Abstract

A summary; an abridgment. Before the use of photostatic copying public records were kept by abstracts of recorded documents.

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 insurance title.

Acknowledgment

Formal declaration before a public official that one has signed a document. Prior to recording real estate legal documents, such as grant deeds and deeds of trust, a Notary Public acknowledges the person's signature on the document.

Acre

A measure of land equal to 43,560 square feet.

Action to Quiet Title

A court action to establish ownership of real property. Although technically not an action to remove a cloud on title, the two actions are usually referred to as "Quiet Title" actions.

Adjustable Rate Mortgage (ARM)

A mortgage where the interest rate is not fixed for the life of the loan. These mortgages adjust periodically based on an index that changes with market conditions. The rate of interest is the sum of the index plus a margin ( the margin remains fixed for the life of the loan). Most ARMs have periodic interest rate and payment caps, as well as a life cap. ARM's may also be referred to as AML's or VRM's.

Adverse Possession

The actual, exclusive, open notorious, hostile and continuous possession and occupation of real property under an evident claim of right or title. The time required legally to obtain title by adverse possession varies from state to state.

Agreement of Sale

An agreement between parties for the sale of real estate. In some states it is synonymous with a Purchase Agreement, Sales Agreement, or Land Contract. In Texas it is known as an Earnest Money Contract.

American Land Title Association

Title policy that assures a lender that it has the proper rights as the beneficiary on a mortgage loan.

Amortization

Gradual payment of a debt through regular installments that cover both interest and principal.

Annual Percentage Rate(APR)

A measure of the total cost of credit (interest as well as other recurrring charges) expressed as a yearly percentage rate. Because all lenders apply the same rules in calculating the annual percentage rate, it provides consumers with a good basis for comparing the cost of loans.

Appraisal and Credit Report Fees

These fees are generally collected by the lender and paid to outside companies performing the services.

Appraised Value

An expert option of the value of a property at a given time, based on facts regarding the location, improvements, etc., of the property and surroundings.

Appraisal Report

Estimate of real estate value, presumably by an expert. An appraisal evaluates the property at a given time based on facts regarding the location, improvements, neighborhood and comparable sales. Generally, the value is based on three approaches: cost, market and income.

Appreciation

Increase in value or worth of property.

Arrears

Payment made after it is due is in arrears. Interest is said to be paid in arrears since it is paid to the date of payment rather than in advance.

"As Is"

A clause that is sometimes used in the transfer of property. It means that the present property is being transferred with no guarantee or warranty provided by the seller.

Assessed Valuation

Value placed on real estate by governmental assessors as a basis for levying property taxes; not identical with appraised or market value.

Assignment

Transfer of a contract from one party to another.

Assumption

New owner assumes the responsibility for repaying an existing mortgage. Both FHA and VA loans are fully assumable. Some adjustable rate mortgages may be partially assumable, but the new owners may be required to re-qualify for the loan.

Balloon Loan

Mortgage in which the remaining principal balance becomes fully due and payable at a predetermined time. Most of the time, balloon loans have level payments unitl the note becomes due and payable.

Balloon Payment

The final payment of a mortgage which is larger than the regular payment; it usually extinguishes the debt.

Bankruptcies

A court action to restructure debt.

Basis

Original cost of property plus value of any improvements put on by the seller minus the depreciation taken by the seller.

Beneficiary

The lender named on the mortgage note. One entitled to the proceeds of property held in trust; also proceeds of wills, insurance policies, or trusts.

Bill of Sale

Written agreement transferring personal property from one person to another.

Blanket Mortgage

A mortgage covering more than one property of the mortgage.

Bond

A debt instrument in the capital markets. The US government, corporations and municipalities use bonds to raise money. Bonds can also be backed by real estate loans and the payments from mortgages.

Bridge Financing

A form of an interim loan, generally made between a short term loan and a long term loan when the borrower needs additional time before obtaining permanent financing.

Broker

A person that represents another for a fee in real estate transactions. Real Estate brokers help consumers locate suitable real estate and are paid a fee for their services.

Building Line or 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 subdividion, by restrictive covenants in deeds or leased, by building codes, or by zoning ordinances.

Buydown

An interest rate buydown is the temporary reduction of the note rate and resulting monthly payments a borrower pays to the lender. The shortfall between the rate on the note and initial payment made by the borrower is usually paid by a third party such as a seller or builder.

Buyer's Broker

Agent who takes the buyer as a client, and is obligated to represent their interest above all others, and owes specific fiduciary duties to the buyer.

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Capital

Accumulated wealth. A portion of wealth which is set aside for the production of additional wealth; specifically, the funds belonging to the partners or shareholders of a business, invested with the expressed intention of their remaining permanently in the business.

Caveat Emptor

A legal term meaning "let buyer beware".

Certificate of Title

A certification issued by a title company or a written opinion rendered by an attorney that the seller has good marketable and isnurable title to the property which he is offering for sale. A certificate of title offers no protection against any hiden defects in the title which an examination of the public 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.

Chain of Title

The chronological order of conveyance of a parcel of land from the original owner to the present owner.

Closing

Conclusion of a real estate sale where the title of the property is transferred to the new owners and funds are transferred to the appropriate parties ( seller, old lender, real estate broker, etc.).

Closing Agent

A neutral third party that facilities the closing of a real estate transaction. The closing agent can be an escrow company, title company or attorney.

Closing Costs

Expenses incurred by the buyer/borrower and the seller in a real estate or mortgage transaction. There can be non-recurring costs that include a one time charge for points, appraisal fees, etc. or a proration of recurring costs such as taxes and insurance incurred while the new buyer/borrower owns the real estate.

Closing Statement

Statement prepared for the buyer and seller itemizing all of the costs of a real estate transaction.

Cloud on Title

An outstanding claim or encumbrance which, if valid, adversely affects the marketability of title.

Comercial Property

Property intedned for use by all types of retail and wholesale stores, office buildings, hotels and service establishments.

Commission

Fee paid to a broker or other entity for services rendered. Real estate brokers and mortgage brokers receive a commission for the services they provide; a real estate broker secures a buyer for a property that is for sale and a mortgage broker secures a mortgage loan for the buyer to finance the purchase of a property. Commissions are generally paid as a percentage of the sales price in a real estate transaction or the loan amount in a mortgage transaction.

Commitment

A written promise to make or insure a loan for a specified amount and on specified items.

Common Law

Rules based on usage as demonstrated by decrees and judgments from the courts.

Community Property

Property owned jointly by husband and wife.

Comparables

Properties which are similar in value to a particular property and are used as comparisons to determine the fair market value of a specified property.

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.

Conditional Commitment

A lenders promise to issue a loan subject to certain conditions. Generally, the lender will not fund the loan until the conditions have been met.

Conditional Offer

Purchase offer in which the buyer proposes to purchase property only after certain events (sale of another home, finding a loan commitment, etc.) occur.

Condominium

A structure of two or more units, the interior space of which are individually owned.

Consideration

Anything of value given to induce another to enter into a contract. Earnest money deposit on a sales contract is consideration.

Construction Loan

Short-term financing for real estate construction. Generally followed by long term financing called a "take out" loan issued upon completion of construction.

Contingency

Condition which must be satisfied before the buyer can consummate the purchase of a property. Contingencies are generally outlined in the purchase contract between the buyer and seller.

Contract of Purchase

An agreement between parties for the sale of real estate. In some states it is synonymous with a Purchase Agreement, Sales Agreement, or Land Contract. In Texas it is known as an Earnest Money Contract.

Contract of Sale

A purchase transaction in which the buyer receives possession of the property, but the seller retains title.

The full purchase price as stated in the contract.

Conventional Loan

A mortgage loan that is not guaranteed or insured by the government. FHA and VA loans are not conventional loans.

Convertible ARMs

ARMs that have a provision allowing the borrower to convert the mortgage to a fixed rate term. The conversion feature is outlined in the mortgage note and has certain restrictions.

Conventional Mortgage

A loan neither insured by the FHA nor guaranteed by the VA.

Counteroffer

A new offer made as a result of another offer, which cancels the original offer

Covenant

An agreement written into deeds and other instruments promising performance or nonperformance of certain acts or stipulating certain uses or nonuses of the property.

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Declaration of Restrictions

A set of restrictions filed by a subdivider to cover an entire tract or subdivision.

Dedication

The voluntary giving of private property to some public use by the owner, as teh dedicatin of land for streets, schools, etc., in a development.

Deed

Formal written document transferring title to real estate; a new deed is used for each transfer. 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. (See also deed of trust, general warranty deed, quitclaim deed, and special warranty deed.)

Deed of Trust

An instrument given by the borrower to a third party (trustee) vesting title to the property in the trustee as security for the borrower's repayment of the mortgage loan.

Deed of Trust Rider

The document required by the lender to be recorded along with the security instrument for an ARM.

Deed Restriction

Restrictions placed on use of real property by writing in a deed to control use and occupancy of the property by future owners.

Default

Failure to make mortgage payments or violations other provisions of the mortgage note.

Defective Title

Title to real property which lacks some of the elements necessary to transfer good title. Title to a negotiable instrument obtained by fraud.

Deficiency Judgment:

Personal claim against the debtor when the sale of foreclosed property does not yield sufficient proceeds to pay off the loan(s) and accrued interest.

Deposit

Also called Earnest Money Deposit, the deposit is 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 down payment. If the sale does not go through, the earnest money deposit will be forfeited to the seller unless the purchase contract expressly provides conditions for its return to the buyer.

Depreciation

Decrease in value to real property improvements due to wear and tear, adverse changes in the neighborhood, or any other reason.

Devise

Real Estate left by will.

Devisee

One to whom real estate is given by will.

Devisor

A testator who leaves real estate.

Direct Endorsement

A lender that can complete the processing and closing of an FHA loan without prior approval from FHA.

Direct Reduction Mortgage

An amortized mortgage in which principal and interest are computed on the remaining balance.

Discount

A loan funded below par (100%). Lenders or investors will fund loans at a discount in order increase the overall yield on the note.

Discount

A loan funded below par (100%). Lenders or investors will fund loans at a discount in order to increase the overall yield on the note.

Disbursements

Payments made during the course of an escrow or at closing.

Documentary Tax Stamps

Stamps affixed to a deed showing the amount of transfer tax. In Nebraska the documentary tax is $1.75 for each thousand dollars of the selling price.

Dower

The rights of a widow to a portion of her deceased husband's property.

Down Payment

Cash to be paid by the buyer at closing to consummate a real estate transaction. Down payment is the difference between the sales price and the mortgage amount.. Buyer cash required at closing includes the down payment, closing costs and prepaid expenses.

Dragnet Clause

A clause in a mortgage or deed of trust which places the real estate as security for existing debts between the parties.

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Earnest Money

The earnest money is 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 down payment. If the sale does not go through, the earnest money deposit will be forfeited to the seller unless the purchase contract expressly provides conditions for its return to the buyer.

Easement

A right-of-way created by grant, reservation, agreement, prescription or necessary implication which one has in land owned by another.

Eminent Domain

A government right to acquire private property for public use by condemnation and the payment of just compensation.

Encroachment

Unauthorized intrusion of a building or improvement such as a wall, fence, etc. onto another's land.

Encumbrance

A legal right or interest in land that affects a good or clear title and may diminish 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 the transfer of real property. It is up to the buyer to determine whether to purchase with the encumbrance.

Equity

The market value of the property less the homeowner's unpaid mortgage balance and any outstanding liens or other debts against the property.

Escheat

Reversion of property to the State by reason of failure to find persons legally entitled to hold or lack of heirs. The State must try to find heirs.

Escrow

The deposit of instruments and/or funds into the care of a neutral third party with instructions to carry out the provisions of an agreement or contract once all instruments and/or funds have been deposited. Many closings are handled by escrow agents. In this situation, the seller deposits the deed and the buyer deposits the funds necessary with the escrow agent. Once all requirements of the purchase contract are in the control of the escrow agent, the money and deed are distributed accordingly.

Escrow Payment

That portion of a mortgagor's monthly payment held in trust by the lender to pay for taxes, mortgage insurance, hazard insurance, lease payments and other items as they become due. Also known as "impounds" in some states.

Escrow Reimbursement

The buyer reimburses the seller for the current balance of his escrow (or impounded) funds.

Estate at Will

Possession of property at the discretion of the owner.

Estate for Years

Tenant has rights in real property for a designated number of years.

Estimated Closing Costs Statement

The statement which lists the financial settlement between buyer and seller and the costs each must pay. A separate statement for buyer and seller is sometimes prepared.

Estoppel

An impediment to a law of action, whereby one is forbidden to contradict or deny one's own previous statement or act.

Exclusive Agency

Listing agreement in which only the listing office may sell the property and earn the commission. If the owner sells the house, the listing office would not receive any commission.

Exclusive Right-to-Sell

Listing agreement under which the owner promises to pay a commission if the property is sold during the listing period by anyone, even the owner.

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