Terminology

A 1031 Exchange is a tax-deferred transaction outlined in Section 1031 of the Internal Revenue Code that involves exchanging “like-kind” investment or income properties. It allows eligible property owners to defer certain taxes when replacing one qualifying property with another that meets IRS requirements.

An Annual Percentage Rate (APR) is the yearly cost of a loan expressed as a percentage. It reflects the interest rate along with certain fees and costs associated with obtaining the loan, providing a more complete picture of the loan’s overall cost.

An Adjustable Rate Mortgage (ARM) is a type of mortgage in which the interest rate can change over the life of the loan. Because the interest rate may increase or decrease over time, the borrower’s monthly payment may also change.

An Abstract of Title is a summary of the recorded documents and events that affect ownership of a property, such as previous transfers, liens, and other matters found in public records. It provides a history of the property’s title and may be used as part of the title review process.

An Addendum refers to additional information or terms that are added to a legal document after it has been initially written. An addendum becomes part of the original document once agreed upon by the parties involved.

Agency is a relationship where one party authorizes another party to act on his/her behalf.

An Appraisal is a property valuation by an authorized agent, using factors (such as location and recent market value of similar properties) to determine an appropriate value.

When a property is being sold “As Is,” it means that the seller isn’t taking responsibility for the condition or repairs of the property, and is not providing any warranty.

An Assumption is an agreement in which a buyer agrees to take on the seller’s existing loan that is secured by a mortgage or deed of trust on the property. The lender typically reviews the buyer’s credit and financial qualifications before approving the transfer.

The Beneficiary is the entity who benefits from a transaction. In regards to a trust deed, a lender is the designated beneficiary, retaining benefit of the property as security for the loan. Legal title remains with the borrower.

A Borrower is the person or entity that receives funds from a lender to purchase, refinance, or otherwise finance real property. The borrower is responsible for repaying the loan according to the terms of the loan agreement.

A Buyer-Broker Agreement is a written agreement in which a prospective buyer hires a broker to help locate real estate that meets the buyer’s preferred type, terms, and conditions as described in the agreement.

CC&Rs are limits and rules placed on a group of residences (homes, condominiums, etc.) by a governing group (builder, developer, neighborhood association, or homeowners association). These are generally an enforceable contract.

Chain of Title refers to the historical sequence of transfers of title to a property from the original owner (often the government) to the present owner. Reviewing the chain of title helps identify the property's ownership history and any issues that may affect the transfer of ownership.

Clear Title refers to ownership of real property that is free from unresolved claims, liens, or other issues that could affect the owner's rights to the property. A clear title allows ownership to be transferred without known title problems that could interfere with the transaction.

The Closing Date is the date of record when title transfers from the seller to the buyer.

A Closing Disclosure is a five-page form that provides final details about the mortgage loan you have selected. It includes the loan terms, your projected monthly payments, and how much you will pay in fees and other costs to get your mortgage (known as closing costs). 

For most covered mortgage loans, the lender is required to provide the Closing Disclosure at least three business days before you close. This disclosure is required under the Final Rule of the CFPB, which went into effect on October 3, 2015.

A Closing Statement is a settlement document that shows an itemized list of all costs, fees, and credits for the buyer and seller in a real estate transaction. It provides a clear summary of the financial details required to complete the closing.

A Cloud on Title refers to any unresolved claim, issue, or restriction that may affect ownership of a property or create uncertainty about who has clear title. Resolving a cloud on title helps ensure the property can be transferred properly.

A Commission is the fee paid to a real estate broker or agent for the professional services they provide during a real estate transaction. The amount and responsibility for payment are determined by the terms of the listing or other applicable agreements.

Comparable Sales are recently sold properties that are similar to a specific property and are used to help determine its value. By comparing factors such as location, size, and features, comparable sales provide a helpful reference when estimating a property's market value.

A Contingency is a clause in a contract that states a specific conditional event must occur in order to bind the parties to the obligations in the contract.

A Contract is a document between parties that outlines the terms of an agreement for the purchase or sale of real estate. It establishes the responsibilities of each party and must generally be in writing to be legally enforceable.

Conveyance is the legal process of transferring title to a property from one owner to another.

A Counteroffer refers to a new offer made in response to an original offer, typically with changes to one or more terms before an agreement is reached.

A Covered Risk is a specific type of loss or title issue that is included within the protection provided by a title insurance policy. Coverage depends on the terms, conditions, exclusions, and exceptions listed in the policy.

A Deed is a written legal document, especially one regarding the ownership and transfer of property.

A Deed of Trust is a legal document, used instead of a mortgage, in which a trustee holds the property's title as security for a loan between the lender and borrower. The borrower remains the legal owner of the property.

Disbursement is the process of releasing and distributing funds after the requirements for closing have been completed. During a real estate transaction, funds may be disbursed to parties such as the seller, lender, real estate professionals, and other parties listed on the closing documents.

Disclosure refers to the act of making something known.

A Due on Sale Clause is a provision in a mortgage that requires the remaining loan balance to be paid in full when the property securing the loan is sold. This typically means the existing mortgage cannot be transferred to the new owner.

An Earnest Money Deposit is a sum of money a buyer includes with an offer to show they are serious about purchasing a property. The deposit is typically held in escrow and may be applied toward the purchase price or closing costs at closing.

An Easement is the legal right to use someone else's property for a specific purpose, such as access, utility lines, or drainage. While ownership of the property does not change, the easement allows certain uses as defined by law or agreement.

An Encumbrance is a legal claim, right, or restriction that affects a property's ownership or use. Common examples include liens, easements, deed restrictions, unpaid taxes, assessments, leases, and other matters that may affect the property's title.

Escrow refers to a process in which a trusted third party is responsible for managing paperwork and holding and distributing funds until the terms of a real estate contract have been completed. 

The escrow process helps protect everyone involved by making sure each party fulfills their agreed-upon responsibilities. Once all agreed-upon conditions have been satisfied, the funds and documents are released to complete the transaction.

An Escrow Account is a temporary account held by a third party on behalf of transacting parties. In real estate terms, an account held by the lender for payment of insurance, taxes, and other periodic debts during the mortgage term.

An Escrow Agent is a neutral third party responsible for holding and managing funds, documents, or other items involved in a transaction until the agreed-upon conditions have been met. In a real estate transaction, the escrow agent helps coordinate the closing process and ensures funds are distributed according to the transaction instructions.

Fair Market Value refers to the estimated price that would be agreed upon in a voluntary sale between willing buyers and sellers with equal negotiating power and a reasonable understanding of the relevant facts.

A Fixture is an item that has been securely, and sometimes permanently, attached to a home.

Funding is the process of providing and receiving the money needed to complete a real estate transaction. In a financed purchase, funding typically refers to the lender releasing loan funds after required closing conditions have been met.

A Grantee is the person or entity receiving an ownership interest in real property from another party. In a deed, the grantee is the party receiving the property interest being transferred.

A Grantor is the person or entity that transfers an ownership interest in real property to another party. In a deed, the grantor is the party giving or conveying the property interest.

A HOA is an organization of property owners in a geographic area designed to make and enforce rules for the properties within its jurisdiction. All property owners in the area are automatically members and required to pay dues/fees as dictated by the association. Duties of the association are dictated by state law.

Homeowner's Insurance is insurance that is purchased to protect the property from damage, and the property owner from loss, based on the terms of the policy.

A Homestead Exemption generally protects a primary residence from a forced sale in the case of financial hardship. It can act as an extra layer of protection for your home, although the exact protection depends on your state's laws.

Interest refers to money paid to a lender above the amount borrowed. The rate of interest reflects the time value of money, the borrower's credit risk, inflation rates and a variety of other market conditions.

A Loan Estimate (LE) is a three-page form provided after applying for a mortgage that outlines important details about the loan you are considering. It includes information such as the estimated interest rate, monthly payment, closing costs, estimated taxes and insurance, and any special features of the loan. 

The Loan Estimate is provided in a standard format to help borrowers compare different loan offers and understand the overall costs before choosing a mortgage. For most covered mortgage loans, this disclosure is required under the Final Rule of the CFPB, which went into effect on October 3, 2015.

A Legal Description is the official written description of a property used to identify its exact location and boundaries for legal documents and public records. It is different from a street address and is used when transferring or recording ownership of real property.

A Lender (also known as a creditor) is the person or institution that provides funds for a real estate loan. In a purchase transaction, the lender provides financing to the borrower and may require a lender’s title insurance policy to help protect its interest in the property.

A Lender's Title Policy is a type of title insurance that protects the lender's financial interest in a property if certain title issues are discovered after closing. It does not provide coverage for the property owner, which is why an Owner's Title Policy is purchased separately.

A Lien is a form of security interest placed on property to secure payment of a debt or fulfillment of an obligation. The property owner who grants the lien is responsible for the debt, and the person or organization that benefits from the lien is known as the lienholder.

A Listing Agreement is a contract between a real estate broker and an owner of real property, granting the broker the authority to act as the owner’s agent in the sale of the property.

A Multiple Listing Service (MLS) is a database used by real estate professionals to share information about properties that are for sale. It provides a central place for agents to access property details, pricing, availability, and other important information, helping buyers find homes and helping sellers reach a larger pool of potential buyers.

A Mortgage is a loan used to buy real estate, where the property being purchased serves as security for the loan. The borrower makes payments over time, and the lender retains an interest in the property until the loan is fully repaid.

Mortgage Insurance is an insurance policy that helps protect lenders from losses if a borrower defaults on a mortgage loan. The cost of this insurance is often paid by the borrower and may be required depending on the type of loan, the down payment amount, and other loan requirements.

The Nationwide Multistate Licensing System (NMLS) is a system used to manage licensing and registration for mortgage professionals. Each registered Mortgage Loan Officer receives a unique NMLS Number that helps regulators, lenders, and consumers identify and verify their credentials.

For an additional premium, Owner’s Extended Coverage (OEC) provides broader protection under an Owner’s Title Insurance policy. Depending on the policy, it may provide coverage for certain title issues not included in a standard owner's policy, such as covered losses related to unrecorded easements, survey matters, unpaid taxes, unrecorded mechanics' liens, the "gap" between the policy's effective date and the recording of documents, assessments, encumbrances, and other covered title defects.

An Owner's Title Policy is a type of title insurance that helps protect a property owner's ownership rights if certain covered title issues are discovered after closing. Unlike a Lender's Title Policy, it protects the homeowner's interest in the property.

An Ownership Claim is a legal right, interest, or other matter that may affect who has the right to own or transfer a property. 

During a sale, a title company reviews public records to identify potential claims, such as unpaid liens, unreleased mortgages, or unresolved ownership interests. These issues may need to be addressed before closing can be completed and clear title can be transferred to the buyer.

PITI is an acronym describing a payment that includes Principal, Interest, Taxes, and Insurance. These costs represent the primary components used to calculate the total monthly cost associated with a mortgage.

A Parcel Number is a unique identification number assigned to a specific piece of property by a local government authority, often for tax and record-keeping purposes. It is commonly used to locate property information in public records.

Points are fees associated with a mortgage loan, where one point equals 1% of the total loan amount. 

Points may be charged as an origination fee (to cover the cost of processing the loan), or as discount points (to help lower the loan’s interest rate.)

Power of Attorney refers to the authority for one person (attorney in fact) to act for another person (principal) in specified legal and/or financial matters.

A Purchase Agreement is a contractual agreement between a buyer and seller of real property, outlining the purchase price and other terms associated with the transfer of title.

A Quitclaim Deed is a legal document used to transfer or “quit” any interest a person may have in real property, without providing any warranties or guarantees of ownership.

A Re-issue Rate is a discounted title insurance premium that may be available when a previous title insurance policy was issued on the same property within a certain time period. If the property qualifies, the discount may help reduce the buyer's or owner's title insurance costs.

Real Property refers to land and anything permanently attached to it, such as a home, building, or other improvements. In a real estate transaction, real property is the property being bought, sold, or transferred, including the rights that come with ownership of the land.

Recording refers to the process of filing documents related to real property with the County Recorder to officially update the public record. This creates a record of transactions and changes that affect ownership or other interests in the property (such as ownership transfers, liens, easements, etc.).

Refinance refers to financing a property again by replacing an existing loan with a new loan, often with different terms or a lower interest rate.

Settlement is another term for the closing process in a real estate transaction. It refers to the process of completing the final requirements of a purchase or sale, including signing documents, transferring funds, and completing the steps necessary to transfer ownership of the property.

A Special Warranty Deed is a deed in which the grantor guarantees only that no title defects occurred during their ownership of the property. It does not provide a warranty or guarantee against title defects that existed before their ownership. A special warranty deed provides less protection against possible title defects than a general warranty deed.

A Subdivision is a tract of land that has been surveyed and divided into smaller lots for the purpose of sale or development. The subdivision is typically recorded with the appropriate governing authority, such as the county or local government office, to establish the legal description and boundaries of the individual lots.

Title refers to the evidence of ownership in a piece of real property. It shows who has legal ownership rights to the property and may include information about any claims, restrictions, or interests that affect ownership.

A Title Commitment is a document that outlines any liens, defects, burdens, taxes, assessments, easements, and other obligations that may affect a property’s title. It also lists the requirements that must be met before title insurance can be issued for the property.

A Title Defect is an issue or irregularity that may affect ownership rights or prevent a property’s title from being considered clear. Examples may include unresolved liens, recording errors, missing documents, or conflicting ownership claims that may need to be addressed before closing.

Title Insurance is a type of insurance that protects against certain financial losses resulting from covered defects or issues with the title to a property. There are two common types of title insurance policies:

- Lender’s Title Insurance: A policy that protects the lender against covered title issues affecting the property. This policy is often required by the lender and is typically purchased by the borrower as part of the mortgage process.

- Owner’s Title Insurance: A separate policy that protects the property owner against covered title issues that may result in financial loss or affect their ownership of the property.

A Title Professional is a person who helps review and protect property ownership rights during a real estate transaction. Their work may include researching public records, identifying potential title issues, preparing title insurance documents, and assisting with the closing process to help reduce risks related to ownership.

A Title Search is a review of property records performed to help confirm ownership and uncover potential issues that could affect a buyer’s rights to the property. The search may reveal items such as liens, ownership claims, easements, or other matters that may need to be resolved before the transaction is completed.

An Underwriter is the company behind a title insurance policy that reviews and takes responsibility for certain risks related to a property’s title. Title agencies may work with one or more underwriters to prepare and issue title insurance policies according to the underwriter’s requirements.

A Warranty Deed is a deed that transfers real estate ownership to a buyer and guarantees that the title is clear. It provides the buyer with protection against certain title claims or issues covered by the deed.