust or contract.
ASSIGNOR: One that makes an assignment. For example, the assignee of a Deed of Trust or contract.
ASSUMPTION: An agreement by one party to pay an obligation previously owned by another. For example, the assumption of an existing Trust Deed by a new owner may occur when property is sold.
ATTORNEY IN FACT: One who holds a power of attorney from another, allowing him to act on behalf of the grantor of the power.
BENEFICIARY: In Trust Deed, the lender is designated as the beneficiary. He obtains the benefit of the security.
BENEFICIARY’S STATEMENT: A report from the lender, usually in writing, setting forth the terms and conditions of a loan already of record, such as amounts still owed, interest rate, monthly payments, etc.
BILL OF SALE: A document that attests to the transfer of ownership of personal property.
BORROWER: One who obtains a loan and owes money to a lender.
BROKER: Broker has several meanings in different situations. Most Realtors are “agents” who work under a “broker.” Some agents are brokers as well, either working for themselves or under another broker. As a normal definition, (BROKER Continued...) a broker is anyone who acts as an agent, bringing two parties together for any type of transaction and earns a fee for doing so.
BUYER: One who purchases or acquires property.
CHAIN OF TITLE: An analysis of the transfers of title to a piece of property over the years.
CLEAR TITLE: A title that is free of liens or legal questions as to ownership of the property.
CLOSING: This has different meanings in different states. In some states a real estate transaction is not considered “closed” until the documents record at the local recorder’s office. In others, the “closing” is a meeting where all of the documents are signed and money changes hands.
CLOSING COSTS: Closing costs are separated into what are called “non-recurring closing costs” and “pre-paid items.” Non-recurring closing costs are any items which are paid just once as a result of buying the property or obtaining a loan. “Pre-paids” are items which recur over time, such as property taxes and homeowner’s insurance. A lender makes an attempt to estimate the amount of non-recurring closing costs and prepaid items on the Good Faith Estimate, which must be issued to the borrower within three days of receiving a home loan application.
CLOSING STATEMENT: See Settlement Statement.
CLOUD ON TITLE: Any conditions revealed by a title search that adversely affects the title to real estate. Usually clouds on title cannot be removed except by deed, release, or court action.
COLLECTION SERVICE: A service performed by a neutral third party in receiving and disbursing loan payment as instructed by the parties concerned.
COMPARABLE SALES: Recent sales of similar properties in nearby areas and used to help determine the market value of a property. Also referred to as “comps.”
CONDEMNATION: The exercise of the power of eminent domain by which property is taken for public use upon payment of just compensation. Condemnation can also refer to the condemning of unsafe structures.
CONDOMINIUM: A multi-family or other structure in which units are individually owned and in which owners of individual units also own an undivided interest in common areas.
CONTINGENT: Dependent upon conditions or events specified but not yet accomplished. Property may be sold contingent upon the seller or buyer meeting a predetermined condition.
CONVEYANCE: A written document that transfers title to an asset from one person to another; a Deed and an assignment.
COUNTY ASSESSOR: One who sets value of property for taxation purposes.
DEED: A written document which conveys ownership of land from one person to another.
DEED OF TRUST: A document executed by the owner of land by which the land is given as security for the payment of a note or other performance of an obligation. The Deed of Trust is usually used in place of a mortgage.
DEFAULT: Failure to perform a duty or to pay an obligation.
DEFICIENCY JUDGMENT: A personal judgment in a judicial foreclosure action for the remaining amount due after a sale of the security.
DEMAND/BENEFICIARY’S DEMAND: A statement from a lender showing the amount due on a loan.
DOMESTIC PARTNER: A legal relationship between two adults who are not married.
EARNEST MONEY: An amount of money given as part of the purchase price of property to bind the agreement between buyer and seller.
EASEMENT: A right or interest in the land of another, such as a right to cross over another person’s property to reach yours.
EMINENT DOMAIN: A right or power of a governmental body to take property.
ENCUMBRANCE: A lien affecting the land and improvements, such as a mortgage or Trust Deed.
EQUITY: Market value of property, less any encumbrance or other liens on the property.
ESCROW: Any transaction wherein one person, for the purpose of effecting the sale, transfer, encumbering, or leasing of real or personal property to another person, delivers any written instrument, money, evidence of title to real or personal property, or other item of value to a third person to be held by such person until the happening of a specified event or the performance of a prescribed (ESCROW Continued...) condition, when it is then to be delivered by such third person to the grantee, grantor, promisee, promisor, obligee, obligor, bailee, bailor, or any agent or employee of any of the latter.
ESCROW ACCOUNT: Once a buyer closes a purchase transaction, they may have an escrow account or impound account with their lender. This means the amount paid to the lender each month includes an amount above what would be required if only paying principal and interest. The extra money is held in the impound account (escrow account) for the payment of items like property taxes and homeowner’s insurance when payment is due. The lender pays for such items on behalf of the home owner with the home owner’s money.
ESCROW DISBURSEMENTS: The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.
ESTATE: The ownership interest of an individual in real property. The sum total of all the real property and personal property owned by an individual at time of death.
EXCEPTION: An interest in real property which is excluded from the conveyance and remains in the grantor or which had been excluded in a prior conveyance.
FANNIE MAE (FNMA): The Federal National Mortgage Association, which is a congressionally chartered, shareholder-owned company that is the nation’s largest supplier of home mortgage funds.
FEDERAL HOUSING ADMINISTRATION (FHA): An agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money or plan or construct housing.
FIRE INSURANCE: Insurance against loss or damage by fire to specific property.
FIRST MORTGAGE: The mortgage that is in first place among any loans recorded against a property. Usually refers to the date in which loans are recorded, but there are exceptions.
FIXED RATE MORTGAGE: A mortgage in which the interest rate does not change during the entire term of the loan.
FORECLOSURE: A proceeding to enforce a lien by the sale of the property in order to satisfy the debt.
GRANTEE: The buyer of a Deed.
GRANTOR: The seller of a Deed.
HAZARD INSURANCE: Insurance coverage that applies in the event of physical damage to a property from fire, wind, vandalism, or other hazards.
HOMEOWNERS’ ASSOCIATION: A nonprofit association that manages the common areas of a planned unit development (PUD) or condominium project. In a condominium project, it has no ownership interest in the common elements. In a PUD project, it holds title to the common elements.
IMPOUND ACCOUNT: An account held in trust by the lender in which the borrower is required to place monthly deposits for taxes, insurance and other purposes.
JOINT TENANCY: A form of ownership or taking title to property which means each party owns the whole property and that ownership is not separate. In the event of the death of one party, the survivor owns the property in its entirety.
JUDGMENT: A decision made by a court of law. In judgments that require the repayment of a debt, the court may place a lien against the debtor’s real property as collateral for the judgment’s creditor.
JUDICIAL FORECLOSURE: A type of foreclosure proceeding used in some states that is handled as a civil lawsuit and conducted entirely under the auspices of a court. Other states use non-judicial foreclosure.
LAND SALE CONTRACT: An agreement to sell and purchase wherein legal title is withheld from the purchaser until such time as the required payments to the seller have been completed.
LEASE OPTION (LEASE WITH OPTION TO PURCHASE): A lease containing an option giving the lessee the right to purchase the property. The price and terms of the purchase must be set forth for the option to be valid. The option may run for the length of the leases or only for a portion of the lease period.
LENDER: One who lends money to borrowers.
LESSEE: The tenant under a lease.
LESSOR: The landlord under a lease.
LEGAL DESCRIPTION: Description of real property, as used in legal documents in contrast to a street address by which the property is commonly known. Legal descriptions usually refer to recorded maps, surveys, or other public documents.
LIEN: A security interest in real or personal property (LIEN Continued...) which places the holder in a position prior to the rights of the general creditors of the owner. Examples include Trust Deeds, mortgages, special assessments, recorded judgments, mechanic’s lien, and taxes.
LIS PENDENS: Notice recorded in the official records of a county to indicate that a lawsuit is pending affecting the lands described in the notice.
LOAN-TO-VALUE (LTV): The percentage relationship between the amount of the loan and the appraised value or sales price.
MARKET VALUE: The price that real property would reasonably be expected to bring were it to be offered for sale with a reasonable sales effort over a reasonable period of time.
METES AND BOUNDS: A term used in describing the boundary lines of land setting forth all the boundary lines together with their terminal points and angles.
MORTGAGE: A written document executed by the owner of land by which the land is given as security for the payment of a debt or performance of an obligation.
NOTARY: To prove execution of a document by means of a notary public’s certificate of acknowledgment.
NOTARY PUBLIC: A person authorized by law to take acknowledgments and to administer oaths.
NOTE: Written evidence of a debt by a borrower that includes a promise of payment in accordance with specified terms. A valuable document which must not be lost even when paid in full. In real property transactions, a Note is usually secured by a Deed of Trust.
NOTICE OF COMPLETION: A notice which should be recorded to indicate completion of a work of improvement to real property. A valid notice of completion limits the time for filing valid mechanic’s liens.
NOTICE OF DEFAULT: Recorded notice that a default has occurred under a Deed of Trust and/or note.
OPEN END DEED OF TRUST: A Deed of Trust which secures additional notes for funds that a lender may advance to a trustor, subsequent to the execution of the original loan.
ORIGINATION FEE: On a government loan, the loan origination fee is one percent of the loan amount, but additional points may be charged which are called “discount points.” One point equals one percent of the loan amount. On a conventional loan, the loan origination fee refers to the total number of points a borrower pays.
PAYEE: One who receives payments.
PAYOR: One who makes payments.
PITI: This stands for principal, interest, taxes and insurance. If you have an “impounded” loan, your monthly payment to the lender includes all of these and may include mortgage insurance as well. If you do not have an impounded account, the lender still calculates this amount and uses it as part of determining your debt-to-income ratio.
POWER OF ATTORNEY: A written authorization to an agent to perform specified acts on behalf of his principal. This may be granted as either a general or a limited power.
PRELIMINARY TITLE REPORT: A report from a title company of the present condition of title made prior to the issuance of a title policy.
PREPAYMENT PENALTY: An agreement to pay a penalty for the payment of a Note before it actually becomes due.
PRORATION: The allocation of property tax, interest, insurance premiums, rental income, etc., between buyer and seller proportionate to time of use.
QUIT CLAIM DEED: A deed which conveys whatever right, title, or interest the grantor may have in property at the time of conveyance. There is no guarantee implied in a quit claim deed.
REALTOR®: A real estate agent, broker or an associate who holds active membership in a local real estate board that is affiliated with the National Association of Realtors®.
REAL PROPERTY: Land or improvements permanently affixed to land.
RECONVEYANCE: The document that is evidence that the Deed of Trust affecting real property has been paid in full and that the lender and the trustee no longer have any interest in the property.
RECORDATION: Filing for record in the office of the county recorder, a very necessary process in dealing with real property.
RECORDING: The noting in the registrar’s office of the details of a properly executed legal document, such as a deed, a mortgage note, a satisfaction of mortgage, or an extension of mortgage, thereby making it a part of the public record.
REQUEST FOR NOTICE OF DEFAULT: A recorded request for notification of a recorded notice of default on a Deed of Trust.
RESERVATION: Right reserved by the grantor in conveying property, or a right which had previously been reserved.
RESTRICTIONS: This is often referred to as covenants, conditions, and restrictions (CC&R) in regard to a piece of property, setting limitations on its use.
RIGHT OF INGRESS OR EGRESS: The right to enter or leave designated premises.
RIGHT OF SURVIVORSHIP: In joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant.
RIGHT OF WAY: The right of another to cross over, under or through a parcel of land.
SALES CONTRACT: An agreement entered into for the sale and purchase of property.
SELLER: One who sells property to another.
SETTLEMENT STATEMENT: A statement prepared by broker, escrow, or lender, giving a complete breakdown of costs involved in a real estate sale. A separate statement is prepared for the buyer and seller.
SHORT PAY (SHORT SALE): A short sale is the sale of real property where the fair market sale price is less than the loan balance.
STATEMENT OF INFORMATION: A brief statement of facts relied on by title insurers to assist in the proper identification of persons.
SUBJECT TO: Usually referred to as the condition of title that exists at the time of acquisition by the buyer, such as subject to a Deed of Trust or record.
SUBORDINATION AGREEMENT: An agreement by which a prior lien is made inferior to an otherwise junior lien.
SURVEY: A process of measuring a parcel of land and ascertaining its area and boundaries.
SUBDIVISION: The division of a tract of land into separate parcels.
SWEAT EQUITY: Contribution to the construction or rehabilitation of a property in the form of labor or services rather than cash.
TAX COLLECTOR: One who collects the taxes on the property.
TENANCY IN COMMON: As opposed to joint tenancy, when there are two or more individuals on title to a piece of property, this type of ownership does not pass ownership to the others in the event of death.
TITLE: Evidence of a person’s right to or the extent of his interest in property.
TITLE INSURANCE: Insurance against loss or damage resulting from defects in title to a particular parcel of real property.
TITLE SEARCH: A check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding.
TRANSFER OF OWNERSHIP: Any means by which the ownership of a property changes hands. Lenders consider all of the following situations to be a transfer of ownership: the purchase of a property “subject to” the mortgage, the assumption of the mortgage debt by the property purchaser, and any exchange of possession of the property under a land sales contract or any other land trust device.
TRUST DEED: A Deed of Trust. (See Deed of Trust)
TRUSTEE: A fiduciary that holds or controls property for the benefit of another.
TRUSTOR (IN A DEED OF TRUST): The borrower under a Deed of Trust.
VENDEE: One who is purchasing property under a land sale contract.
VENDOR: One who is selling property under a land sale contract.
VESTING: The manner in which the owner of real property holds title. For example, John Jones, a single man.
ZONING: Local government regulations relating to the use of property.