The title industry has its own language. Many of its words and idioms
are derived from the language of the law while others are common words given special
meaning related to land titles. There are also words and phrases coined over the
years by the title industry.
NOTE: To assist you in this regard we have provided this glossary of words and terms
used in the title industry. The list is not exhaustive nor complete. Words and terms
will be found which are not in common use in a particular area. No attempt has been
made to conform definitions to dictionary standards. Only meanings familiar in the
title business are shown. Definitions, as far as possible, are in layman's language,
substantially accurate and comprehensive without being technically or legalistically
correct.
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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.
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.
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.
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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.
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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.
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.
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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.
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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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