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Abstract Of Title
A summary of the public records relating to the title to a particular piece of
land. An attorney or title insurance company reviews an abstract of title to
determine whether there are any title defects which must be cleared before a
buyer can purchase clear, marketable, and insurable title.
Acceleration Clause
Condition in a mortgage that may require the balance of the loan to become due
immediately, if regular mortgage payments are not made or for breach of other
conditions of the mortgage.
Agreement of Sale
Known by various names, such as contract of purchase, purchase agreement, or
sales agreement according to location or jurisdiction. A contract in which a
seller agrees to sell and a buyer agrees to buy, under certain specific terms
and conditions spelled out in writing and signed by both parties.
Amortization
A payment plan which enables the borrower to reduce his debt gradually through
monthly payments of principal.
Appraisal
An expert judgment or estimate of the quality or value of real estate as of a
given date.
Assumption of Mortgage
An obligation undertaken by the purchaser of property to be personally liable
for payment of an existing mortgage. In an assumption, the purchaser is
substituted for the original mortgagor in the mortgage instrument and the
original mortgagor is to be released from further liability in the assumption,
the mortgagee's consent is usually required.
The original mortgagor should always obtain a written release from further
liability if he desires to be fully released under the assumption. Failure to
obtain such a release renders the original mortgagor liable if the person
assuming the mortgage fails to make the monthly payments.
An "Assumption of Mortgage" is often confused with "purchasing
subject to a mortgage." When one purchases subject to a mortgage, the
purchaser agrees to make the monthly mortgage payments on an existing mortgage,
but the original mortgagor remains personally liable if the purchaser fails to
make the monthly payments. Since the original mortgagor remains liable in the
event of default, the mortgagee's consent is not required to a sale subject to a
mortgage.
Both "Assumption of Mortgage" and "Purchasing Subject to a
Mortgage" are used to finance the sale of property. They may also be used
when a mortgagor is in financial difficulty and desires to sell the property to
avoid foreclosure.
Binder or "Offer to Purchase to
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A preliminary agreement, secured by the payment of earnest money, between a
buyer and seller as an offer to purchase real estate. A binder secures the right
to purchase real estate upon agreed terms for a limited period of time. If the
buyer changes his mind or is unable to purchase, the earnest money is forfeited
unless the binder expressly provides that it is to be refunded. Broker
Building Line of Setback
Distances from the ends and/or sides of the lot beyond which construction may
not extend. The building line may be established by a filed plat of subdivision,
by restrictive covenants in deeds or leases, by building codes, or by zoning
ordinances.
Certificate of Title
A certificate issued by a title company or a written opinion rendered by an
attorney that the seller has good marketable and insurable title to the property
which he is offering for sale. A certificate of title offers no protection
against any hidden defects in the title which an examination of the records
could not reveal. The issuer of a certificate of title is liable only for
damages due to negligence. The protection offered a homeowner under a
certificate of title is not as great as that offered in a title insurance
policy.
Closing Costs
The numerous expenses which buyers and sellers normally incur to complete a
transaction in the transfer of ownership of real estate. These costs are in
addition to price of the property and are items prepaid at the closing day. This
is a typical list:
BUYER'S EXPENSES
- Documentary Stamps on Notes
- Recording Deed and Mortgage
- Escrow Fees
- Attorney's Fee
- Title Insurance
- Appraisal and Inspection
- Survey Charge
SELLER'S EXPENSES
- Cost of Abstract
- Documentary Stamps on Deed
- Real Estate Commission
- Recording Mortgage
- Survey Charge
- Escrow Fees
- Attorney's Fee
The agreement of sale negotiated previously between the buyer and the seller may
state in writing who will pay each of the above costs. to
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Closing Day
The day on which the formalities of a real estate sale are concluded. The
certificate of title, abstract, and deed are generally prepared for the closing
by an attorney and this cost charged to the buyer. The buyer signs the mortgage,
and closing costs are paid. The final closing merely confirms the original
agreement reached in the agreement of sale.
Cloud On Title
An outstanding claim or encumbrance which adversely affects the marketability of
title.
Commission
Money paid to a real estate agent or broker by the seller as compensation for
finding a buyer and completing the sale. Usually it is a percentage of the sale
price--6 to 7 percent on houses, 10 percent on land.
Condemnation
The taking of private property for public use by a government unit, against the
will of the owner, but with payment of just compensation under the government's
power of eminent domain. Condemnation may also be a determination by a
governmental agency that a particular building is unsafe or unfit for use.
Condominium
Individual ownership of a dwelling unit and an individual interest in the common
areas and facilities which serve the multi-unit project.
Contractor
In the construction industry, a contractor is one who contracts to erect
buildings or portions of them. There are also contractors for each phase of
construction: heating, electrical, plumbing, air conditioning, road building,
bridge and dam erection, and others.
Conventional Mortgage
A mortgage loan not insured by HUD or guaranteed by the Veterans'
Administration. It is subject to conditions established by the lending
institution and State statutes. The mortgage rates may vary with different
institutions and between States. (States have various interest limits.)
Cooperative Housing
An apartment building or a group of dwellings owned by a corporation, the
stockholders of which are the residents of the dwellings. It is operated for
their benefit by their elected board of directors. In a cooperative, the
corporation or association owns title to the real estate. A resident purchases
stock in the corporation which entitles him to occupy a unit in the building or
property owned by the cooperative. While the resident does not own his unit, he
has an absolute right to occupy his unit for as long as he owns the stock.
Deedto
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A formal written instrument by which title to real property is transferred from
one owner to another. The deed should contain an accurate description of the
property being conveyed, should be signed and witnessed according to the laws of
the State where the property is located, and should be delivered to the
purchaser at closing day. There are two parties to a deed: the grantor and the
grantee. (See also deed of trust, general warranty deed, quitclaim deed, and
special warranty deed.)
Deed of Trust
Like a mortgage, a security instrument whereby real property is given as
security for a debt. However, in a deed of trust there are three parties to the
instrument: the borrower, the trustee, and the lender, (or beneficiary). In such
a transaction, the borrower transfers the legal title for the property to the
trustee who holds the property in trust as security for the payment of the debt
to the lender or beneficiary. If the borrower pays the debt as agreed, the deed
of trust becomes void. If, however, he defaults in the payment of the debt, the
trustee may sell the property at a public sale, under the terms of the deed of
trust. In most jurisdictions where the deed of trust is in force, the borrower
is subject to having his property sold without benefit of legal proceedings. A
few States have begun in recent years to treat the deed of trust like a
mortgage.
Default
Failure to make mortgage payments as agreed to in a commitment based on the
terms and at the designated time set forth in the mortgage or deed of trust. It
is the mortgagor's responsibility to remember the due date and send the payment
prior to the due date, not after. Generally, thirty days after the due date if
payment is not received, the mortgage is in default. In the event of default,
the mortgage may give the lender the right to accelerate payments, take
possession and receive rents, and start foreclosure. Defaults may also come
about by the failure to observe other conditions in the mortgage or deed of
trust.
Depreciation
Decline in value of a house due to wear and tear, adverse changes in the
neighborhood, or any other reason.
Documentary Stamps
A State tax, in the forms of stamps, required on deeds and mortgages when real
estate title passes from one owner to another. The amount of stamps required
varies with each State.
Down Payment
The amount of money to be paid by the purchaser to the seller upon the signing
of the agreement of sale. The agreement of sale will refer to the downpayment
amount and will acknowledge receipt of the downpayment. Downpayment is the
difference between the sales price and maximum mortgage amount. The downpayment
may not be refundable if the purchaser fails to buy the property without good
cause. If the purchaser wants the downpayment to be refundable, he should insert
a clause in the agreement of sale specifying the conditions under which the
deposit will be refunded, if the agreement does not already contain such clause.
If the seller cannot deliver good title, the agreement of sale usually requires
the seller to return the downpayment and to pay interest and expenses incurred
by the purchaser.
Earnest Moneyto
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The deposit money given to the seller or his agent by the potential buyer upon
the signing of the agreement of sale to show that he is serious about buying the
house. If the sale goes through, the earnest money is applied against the
downpayment. If the sale does not go through, the earnest money will be
forfeited or lost unless the binder or offer to purchase expressly provides that
it is refundable.
Easement Rights
A right-of-way granted to a person or company authorizing access to or over the
owner's land. An electric company obtaining a right-of-way across private
property is a common example.
Encroachment
An obstruction, building, or part of a building that intrudes beyond a legal
boundary onto neighboring private or public land, or a building extending beyond
the building line.
Encumbrance
A legal right or interest in land that affects a good or clear title, and
diminishes the land's value. It can take numerous forms, such as zoning
ordinances, easement rights, claims, mortgages, liens, charges, a pending legal
action, unpaid taxes, or restrictive covenants. An encumbrance does not legally
prevent transfer of the property to another. A title search is all that is
usually done to reveal the existence of such encumbrances, and it is up to the
buyer to determine whether he wants to purchase with the encumbrance, or what
can be done to remove it.
Equity
The value of a homeowner's unencumbered interest in real estate. Equity is
computed by subtracting from the property's fair market value the total of the
unpaid mortgage balance and any outstanding liens or other debts against the
property. A homeowner's equity increases as he pays off his mortgage or as the
property appreciates in value. When the mortgage and all other debts against the
property are paid in full the homeowner has 100% equity in his property.
Escrow
Funds paid by one party to another (the escrow agent) to hold until the
occurrence of a specified event, after which the funds are released to a
designated individual. In FHA mortgage transactions an escrow account usually
refers to the funds a mortgagor pays the lender at the time of the periodic
mortgage payments. The money is held in a trust fund, provided by the lender for
the buyer. Such funds should be adequate to cover yearly anticipated
expenditures for mortgage insurance premiums, taxes, hazard insurance premiums,
and special assessments.
Foreclosureto
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A legal term applied to any of the various methods of enforcing payment of the
debt secured by a mortgage, or deed of trust, by taking and selling the
mortgaged property, and depriving the mortgagor of possession.
General Warranty Deed
A deed which conveys not only all the grantor's interests in and title to the
property to the grantee, but also warrants that if the title is defective or has
a "cloud" on it (such as mortgage claims, tax liens, title claims,
judgments, or mechanic's liens against it) the grantee may hold the grantor
liable.
Grantee
That party in the deed who is the buyer or recipient.
Grantor
That party in the deed who is the seller or giver.
Hazard
Insurance
Protects against damages caused to property by fire, windstorms, and other
common hazards.
Interest
A charge paid for borrowing money.
Lien
A claim by one person on the property of another as security for money owed.
Such claims may include obligations not met or satisfied, judgments, unpaid
taxes, materials, or labor. (See also special lien.)
Marketable Titleto
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A title that is free and clear of objectionable liens, clouds, or other title
defects. A title which enables an owner to sell his property freely to others
and which others will accept without objection.
Mortgage
A lien or claim against real property given by the buyer to the lender as
security for money borrowed. Under government-insured or loan-guarantee
provisions, the payments may include escrow amounts covering taxes, hazard
insurance, water charges, and special assessments. Mortgages generally run from
10 to 30 years, during which the loan is to be paid off.
Mortgage Commitment
written notice from the bank or other lending institution saying it will advance
mortgage funds in a specified amount to enable a buyer to purchase a house.
Mortgage Insurance Premium
The payment made by a borrower to the lender for transmittal to HUD to help
defray the cost of the FHA mortgage insurance program and to provide a reserve
fund to protect lenders against loss in insured mortgage transactions. In FHA
insured mortgages this represents an annual rate of one-half of one percent paid
by the mortgagor on a monthly basis.
Mortgage Note
A written agreement to repay a loan. The agreement is secured by a mortgage,
serves as proof of an indebtedness, and states the manner in which it shall be
paid. The note states the actual amount of the debt that the mortgage secures
and renders the mortgagor personally responsible for repayment.
Mortgage (Open-End)
A mortgage with a provision that permits borrowing additional money in the
future without refinancing the loan or paying additional financing charges.
Open-end provisions often limit such borrowing to no more than would raise the
balance to the original loan figure.
Mortgagee
The lender in a mortgage agreement.
Mortgagor
The borrower in a mortgage agreement.
Platto
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A map or chart of a lot, subdivision or community drawn by a surveyor showing
boundary lines, buildings, improvements on the land, and easements.
Points
A point is one percent of the amount of the mortgage loan.
Prepayment
Payment of mortgage loan, or part of it, before due date. Mortgage agreements
often restrict the right of prepayment either by limiting the amount that can be
prepaid in any one year or charging a penalty for prepayment. The Federal
Housing Administration does not permit such restrictions in FHA insured
mortgages.
Principal
The basic element of the loan as distinguished from interest and mortgage
insurance premium. In other words, principal is the amount upon which interest
is paid.
Quitclaim Deed
A deed which transfers whatever interest the maker of the deed may have in the
particular parcel of land. A quitclaim deed is often given to clear the title
when the grantor's interest in a property is questionable. By accepting such a
deed the buyer assumes all the risks. Such a deed makes no warranties as to the
title, but simply transfers to the buyer whatever interest the grantor has.
Real Estate Brokerto
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A middle man or agent who buys and sells real estate for a company, firm, or
individual on a commission basis. The broker does not have title to the
property, but generally represents the owner.
Refinancing
The process of the same mortgagor paying off one loan with the proceeds from
another loan.
Restrictive Convents
Private restrictions limiting the use of real property. Restrictive covenants
are created by deed and may "run with the land," binding all
subsequent purchasers of the land, or may be "personal" and binding
only between the original seller and buyer. The determination whether a covenant
runs with the land or is personal is governed by the language of the covenant,
the intent of the parties, and the law in the State where the land is situated.
Restrictive covenants that run with the land are encumbrances and may affect the
value and marketability of title. Restrictive covenants may limit the density of
buildings per acre, regulate size, style or price range of buildings to be
erected, or prevent particular businesses from operating or minority groups from
owning or occupying homes in a given area. (This latter discriminatory covenant
is unconstitutional and has been declared unenforceable by the U.S. Supreme
Court.)
Special Assessmentsto
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A special tax imposed on property, individual lots or all property in the
immediate area, for road construction, sidewalks, sewers, street lights, etc.
Special Lien
A lien that binds a specified piece of property, unlike a general lien, which is
levied against all one's assets. It creates a right to retain something of value
belonging to another person as compensation for labor, material, or money
expended in that person's behalf. In some localities it is called
"particular" lien or "specific" lien. (See lien.)
Special Warranty Deed
A deed in which the grantor conveys title to the grantee and agrees to protect
the grantee against title defects or claims asserted by the grantor and those
persons whose right to assert a claim against the title arose during the period
the grantor held title to the property. In a special warranty deed the grantor
guarantees to the grantee that he has done nothing during the time he held title
to the property which has, or which might in the future, impair the grantee's
title.
Survey
A map or plat made by a licensed surveyor showing the results of measuring the
land with its elevations, improvements, boundaries, and its relationship to
surrounding tracts of land. A survey is often required by the lender to assure
him that a building is actually sited on the land according to its legal
description.
Taxto
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As applied to real estate, an enforced charge imposed on persons, property or
income, to be used to support the State. The governing body in turn utilizes the
funds in the best interest of the general public.
Title
As generally used, the rights of ownership and possession of particular
property. In real estate usage, title may refer to the instruments or documents
by which a right of ownership is established (title documents), or it may refer
to the ownership interest one has in the real estate.
Title Insurance
Protects lenders or homeowners against loss of their interest in property due to
legal defects in title. Title insurance may be issued to a "mortgagee's
title policy." Insurance benefits will be paid only to the "named
insured" in the title policy, so it is important that an owner purchase an
"owner's title policy", if he desires the protection of title
insurance.
Title Search
A check of the title records, generally at the local courthouse, to make sure
the buyer is purchasing a house from the legal owner and there are no liens,
overdue special assessments, or other claims or outstanding restrictive
covenants filed in the record, which would adversely affect the marketability
or value of title.
Trustee
A party who is given legal responsibility to hold property in the best interest
of or "for the benefit of" another. The trustee is one placed in a
position of responsibility for another, a responsibility enforceable in a court
of law. (See deed of trust.)
Zoning Ordinancesto
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The acts of an authorized local government establishing building codes, and
setting forth regulations for property land usage.
Source: general knowledge, different
books and websites
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