Terms You Should Know When Buying A Home

abstract
A historical summary of all transactions shown in the public records affecting a particular piece of real estate.

adverse possession
A means of acquiring title to real estate where an occupant has been in actual, open, notorious, exclusive, and continuous occupancy of property for the period required by state law.

appraisal
An estimate and opinion of the quality or value of real estate as of a given date.

closing
The procedure by which title to real estate is transferred by deed, or a lien is created on the title by deed of trust or mortgage, and all necessary documents are accumulated and disbursement of money is made for the purchase of finance of real estate and related costs. The closing is conducted by a settlement agent responsible for the accumulation of all necessary documents to facilitate the closing and the preparation of the settlement statement and disbursement of money. The settlement agent causes the deed or deed of trust or mortgage to be recorded in the public records.

closing costs
Various fees and expenses payable by the seller and buyer at the time of a real estate closing.

commitment for title insurance
Prepared by the title insurance company, after the title is searched in the public records, indicating the status of the title and setting forth requirements to be satisfied upon closing. Such requirements may include a deed to the purchaser and a deed of trust or mortgage, satisfaction of delinquent taxes, judgments, etc., and payment and release of other encumbrances on the title.

courtesy
A husband's fractional life or fee estate in the property of his deceased wife. By statute, in most states it is a life estate or fee simple in one third of the land the wife owned during their marriage.

deed
A written instrument duly executed, acknowledged and delivered for the purpose of conveying title to real estate.

deed of trust
A conveyance of title to land by a maker of a note (borrower/owner) to a third party, a trustee, as collateral security for the payment of the note with the condition that the trustee shall re-convey the title to the borrower upon payment of the note, and with power in the trustee to sell the land and pay the note in the event of a default on the part of the borrower.

defect in title
Any recorded instrument that would prevent a grantor from giving a clear title. discount points Amounts paid to the lender (usually by the borrower) at the time of origination of a loan, to account for the difference between the market interest rate and the lower face rate of the note.

dower
A fractional estate for life or fee simple to which a married woman by statute is entitled on the death of her husband. In most states, it is a life or fee estate of one third of the value of all land which the husband owned during their marriage.

easement
A privilege or right to use or enjoyment which one person may have in, on, over and across the lands of another. For example, a right-of-way for utility lines, joint driveways, etc. An appurtenant easement is an easement which benefits another parcel of real estate and is usually for access to and from that parcel.

encroachment
Trespass. A building, a part of a building, or an obstruction that physically intrudes upon, overlaps, or trespasses upon the property of another.

encumbrance
Any right or interest in land that is held by others and may lessen the value of the title to real estate. Includes outstanding mortgage loans, unpaid taxes, easements, deed restrictions, etc.

equity
The interest of value which an owner has in real estate over and above the debts against it.

escrow
An agreement between two or more parties providing that certain instruments or property be placed with a third party for safekeeping, pending the fulfillment or performance of a specified act or condition. Real estate settlements are sometimes referred to as escrow closings.

fee simple
An estate in which the owner is entitled to the entire property, with unconditional power of disposition (sell) during the owner's life, and which descends to the heirs upon the owner's death if the owner dies without a will (interstate) or can be devised (given to another) by will (testate).

foreclosure
A judicial or non-judicial legal process by which the owner/borrower of real estate is deprived of any interest in that property due to failure to comply with the terms and conditions of the loan. Generally, the failure to make (timely) mortgage payments will result in foreclosure.

general warranty deed
A deed containing a promise whereby the seller agrees to protect the buyer against any claims against the real estate.

grantee
The buyer of real estate.

grantor
The seller of real estate.

hazard insurance
Protects against loss caused to property by fire, some natural causes, vandalism, etc., depending on the terms of the policy.

hidden defect
Any encumbrance on a title that is not apparent in the public records; for example, unknown heirs, forged instruments, mental incompetence, infancy of a seller, etc.

lien
A charge against property making it security for the payment of a debt, judgment, mortgage, or taxes; it is a type of encumbrance.

marketable title
A title that is free and clear of objectionable liens, clouds, encumbrances or other title defects.

mechanic's lien
A lien given by law upon a building or other improvement on the land, and upon the land itself as security for the payment for labor done and materials furnished for improvement.

mortgage
An instrument recognized by law by which property is pledged to secure the payment of debt or obligation.

mortgagee
The lender under a deed of trust or mortgage, also referred to as note-holder or beneficiary.

mortgager
The owner/borrower under a mortgage/deed of trust, also referred to as borrower and grantor in the deed of trust or mortgage.

owner's policy
A title insurance policy insuring the owner against loss due to defects in title not excepted to or excluded from the policy.

partial interest
Any interest less than the whole.

perfecting title
The elimination of all claims made against a title to real estate.

plat (or survey)
A map of land made by a surveyor showing boundary lines, buildings, and other improvements on the land.

prepayment penalty
Penalty paid to the lender for payment of the debt before it becomes due.

reissue rate
A reduced title insurance premium for the owner's title insurance applicable in cases where the seller of the land had purchased an owner's title insurance policy within a specified period of time prior to the current purchase.

restriction
A limitation placed upon the use of property, contained in the deed or other written instrument in the chain of title or in local ordinances pertaining to land use. settlement agent Person or company that conducts the closing of a sale and/or finance of real estate.

special warranty deed
A deed containing a covenant whereby the seller agrees to protect the grantee (purchaser) against any claims created by the grantor (seller).

tenants by the entirety with the right of survivorship as at common law
An estate that exists only between husband and wife with equal right of possession and enjoyment during their joint lives and with the right of survivorship; i.e., when one dies, the property goes to the surviving tenant. Such ownership requires both to convey land at the same time and together, a judgment against only one does not attach as a lien against the title to the real estate, and the survivor takes title by survivorship, not be probate. Title Evidence that the owner of the land is in lawful possession thereof; evidence of ownership.

title defect
An unresolved claim against the ownership of property which prevents presentation of a marketable title. Such claims may arise from failure of the owner's spouse, or former part owner to sign a deed, current liens against the property, or an interruption in the title records to a property.

title insurance
An insurance policy that protects the holder from loss sustained by defects in the title.

title failure
Any circumstance that defeats the right of whole ownership of property by the owner of record. Title search An examination of the public records to determine the ownership and encumbrances affecting real property.

trustee
One who holds property in trust for another to secure performance of an obligation; the neutral party in a trust deed transaction.