Terms to Know

Title & Settlement Jargon Made Simple

A

Abstract

An abbreviation of the cardinal aspects of all recorded deeds, mortgages, leases and other instruments affecting the title to a particular piece of land.

Adverse Possession

The unauthorized occupation of land belonging to another, by a person who does not have the consent of the owner. Said occupier is said to hold possession adversely to the rights and interests of the owner. In most states, by operation of law, title to the land becomes vested in such occupier after a fixed number of years of peaceful occupancy.

 

ALTA

American Land Title Association, the national trade association for the title insurance industry. ALTA member companies include businesses that conduct your closing and issue you an Owner’s Policy of Title Insurance.

Amortization

This term has developed through French and Old English from the Latin words “mors” or “mort” meaning death or dead. It is the killing off of an existing debt by regular partial payments.

APR

Annual Percentage Rate. The yearly interest percentage of a loan as expressed by the actual rate of interest paid.

Appraisal

An estimate of value of property from analysis of facts about the property; an opinion of value.

B

Broker

One who acts as an agent for another in negotiating sales or purchases in return for a fee or commission.

C

Chain of Title

Beginning with a conveyance out of an original source of title such as a government, each succeeding deed, will or other medium which conveys and transfers the title to succeeding owners constitutes a link in the chain of title. The chain of title is the composite of all such links.

Claim

A right to assert, or the assertion of, a demand for payment of money due; or the surrender or delivery of possession of property or the recognition or some right. A demand for something as one’s rightful due.

Closing

In some areas called a “settlement.” The process of completing a real estate transaction during which deeds, mortgages, leases and other required instruments are signed and/or delivered, an accounting between the parties is made, the money is disbursed, the papers are recorded, and all other details such as payment of outstanding liens and transfer of hazard insurance policies are attended to.

Closing Disclosure

The five-page Closing Disclosure must be provided to the consumer three business days before they close on the loan. The Closing Disclosure details all of the costs associated with their mortgage transaction.

Consummation

Consummation is not the same thing as closing or settlement. Consummation occurs when the consumer becomes contractually obligated to the creditor on the loan, not, for example, when the consumer becomes contractually obligated to a seller on a real estate transaction.

Contract

Same as “agreement,” but usually more formal.

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.

D

Deed

A written document by which title to real estate is conveyed from one party to another.

Defect

A blemish, imperfection or deficiency. A defective title is one that is irregular and faulty.

E

Earnest Money

Down payment or a small part of the purchase price made by a purchaser as evidence of good faith.

Easement

A right held by a person to enjoy or make limited use of another’s real property.

Endorsement

Addition to or modification of a title insurance policy that expands or changes coverage of the policy, fulfilling specific requirements of the insured.

Escrow

Technically, this term strictly refers to a deed delivered to a third person to be held by him until the fulfillment or performance of some act or condition by the grantee. In the title industry, it means the depositing with an impartial third party (typically an escrow agent or title company) of anything pertaining to a real estate transaction including money and documents of all kinds. The money and documents are to be disbursed and delivered to the rightful parties by the escrow agent or title company when all conditions of the transaction have been met.

Escrow Agreement

A written agreement usually made between buyer, seller and escrow agent, but sometimes only between one person and the escrow agent. It sets forth the conditions to be performed incident to the object deposited in escrow, and gives the escrow agent instructions with respect to the disposition of the object so deposited.

Estate

(1) A sizable piece of rural land usually with a large house and other pretentious improvements. (2) The whole of one’s possessions, especially all of the property, assets, debts, and liabilities left by a deceased or bankrupt person. (3) The nature and extent of an owner’s rights in real estate.

Examination

In title industry terms, to peruse and study the instruments in a chain of title and to determine their effect and condition in order to reach a conclusion as to the status of the title.

Exceptions

Insurance policies include a list of items excluded from coverage. Items excluded from coverage can be found in section two of Schedule B of the policy.

F

Foreclosure

A legal proceeding for the collection of real estate mortgages and other types of liens on real estate, which results in cutting off the right to redeem the mortgaged property and usually involves a judicial sale of the property to pay the mortgage debt. 

H

Hazard Insurance

Real estate insurance protecting against fire, some natural causes, vandalism, etc., depending upon the policy. The buyer often adds liability insurance and extended coverage for personal property

J

Judgment

A conclusion or determination by a court of law usually awarding the payment of money or relief of some kind to one of the parties to a lawsuit. 

L

Lien

The liability of real estate as security for payment of a debt. Such liability may be created by contract, such as a mortgage, or by operation of law, such as a mechanics lien.

Lis Pendens

A pending lawsuit. A lis pendens notice is legal notice to the world that a lawsuit is pending.

Loan Policy

A policy of title insurance issued to the mortgage lender insuring against loss by defects in, liens against, or unmarketability of title.

M

Marketable Title

A title that a court of equity considers to be so free of material defects and liens that it will force the title’s acceptance by questioning purchaser. Also known as a merchantable title.

Market Value

An average between 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, which 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.

Mortgage

A temporary conditional pledge of property to a creditor as security for the payment of a debt that may be cancelled by payment. 

O

Owner's Policy

This policy is purchased for a one-time fee and protects a homeowner’s investment in a property for as long as they or their heirs have an interest in the property. Only an owner’s policy protects the buyer should a covered title problem arise with the title that was not found during the title search. Possible hidden title problems can include errors or omissions in deeds, mistakes in examining records, forgery and undisclosed heirs.

P

Power of Attorney

A legal instrument authorizing one to act as another’s agent or attorney.

Preliminary Title Report

A report prepared prior to issuing a title insurance policy that shows the ownership of a specific parcel of land. It includes information about liens and encumbrances that will not be covered under a title insurance policy.

Premium

The amount payable for an insurance policy.

Promissory Note

A written promise to pay or repay a specified sum of money at a stated time, or on demand, to a named person. In addition to the payment of principal, a promissory note usually provides for the payment of interest.

Public Records

The transcriptions in a recorder’s office of instruments that have been recorded, including the indexes pertaining to them.

R

Record Title

The aspects of a title that appear in the public records as distinguished from unrecorded title aspects and interests.

Refinance Rate

When referring to title insurance, the refinance rate is the reduced rate for a loan policy issued on the new loan in a refinance transaction, in which the original loan was previously insured within some period of years.

 

Reissue Rate

When referring to title insurance, the reissue rate is the reduced rate for an Owner’s Policy of title insurance issued on a property that was previously insured within some period of years. In some states, the term is also used for a refinance rate.

S

Search

A careful exploration and inspection of the public records in an effort to find all recorded instruments relating to a particular chain of title.

Settlement

In some areas called a “closing.” The process of completing a real estate transaction during which deeds, mortgages, leases and other required instruments are signed and/or delivered, an accounting between the parties is made, the money is disbursed, the papers are recorded, and all other details such as payment of outstanding liens and transfer of hazard insurance policies are attended to.

Special Warranty Deed

A deed that warrants the title only with respect to acts of the seller and the interests of anyone claiming by, through, or under him.

Survey

(1) To determine the location, boundaries, area, or the elevations of land and structures upon the earth’s surface by means of courses in relation to the North Star, and the measuring of angles and distances by using the techniques of geometry and trigonometry. (2) The map or plat drawn by a surveyor that represents the property surveyed and shows the results of a survey.

T

Tax Lien

The lien that is imposed upon real estate by operation of law that secures the payment of real estate taxes.

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 Committment

An offer to issue a title insurance policy. The title commitment will describe the various conditions, exclusions and exceptions that will apply to that particular policy.

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 Examination

To peruse and study the instruments in a chain of title and to determine their effect and condition in order to reach a conclusion as to the status of the title.

 

Title Insurance

Insurance that protects purchasers of real estate and mortgages against loss from defective titles, liens and encumbrances.

Title Search

A search and perusal of the public records for recorded instruments that affect the title to a particular piece of land.

U

Underwriter

An insurance company that issues insurance policies either to the public or to another insurer.