Abstract- A history of all transactions
shown in the public records affecting a particular tract of land.
Abstract Plant- See Title Plant.
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.
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.
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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.
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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.
Courtesy- A right that a husband has in his wife's property
at her death. It does not exist in all states.
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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.
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.
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Earnest Money- A deposit of funds by the
purchaser of a piece of real estate as evidence of good faith.
Easement- A right to use all or part of the land owned by
another for a specific purpose. An easement may, for example,
entitle its holder to install and maintain sewer or utility lines.
Eminent Domain- The right of a government to take privately
owned property for public purposes under condemnation proceedings
subject to payment of its fair market value.
Encroachment- Any building, improvement or structure located
on one property (such as a wall, fence or driveway) that intrudes
upon the property of another.
Encumbrance- Any interest, right, lien or liability attached
to a parcel of land (such as unpaid taxes or an unsatisfied
mortgage) that constitutes or represents a burden or charge upon the
property.
Equity- The market value of real property, less the amount of
existing liens.
Escheat- The reversion of property to the state when an owner
dies leaving no legal heirs, devisees or claimants.
Escrow- A method of closing a real estate transaction in
which all required documents and funds are placed with a third party
for processing and disbursement.
Estoppel- A legal restraint that stops or prevents a person
from contradicting or reneging on his previous position or previous
assertions or commitments.
Examination- The study of the instruments and muniments
incident to a chain of title to determine their effect and condition
in order to reach a conclusion as to the status of the title.
Exception- A provision in a title insurance binder or policy
that excludes liability for a specific title defect or an
outstanding lien or encumbrance.
Execute- To sign a legal instrument. A deed is said to be
executed when it is signed, sealed, witnessed and delivered.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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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