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In order to
avoid too much confusion when you become involved in
a real estate transaction Pioneer gathered the
following glossary of commonly used terms in the real
estate business. Please note that the following terms
are defined such as to apply to real estate and/or
title insurance business. For more precise
definitions, you are advised to seek legal counsel.
Abstract
A history of all
transactions shown in the public records affecting a
particular tract of land.
Abut
To touch or border
upon. A piece of land bordering on a street or an
adjoining piece of property is said to abut such
street or property.
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.
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.
Agreement
A legally binding
contract made between two or more persons.
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.
Amortization
Payment to reduce
the principal of a debt in regular, periodic
installments.
Appraisal
A report from an
independent third party detailing the estimated value
of real estate.
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.
Arbitration
The process by
which parties who cannot agree among themselves
submit the dispute to the judgment of an impartial
party.
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.
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.
Avigation
Easement
An easement over
private property which abuts and extends out from the
end of airport runways with said easement restricting
the graduated height of agricultural crops, bushes,
trees, and other objects in the take off and landing
path of aircraft.
Back Title Letter
Also called
"back title certificate" in some areas, and
"starter" in others. When titles previously
have been examined up to a certain date by reliable
examiners, title companies sometimes give subsequent
examiners of such titles a letter that sets forth the
condition of the title at the time of the previous
examination and authorizes them to begin their
subsequent examination with the terminal date of the
previous examination.
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.
Bankruptcy
A proceeding in
U.S. District Court wherein assets of an insolvent
debtor are protected and distributed in an equitable
manner.
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.
Certificate of Title
A certificate
issued by a title examiner stating the condition of a
title.
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
The successive
ownerships or transfers in the history of title to a
tract of land.
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.
Closing
Also called
"settlement." A meeting of all parties
involved in a property transaction during which the
transaction is consummated.
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.
Commitment
Also called
"binder." A document issued by a title
insurance company that contains the conditions under
which a policy of title insurance will be issued.
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.
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.
Conveyance
The transfer of
title to property from one person to another.
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.
Curtesy
A right that a
husband has in his wife's property at her death. It
does not exist in all states.
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 document through
which a conveyance of property is effected.
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.
Default
Failure to perform
a promised task or to pay an obligation when due.
Defect
A blemish,
imperfection or deficiency. A defective title is one
that is irregular and faulty.
Depreciation
Loss in value
occasioned by ordinary wear and tear, destructive
action of the elements, or functional or economic
obsolescence.
Devise
A gift of real
estate made by a will.
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.
Dower
A right that a
wife has in her husband's property at the time of his
death. Does not exist in all states.
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.
Egress
The right to a
path or right-of-way over which a person may leave or
go away from his own real estate.
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.
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.
Et ux
Abbreviations for
Latin "et uxor" meaning "and
wife." Joe Doaks et ux means Joe Doaks and wife.
Et vir
A Latin term
meaning "and husband." Jane Allen et vir
means Jane Allen and husband.
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.
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.
FHA
(Federal Housing Administration)
A federal agency
that insures first mortgages, enabling lenders to
lend a very high percentage of the sale price.
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.
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.
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.
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.
Grantee
One to whom a
grant is made.
Grantor
One who makes a
grant.
Hereditaments
Any and all kinds
of estates, interest and rights in real estate that
can be inherited.
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.
HUD
(Department of Housing and Urban Development)
The federal
department responsible for the major housing programs
in the United States.
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.
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.
Junior
Mortgage
A mortgage
lower in lien priority than another.
Leasehold
The right to
possession and use of land for a fixed period of
time. The lease is the agreement that creates the
right.
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 monetary charge
imposed on a property, usually arising from some debt
or obligation.
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.
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.
Lis Pendens
A legal notice
intending to bind third parties of litigation
claiming an interest in real estate.
Lot
Generally, any
portion or parcel of real property. Usually refers to
a portion of a subdivision.
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.
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.
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.
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.
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.
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.
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.
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 contractual
relationship between two insurance companies under
which one insurer assumes a portion of the risk of
the insurance policy written by the other.
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.
Riparian
Rights
The rights of
owners of lands bordering watercourses which relate
to the water and its use.
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
Leaseback
The sale of an
asset to a buyer who immediately leases it back to
the seller.
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.
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.
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.
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
Also called
"abstract plant" in some areas. 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
Search
A title search is
a detailed examination of the historical records
concerning a property. These records include deeds,
court records, property and name indexes, and many
other documents. The purpose of the search is to
verify the seller's right to transfer ownership, and
to discover any claims, defects and other rights or
burdens on the property.
Underwriter
An insurance
company that issues insurance policies to the public
or to another insurer.
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.
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.
Waiver
The voluntary and
intentional relinquishment of a known right, claim or
privilege.
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.
Zoning
Laws passed by
local governments regulating the size, type,
structure, nature and use of land or buildings.
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