Commonly Used Terms

Title Abstract – The condensed history of a title to a particular parcel of real estate, consisting of a summary of the original grant and all subsequent conveyances and encumbrances affecting the property and a certification by the abstractor that the history is complete and accurate.

Acre – A measure of land equal to 43560 square feet or 4840 square yards.

Adjustable Rate Mortgage (ARM) – A loan characterized by a fluctuating interest rate, usually one tied to a bank or savings and loan association cost-of-funds index.

Annual Percentage Rate (APR) – The relationship of the total finance charges associated with a loan. This must be disclosed to the borrowers by lenders in the Truth-in-Lending Act.

Appraisal – An estimate of the quantity, quality or value of something. The process through which conclusions of property value are obtained; also refers to the report that sets forth the process of estimation and conclusion of value.

Attorney Opinion of Title – An abstract of title that an attorney has examined and has certified to be, in his own opinion, an accurate statement of the facts concerning the property ownership.

Balloon Payment – A final payment of a mortgage loan that is considerably larger than the required periodic payments because the loan amount was not fully amortized.

Beneficiary – (1) the person for whom a trust operates or in whose behalf the income from a trust estate is drawn. (2) A lender in a deed of trust loan transaction.

Broker – One who acts as an intermediary on behalf of others for a fee or commission.

Building Permit – Written governmental permission for the construction, alteration or demolition of an improvement, showing compliance with building codes and zoning ordinances.

Closing Statement (HUD1) – A detailed cash accounting of a real estate transaction showing all cash received, all charges and credits made and all cash paid out in the transaction.

Commission – Payment of a broker for services rendered, such as in the sale or purchase of real property; usually a percentage of the selling price of the property.

Consideration – (1) that received by the grantor in exchange for his or her deed. (2) something of value that induces a person to enter into a contract.

Conventional Loan – A loan that requires no insurance or guarantee.

Deed – A written instrument that, when executed and delivered, conveys title to or an interest in real estate.

Easement – a right to use the land of another for a specific purpose, such as for a right-of-way or utilities; an incorporeal interest in land.

Escrow – The closing of transaction through a third party called an escrow agent, who receives funds on behalf of the broker’s principal or some other person until the consummation or termination of transaction.

FHA Loan – A loan insured by the Federal Housing Administration and made by an approved lender in accordance with the FHA’s regulations.

Grantee – A person who receives a conveyance of real property from a grantor.

Grantor – The person transferring title to or an interest in real property to a grantee.

Home Equity Loan – A loan under which a property owner uses his or her residence as collateral and can then draw funds up to a prearranged amount against the property.

Homeowners Insurance Policy – A standardized package insurance policy that covers a residential real estate owner against financial loss from fire, theft, public liability and other common risks.

Construction Loan – A short-term loan usually made during the construction phase of a building project.

Joint Tenancy – Ownership of real estate between two or more parties who have been named in one conveyance as joint tenants. Upon the death of a joint tenant, the decedent’s interest passes to the surviving joint tenant or tenants by the right of survivorship.

Judgement – The formal decision of a court upon the respective rights and claims of the parties to an action or suit. After a judgement has been entered and recorded with the county recorder, it usually becomes a general lien on the property of the defendant.

Lease – A written contract between a landlord and a tenant that transfers the right to exclusive possession and use of the landlord real property to the lessee for a specified period of time and for a stated consideration. By state law leases for longer than a certain period of time must be in writing to be enforceable.

Legal Description – A description of a specific parcel of real estate complete enough for an independent surveyor to locate it and identify it.

Levy – To assess; to seize or collect. To levy a tax is to assess a property and set the rate of taxation. To levy an execution is to officially seize the property of a person in order to satisfy an obligation.

Lien – A right given by law to certain creditors to have their debts paid out of the property of a defaulting debtor, usually by means of a court sale.

Listing Broker – The broker in a multiple-listing situation from whose office a listing agreement is initiated, as opposed to the cooperating broker, from whose office negotiations leading up to a sale are initiated. The listing broker and the cooperating broker may be the same person.

Loan Origination Fee – A fee charged to the borrower by the lender for making a mortgage loan. The fee is usually computed as a percentage of the loan amount.

Mortgage – A conditional transfer or pledge of real estate as security for the payment of a debt. Also, document creating a mortgage lien.

Mortgage Banker – Mortgage loan companies that originate, service and sell loans to investors.

Mortgagor – A borrower in a mortgage loan transaction.

Owners Affidavit – A written statement made by a seller or grantor in which the seller (1) identifies himself as, (2) certifies that since the examination of title that no defects have occurred in the title and (3) certifies that he or she is in possession of the property.

Planned Unit Development (PUD) – A planned combination of diverse land uses, such as housing, recreation and shopping, in one contained development and subdivision.

Power of Attorney – A written instrument authorizing a person, the attorney-in-fact, to act as agent for another person to the extent indicated in the instrument.

Prepaid Items – On a closing statement, items that have been paid in advance by the seller, such as insurance premiums and some real estate taxes, for which he or she must be reimbursed by the buyer, or items that buyer must pay in advance of when they are due.

Principal – The original amount of the total due and payable at a certain date.

Private Mortgage Insurance (PMI) – Insurance provided by private carrier that protects a lender against a loss in the event of a foreclosure and deficiency.

Promissory Note – a financing instrument that states the terms of the underlying obligation, is signed by its maker and is negotiable.

Recording – The act of entering or recording documents affecting or conveying interests in real estate in the County recorder’s office. Until it is recorded, a deed or mortgage ordinarily is not effective against subsequent purchasers or mortgagees.

Payoff Statement – The document signed by a lender indicating the amount required to pay a loan balance in full and satisfy the debt; used in the settlement process to protect both the sellers and the buyers interest.

Release Deed – A document that transfers all rights given a trustee under a deed of trust loan back to the grantor after the loan has been fully paid.

Satisfaction of Mortgage – A document acknowledging the payment of a mortgage debt.

Subdivision – A tract of land divided by the owner into building lots and streets according to a recorded subdivision plat which must comply with local regulations.

Subordination Agreement – A written agreement between holders of liens on a property that changes the priority or mortgage, judgement and other liens under certain circumstances.

Survey – The process by which boundaries are measured and land areas are determined; the on-site measurement of lot lines, dimensions and position of a house on a lot, including the determination of any existing encroachments or easements.

Tenancy by the Entirety – The joint ownership, recognized in some states, of property acquired by husband and wife during marriage. Upon the death of one spouse the survivor becomes the owner of the property.

Tenancy in Common – A form of co-ownership by which each owner holds an undivided interest in real property as if he or she were sole owner. Each individual owner has the right to partition. Unlike joint tenants, tenants in common have right of inheritance.

Title – the right to or ownership of land.

Title Insurance – a policy insuring the owner or mortgagee against loss by reason of defects in the title to a parcel of real estate, other than encumbrances, defects and matters specifically excluded by the policy.

Title Search – The examination of public records relating to real estate to determine the current state of the ownership.

Deed of Trust – An instrument used to create a mortgage lien by which the borrower conveys title to a trustee, who holds it as security for the benefit of the note holder.

VA Loan – A mortgage loan on approved property made to a qualified veteran by an authorized lender and guaranteed by the Department of Veteran Affairs in order to limit the lender’s possible loss.