Real Estate Glossary

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ABSTRACT

The notes made by a title examiner based on his examination of the land records. These
notes are a concise summary of the transactions affecting the property. The title agency
produces a BINDER from the information in the abstract.

ACCRETION

The buildup of land from natural forces such as wind or water.

ACKNOWLEDGMENT

As a verb, the confirmation by a party executing a legal document that this is his
signature and voluntary act. This confirmation is made to an authorized officer of the
Court or notary public who signs a statement also called an acknowledgment.

ACRE

43,560 square feet of land.

ADMINISTRATOR

A person appointed by the Court to settle the estate of a person who dies without a
will. The feminine form is Administratrix. Compare, EXECUTOR.

ADVERSE POSSESSION

A claim made against land titled in another person based on open, notorious and hostile
possession and use of the land to the exclusion of the titled owner.

AMORTIZATION

The periodic principal pay down of a loan.

APPROVED ATTORNEY

An attorney authorized by a title insurance company to handle closings and render title
opinions.

APPURTENANCE

Anything attached to the land or used with it passing to the new owner.

ASSIGNEE

One who receives an assignment or transfer of rights. An assignment of a contract
transfers the right to buy property.

ASSIGNOR

The one who assigns to another person.

ASSUMPTION

Taking over a loan and becoming personally liable for the repayment. Compare, SUBJECT
To.

ATTACHMENT

Seizure of property through Court process to repay a debt.

ATTORNEY IN FACT

A type of agency relationship where one person holds a POWER OF ATTORNEY allowing him
to execute legal documents on behalf of another. Decisions made by the attorney in fact
are binding on the principal.

BANKRUPTCY

A provision of Federal Law whereby a debtor surrenders his assets to the Bankruptcy
Court and is relieved of the future obligation to repay his unsecured debts. A Trustee in
Bankruptcy administers the assets, selling them to pay as much of the debt as possible. If
your seller is in bankruptcy, the Trustee in Bankruptcy owns the property and is the party
to sign the contract and make decisions. After bankruptcy, the debtor is discharged and
his unsecured creditors may not pursue further collection efforts against him. Secured
creditors, those holding deeds of trust or judgment liens, continue to be secured by the
property but they may not take other action to collect from the debtor.

BENEFICIARY

A person named to receive a benefit from a TRUST. A contingent beneficiary has
conditions attached to his rights, usually someone else must die first. BINDER A title
insurance binder is the written commitment of a title insurance company to insure title to
the property subject to the conditions and exclusions shown on the binder.

BOND

An amount of money, often posted with the Court, to guarantee against loss as a result
of a possible claim. For example, if there is a LIEN against the property, the owner may
post a bond and the lien is removed from the property and the parties argue over the money
rather than the property.

BUILDING RESTRICTION LINE

A required set-back a certain distance from the road within which no building may take
place. This restriction may appear in the original plat of subdivision, restrictive
covenants or by building codes and zoning ordinances.

CAVEAT EMPTOR

Buyer beware. The buyer must inspect the property and satisfy himself it is adequate
for his needs. The seller is under no obligation to disclose defects but may not actively
conceal a known defect or lie if asked.

CERTIFICATE OF SATISFACTION

A document signed by the Noteholder and recorded in the land records evidencing release
of a DEED OF TRUST, MORTGAGE or other lien on the property.

CERTIFICATE OF TITLE

A written opinion by an attorney setting forth the status of title to the property as
shown on the public records. The certificate does not certify as to matters not of record
and affords no protection unless the author was negligent. Compare, TITLE INSURANCE.

CHAIN OF TITLE

The series of transactions from GRANTOR to GRANTEE as evidenced in the land records.

COINSURANCE

When more than one insurance company shares the risk of a particular transaction or
series of transactions. Lenders may require co-insurance on large commercial projects.

COLLATERAL

Property pledged to secure a loan.

CONDEMNATION

Taking of private property for a public use through exercise of the power of EMINENT
DOMAIN. The Constitution protects against taking without fair compensation.

CONDOMINIUM

A system of individual FEE SIMPLE ownership of portions (units) in a multi-unit
structure, combined with joint ownership of common areas. Each individual may sell or
encumber his own unit. Compare, COOPERATIVE.

CONSERVATOR

Also called a Committee or Guardian, a person designated by the Court to protect and
preserve the property of someone who is not able to manage their own affairs. Examples
include the mentally incompetent, minors and incarcerated persons.

CONTRACT FOR DEED

Also known as a Land Contract or Land Installment Contract. A method of financing where
title remains in the Seller’s name until the Buyer has paid the full purchase price. A
Contract for Deed will normally trigger the DUE ON SALE CLAUSE in a DEED OF TRUST or
MORTGAGE but Veterans Administration regulations specifically allow Contracts for Deed
without invoking the DUE ON SALE CLAUSE.

COOPERATIVE

A system of individual ownership of stock in a corporation that in turn, owns the
structure. Each owner has an exclusive right to use his individual unit and must pay his
portion of the debt encumbering the entire building. Compare, CONDOMINIUM.

COTENANCY

Ownership in the same land by more than one person. See, TENANCY IN COMMON, JOINT
TENANTS, TENANCY BY THE ENTIRETIES.

COVENANT

A written agreement or restriction on the use of land or promising certain acts.
Homeowner Associations often enforce restrictive covenants governing architectural
controls and maintenance responsibilities. However, land could be subject to restrictive
covenants even if there is no homeowner’s association.

DEED

The written document conveying real property. The Deed must be executed (signed),
ACKNOWLEDGED, and DELIVERED to the Grantee. Once recorded at the Courthouse, the original
piece of paper is not needed to convey title in the future.

DEED OF TRUST

A voluntary lien to secure a debt deeding the property to Trustees who foreclose, sell
the property at public auction, in the event of default on the Note the Deed of Trust
secures. Compare, MORTGAGE.

DEFICIENCY JUDGMENT

If the foreclosure sale does not bring sufficient proceeds to pay the costs of sale and
the note in full, the holder of the note may obtain a judgment against the maker for the
difference.

DELIVERY

The final, unconditional and absolute transfer of a DEED to the Grantee so that the
Grantor may not revoke it. A Deed, signed but held by the Grantor, does not pass title.

DOWER

A spouse’s interest in the property of a deceased spouse.

DUE ON SALE CLAUSE

A clause in the DEED OF TRUST or MORTGAGE that makes the loan non-assumable by
providing the noteholder may call the loan immediately due and payable upon a sale or
conveyance of an interest in the property. The FNMA/FHLMC form provides that a lease of
more than three years or a lease with an option to buy also triggers this provision.

EASEMENT

The right to use the land of another for a specific limited purpose. Examples include
utility lines, driveways, and INGRESS AND EGRESS. Easements can be temporary or permanent.

EMINENT DOMAIN

The power of the state to take private property for public use upon payment of just
compensation.

ENCROACHMENT

The physical intrusion of a structure or improvement on the land of another. Examples
include a fence or driveway over the property line.

ENCUMBRANCE

Any lien, liability or charge against a property.

EQUITY SHARING

A form of joint ownership between an owner/occupant and an owner/investor. The investor
takes depreciation deductions for his share of the ownership. The occupant receives a
portion of the tax write-offs for interest and taxes and a part of his monthly payment is
treated as rent. The co-owners divide the profit upon sale of the property. Compare, JOINT
OWNERSHIP.

ESCHEAT

Property that reverts to the state when an individual dies without heirs and without a
will.

ESCROW

A disinterested third party holds funds or documents on behalf of others and subject to
their instructions.

EXECUTOR

A person named in a will to carry out its terms and administer the estate. The feminine
form is Executrix. Compare, ADMINISTRATOR.

FEE SIMPLE

The absolute total interest in real property. Compare, LIFE ESTATE, REVERSION .

FINANCING STATEMENT

Lenders record financing statements to evidence personal property, such as a new
furnace, siding or windows, is subject to a lien.

FIXTURES

An item of personal property attached to real property so that it can not be removed
without damage to the real property. A FIXTURE becomes part of the real property.

FORECLOSURE

The process by which a lender sells property securing a loan in order to repay the
loan. Under a DEED OF TRUST, foreclosure is by public auction after appropriate
advertisement. A MORTGAGE may require the lender to obtain Court approval prior to sale.

GENERAL WARRANTY DEED

The Grantor warrants title against all claims.

GRANTEE

The person receiving an interest in property. Compare, GRANTOR

GRANTOR

The person granting, selling or giving up an interest in property. Compare, GRANTEE.

GROUND LEASE

The owner grants a long term lease of the land (usually 99 years) and allows the lessee
to build and use the land as agreed. At the end of the term, the land and all improvements
revert to the owner.

GUARDIAN

One appointed by the Court to administer the affairs of a minor. A guardian ad litem is
appointed to protect one’s interest in a particular legal action. See, CONSERVATOR. HIATUS
– A gap or space left between two parcels of land and not included in the legal
description of either parcel. Similar terms are Gaps and Gores.

HOMESTEAD DEED

A declaration filed in the land records that an individual is asserting his homestead
exemption. That exemption allows one to protect some assets (amount varies by state)
against the claims of creditors.

INDEMNITY

A protection against actual loss or damage as a result of the matter mentioned. An
indemnity is not an absolute guarantee that something won’t happen, it states the terms
under which an actual loss will be compensated.

INGRESS AND EGRESS

Applied to EASEMENTS, meaning the right to go in and out over a piece of property but
not the right to park on it.

INSURABLE TITLE

Title subject to a defect or claim which a title insurance company is willing to insure
against. Compare, MARKETABLE TITLE.

INSURED CLOSING LETTER

An Indemnity given to a lender from a title insurance company, agreeing to be
responsible if the closing agent does not follow the lender’s instructions or
misappropriates the loan proceeds. Lender’s usually require an insured closing letter be
on file for each settlement.

INTESTATE

An estate without a Will. Compare, TESTATE

JOINT OWNERSHIP AGREEMENT

An agreement between owners defining their rights, ownership, monetary obligations and
responsibilities. This could be between and investor and an occupant or the occupants. If
an investor is involved, the investor does not take depreciation deductions and none of
the occupant’s payment is deemed rent for tax purposes. Compare, EQUITY SHARING.

JOINT TENANCY

Two or more persons own a property. Joint tenants with the common law right of
survivorship means the survivor inherits the property without reference to the decedent’s
will. Creditors may sue to have the property divided to settle claims against one of the
owners. Compare, TENANTS IN COMMON, TENANTS BY THE ENTIRETY.

JUDGMENT LIEN

A judgment is a lien against all real property owned by the judgment debtor in the
county where the judgment is docketed (recorded).

LAND CONTRACT

See, CONTRACT FOR DEED.

LIEN

A claim or charge against property. Property is said to be encumbered by a lien and the
lien must be removed to clear title.

LIFE ESTATE

The right to use, occupy and own for the life of an individual. Compare, FEE SIMPLE.

MAJORITY

The age at which a person may handle his own affairs.

MARKETABLE TITLE

Title without defects or claims so as to be readily accepted without fair or reasonable
doubt. Compare, INSURABLE TITLE.

MECHANIC’S LIENS

The right of an unpaid contractor, laborer or supplier to file a lien against property
to recover the value of his work

METES AND BOUNDS

A means of describing land by directions and distances rather than reference to a lot
number. Generally used when land has not been subdivided into lots.

MORTGAGE

A voluntary lien filed against property to secure a debt, usually a loan. To foreclose,
the lender must often institute a court action and the borrower may have the right to
reclaim the property after foreclosure. Compare, DEED OF TRUST.

NOTE

A written promise to pay a certain sum of money at a certain time. A negotiable note
starts "Pay to the order of" and is transferable by endorsement similar to a
check.

NOTARY PUBLIC

One authorized by law to acknowledge and certify documents and signatures.

PARTITION

The forced division of land among parties who were formerly co-owners. A partition suit
may ask to divide the land or if that is not practical, sell the land and divide the
proceeds.

PLAT

A map showing the division of piece of land with lots, streets and, if applicable,
common area.

PIPESTEM LOT

A lot connected to a public street by a narrow strip of land. Usually several adjacent
pipestems are combined to form one driveway with each owner having a mutual-reciprocal
easement to use and maintain the driveway to the street.

POWER OF ATTORNEY

A written document authorizing another to act on his behalf as an ATTORNEY IN FACT. One
does not need to be a licensed attorney to act as an attorney in fact but, power of
attorney forms are powerful legal documents that should be used only under advice of a
licensed attorney at law.

PREPAYMENT PENALTY

An additional charge imposed by the lender for paying off a loan before the due date.

QUIET TITLE

A suit brought to remove a claim or objection on title.

QUITCLAIM DEED

A deed releasing whatever interest you may hold in a property but making no warranty
whatsoever. Compare, SPECIAL WARRANTY DEED and GENERAL WARRANTY DEED.

RESISSUE RATE

A discounted rate for title insurance when the title was previously insured with an
owner’s title insurance policy issued within the last ten years.

REMAINDER

An interest in land that is postponed until the termination of some other interest such
as a LIFE ESTATE. Compare, FEE SIMPLE.

REVERSION

A provision in a conveyance that the land will return to the grantor upon the happening
of an event or contingency. Compare, FEE SIMPLE.

RIPARIAN RIGHTS

The rights of an owner of land adjacent to water.

SPECIAL WARRANTY DEED

The seller warrants he has done nothing to impair title but makes no warranty before
his ownership. Compare, GENERAL WARRANTY DEED AND QUITCLAIM DEED.

STATUTE OF LIMITATIONS

The time period to file a law suit to enforce a claim or it
is barred by law.

SUBDIVISION

Dividing land into lots and streets. The owner signs a PLAT and Deed of Resubdivision
which is recorded among the land records. The state and county have strict requirements
for subdivision of land.

SUBJECT TO

Taking title to property with a lien but not agreeing to be personally responsible for
the lien. If the holder who forecloses the lien can take the property but may not collect
any money from the owner who took "subject to." Compare, ASSUMPTION.

TENANTS BY THE ENTIRETY

A husband and wife own the property with the common law right of survivorship so, if
one dies, the other automatically inherits. One may not sue the other to PARTITION the
property. A creditor of one may not claim the property or the proceeds of sale. Compare,
TENANT IN COMMON, JOINT TENANTS.

TENANT IN COMMON

Two or more persons own the property with no right of survivorship. If one dies, his
interest passes to his heirs, not necessarily the co-owner. Either party, or a creditor of
one, may sue to PARTITION the property. Compare, TENANTS BY THE ENTIRETY, JOINT TENANTS.

TESTATE

To die with a Will. Compare, INTESTATE.

TESTATOR

One who makes out a last will and testament. The feminine form is Testatrix.

TITLE INSURANCE

Insurance that provides an INDEMNITY against loss or damage as a result of defect in
title ownership to a particular piece of property. Title insurance covers mistakes made
during a TITLE SEARCH as well as matters which could not be found or discovered in the
public records such as missing heirs, mistakes, fraud and forgery. Compare, CERTIFICATE OF
TITLE.

TITLE SEARCH

An examination of the public records, including court decisions, to disclose facts
concerning the ownership of real estate. The title examiner prepares an ABSTRACT and the
title agent prepares a BINDER but decisions regarding the legal sufficiency of title or
questions requiring legal interpretation must be resolved by a licensed attorney at law.

TRUST

A right to or in property held for the benefit of another. A trust may be written or
implied. An implied trust is called a Constructive Trust.

TRUSTEE

One who holds property in Trust for another.

USURY

Charging more than the maximum legally permitted rate of interest.

WRAPAROUND

The debt secured includes an existing debt already on the property. The payments made
to the holder of the wraparound include payments due on the existing loan and the holder
must forward the appropriate portion of each payment to the existing
noteholder. Often
used to avoid a PREPAYMENT PENALTY or a DUE ON SALE CLAUSE. Can refer to a wraparound DEED
OF TRUST or CONTRACT FOR DEED.

ZONING

Regulation of private land use and development by local government.