Glossary of Terms
The real estate industry
has its own unique language and, with some knowledge of this
language, you may find yourself a bit confused if you become
involved in a real estate transaction.
||Select the first letter of the word from the
list above to jump to appropriate section of the glossary.
If the term you are looking for starts with a digit or symbol,
choose the '#' link. The foregoing terms are defined
only in their real estate or title insurance contexts and
may have completely different meanings in other contexts.
For more precise definitions, you are advised to seek
- A history of all transactions shown in the public records affecting
a particular tract of land.
- A clause in a deed
of trust that allows the loan balance to be fully due and
- Adjustable Rate Mortgage
- A loan under which the interest rate is periodically adjusted,
in accordance with some market indicator, to more closely coincide
with the current rates. The extent and number of these adjustments
are agreed to at the inception of the loan.
- Ad Valorem
- Latin for according to valuation. Property
tax is an ad valorem tax based on the assessed value of the
- Adverse Possession
- The possession, by one person, or land belonging to another
in a manner deemed adverse to the interest of the owner. In most
states, by operation of law, title to the land becomes vested
in such person after a fixed number of years if the owner fails
to assert their rights.
- A written statement made under oath before a notary public or
other judicial officer.
- A legally binding contract made between two or more persons.
- The voluntary or involuntary act of transferring ownership,
title, or interest to another. Real
property is usually sold on a voluntary basis. Involuntary
alienation is the act of transferring without the owner's consent,
as in foreclosure.
- ALTA (American Land Title Association)
- The trade association of the title insurance industry, which
has adopted certain insurance policy forms to standardize coverage
on a national basis.
- Payment to reduce the principal of a debt in regular, periodic
- A report from an independent third party detailing the estimate
value of real estate.
- A right or privilege that is a part of the ownership of property,
such as a right of way to a highway across the land of another.
- (1) The valuation of real estate for purposes of taxes or special
improvement charges. (2) The amount of taxes or special improvement
charges. Special improvement charges are usually for the costs
of streets, sidewalks, sewers, etc.
- Balloon Note
- A form of promissory
note that calls for the minimum payment of principal and the
payment of interest at regular intervals. This type of note requires
a substantial final payment, which represents all the principal.
- A proceeding in U.S. District Court wherein assets of an insolvent
debtor are protected and distributed in an equitable manner.
- In a deed of trust, the party that lends the proceeds of a loan
to the grantor.
- Sometimes called preliminary certificate or commitment.
(1) a preliminary report as to the condition of a title and a
commitment to issue a title insurance policy in a certain manner
which certain conditions are met. (2) A deposit in escrow
of a small part of the purchase price of real estate as evidence
of good faith and to bind an agreement to purchase.
- Certificate of Title
- A certificate issued by a title examiner stating the condition
of a title.
- Chain of Title
- The successive ownerships of transfers in the history
of title to a tract of land.
- An adverse right or interest asserted by one party against another
or against an insurer or indemnitor. Claims may arise from
unpaid debts or taxes, as well as from hidden title defects such
as fraud, forgery, missing heirs, etc.
- Clear Title
- Real property ownership free of liens, defects, encumbrances
- Also called settlement. A meeting of all parties involved
in a property transaction during which the transaction is consummated.
- Clouded Title
- An irregularity, possible claim or encumbrance that, if valid,
would adversely affect or impair the title.
- Security that can be liquidated if the debt is not repaid.
- Also called binder.
A document issued by a title insurance company that contains the
conditions under which a policy of title insurance will be issued.
- (1) The taking of private property for a public purpose, with
compensation to the owner under the right of eminent
domain. Governmental units, railroads and utility companies
have right to condemn and take private property. (2) The
destruction by government of private property that imperils the
life, health or safety of the public.
- Conventional Loan
- A loan secured by a mortgage or deed of trust for which the
loan-to-value is within an acceptable range for a particular lending
- The transfer of title of property from one person to another.
- A formal agreement or contract between two parties in which
one party gives the other certain promises an assurances, such
as covenants of warranty in a warranty deed.
- Credit Bid
- The minimum price set by a beneficiary in a non-judicial foreclosure.
A third party bidder at a non-judicial foreclosure must offset
the beneficiary's credit bid to become the grantee in the real
property. This is usually accomplished by the third party
bidder bidding one dollar more than the credit bid.
- The setting aside of certain land by the owner and declaring
it to be for public use (e.g., streets, sidewalks and parks).
- A document through which a conveyance of property is effected
- Deed of Trust
- An instrument
used to secure payment of a debt, most often a promissory
note. A deed of trust is a specific
lien that contains three parties called the beneficiary,
(sometimes call trustor), and trustee.
- Deed Restriction
- A covenant contained in a deed imposing limits on the use or
occupancy of the real estate or the type, size, purpose or location
of improvements to be constructed on it.
- A blemish, imperfection or deficiency. A defective title
is one that is irregular and faulty.
of Housing and Urban Development
- The federal department responsible for the major housing programs
in the United States.
- Department of Veterans
- Housing loans to veterans by banks, savings and loans, or other
lenders that are guaranteed by the VA, enabling veterans to buy
a residence with little or no down payment.
- Loss in value occasioned by ordinary wear and tear, destructive
action of the elements, or functional or economic obsolescence.
- A gift of real estate made by a will.
- Dominant Estate
- The property for the benefit of which a right-of-way easement
exists across another's adjoining piece of land is said to be
the dominant estate. The land across which the easement
runs is said to be the servient estate.
- Due On Sale
- A clause in a deed
of trust that demands the entire loan balance payable in full
when the property is sold.
- Earnest Money
- A deposit of funds by the purchaser of a piece of real estate
as evidence of good faith.
- A right to use all or part of the land owned by another for
a specific purpose. An easement may, for example, entitle
its holder to install and maintain sewer or utility lines.
- Eminent Domain
- The right of a government to take privately owned property for
the public purposes under condemnation
proceedings subject to payment of its fair market value.
- Any building, improvement or structure located on one property
(such as a wall, fence or driveway) that intrudes upon the property
- Any interest, right, lien or liability attached to a parcel
of land (such as unpaid taxes or an unsatisfied mortgage) that
constitutes or represents a burden or charge upon the property.
- The market value of real property, less the amount of existing
- The reversion of property to the state when an owner dies leaving
no legal heirs, devisees or claimants.
- A method of closing a real estate transaction in which all required
documents and funds are placed with a third party for processing
- A legal restraint that stops or prevents a person from contradicting
or reneging on their previous position or previous assertions
- The study of the instruments and muniments incident to a chain
of title to determine their effect and condition in order to reach
a conclusion as to the status of the title.
- A provision to the title insurance binder or policy that excludes
liability for a specific title defect or an outstanding lien or
- To sign a legal instrument. A deed is said to be executed
when it is signed, sealed, witnessed and delivered.
- Fannie Mae (FNMA)
- See Federal National Mortgage Association.
- Fee Simple
- The absolute ownership of a parcel of land. The highest
degree of ownership that a person can have in real estate, which
gives the owner unqualified ownership and full power of disposition.
Home Loan Mortgage Corporation
- A federal agency that purchases both conventional and federally
insured first mortgages from members of the Federal Reserve
System and the Federal Home Loan Bank System.
- Federal Housing Administration
- A federal agency that insures first mortgages, enabling lenders
to lend a very high percentage of the sale price.
- Federal Tax Lien
- A general
lien that attaches to real property of a taxpayer.
A non-judicial foreclosure will not divest a federal tax lien
that is junior in priority to a foreclosing debt. After
a non-judicial foreclosure a property with an attached junior
federal tax lien can be redeemed by the Internal Revenue Service
up to 120 days from the date of foreclosure.
- See Federal
- Fixed Rate Mortgage
- A mortgage having a rate of interest that remains the same for
the life of the mortgage.
- Personal property that is attached to real property and is legally
treated as real property while it is so attached. (e.g.,
- The lender refrains from taking legal action against the borrower
on a mortgage or deed of trust that is in default. Usually
granted only when a borrower and lender have worked out an arrangement
to take care of the default at some future date.
- A legal proceeding in which real estate secured by a mortgage
of trust is sold to satisfy the underlying debt.
- Freddie Mac (FHLMC)
- See Federal
Home Loan Mortgage Corporation
- General Lien
- A general lien
is directed against a person and attaches to all of their property.
See also Specific
- Ginnie Mae (GNMA)
- See Government
National Mortgage Association.
National Mortgage Association
- A federal association working with the FHA
that offers special assistance in obtaining mortgages and purchases
mortgages in the secondary market.
- To bestow or confer, with or without compensation, a gift such
as land or money by one having control or authority over the gift.
- One to whom a grant is made
- One who makes a grant. In a deed
of trust, the party that borrowers the loan proceeds from
- Homeowners Insurance
- Real estate insurance protecting against loss caused by fire,
some natural causes, vandalism, etc., depending on the terms of
the policy. Also includes coverage such as personal liability
and theft away from home
- Homestead Exemption
- In many states, a portion of the value of real property is protected
or exempt from judgments for debts. The purpose of homestead
laws is to protect the family from eviction. In Washington
state, an automatic homestead exemption for family of their personal
residence is $30,000.
- See Department
of Housing and Urban Development.
- (1) A sorted listing in the public records of the names of parties
to recorded real estate instruments together with the book and
page number of the record.
- (2) The listing in abstract and title plants of recorded real
estate instruments in groups according to land description, know
as a geographic index.
- (3) The sorted listing in abstract and title plants, by names
of the parties, of all recorded instruments that affect but do
not describe particular real estate, such as judgments, power
of attorney, wills and probate proceeding. Such indexes
are known by various names, such as general index, judgment
index and name index.
- Any written document having a legal effect that performs a specific
- Interest Only Note
- A note where payments of interest are made with a final payment
of principal due upon maturity. Also see Balloon
- Involuntary Alienation
- See Alienation.
- The determination of a court regarding the rights of parties
in any action. A judgment of debt on a property owner can
create a lien on all of that owner's land within a certain jurisdiction.
- Judicial Foreclosure
- A method of foreclosing
property by means of court supervision. The court will
determine, usually from an appraisal,
price below which no bids will be accepted.
- Junior Mortgage
- A mortgage lower in lien priority than another.
- The right to possession and use of land for a fixed period of
time. The lease is the agreement that creates the right.
- A tenant holding a leasehold.
- A landlord; one who gives a leasehold to lessee.
- Permission to go upon or use the land of another, the permission
being a personal privilege and not constituting an interest in
- A monetary charge imposed on a property, usually arising from
some debt or obligation.
- Loan Policy
- A title insurance policy insuring a mortgagee
under a mortgage,
under a deed
or trust, against loss caused by invalidity or unenforceability
of a lien, or loss of priority of the mortgage or deed of trust.
- Lis Pendens
- A legal notice intending to bind third parties of litigation
claiming an interest in real estate.
- Market Value
- The average of 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, that 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.
- A conditional pledge of property to a creditor as security for
the payment of a debt. A mortgage is a two party agreement
comprised of a mortgagee
- Mortgage Insurance
- Insurance written by an independent mortgage insurance company
protecting the mortgage lender against loss incurred by a mortgage
default, thus enabling the lender to lend a higher percentage
of the sale price.
- The holder of a mortgage. The party to whom a mortgage
is made, generally the lender.
- A person who executes a mortgage, generally the property
- Multiple Listing
- The pooling in a central bureau of listings of properties for
sale. These listings are held individually by member real
estate brokers, with the agreement that any member may sell the
properties and, in the case of a sale, the commissions will be
divided between the broker making the sale and the broker who
listed the property.
- Non-Judicial Foreclosure
- A method of foreclosure
that does not require court action. The beneficiary on
of trust sets the minimum bid amount which is their credit
bid. Any interested parties interested in bidding must
offset the amount, usually one dollar. The sale is usually
conducted by the trustee
on the deed of trust.
- Also called promissory
note. A written promise to pay a sum of money, usually
at a specified interest rate, at a stated time to a named payee.
- Notice of Default
- An instrument
that puts the grantor on a deed
of trust on notice that their real property could be sold
a public auction if the default is not cured.
- Notice of Trustee's Sale
- An instrument
that puts the grantor on a deed
of trust on notice that their real property is schedule for
a public auction. And the default must be cured to prevent
- Owner's Policy
- A policy of title insurance insuring a owner of real estate
against loss occasioned by defects in, liens against, or unmarketability
of the owner's title.
- Plat Map
- A map dividing a parcel of land into lots, as in a subdivision.
A plat book contains the plat maps for a given area.
- One percent of the amount of the loan.
- Power Of Sale
- A clause in a deed
of trust which gives the trustee the power to sell the real
property upon orders from the beneficiary. This clause is
usually executed when the grantor
fails to make payments on the promissory
- The amount payable for an insurance policy.
- Prescriptive Easement
- A right to use another's property that is not inconsistent with
the owner's rights and that is acquired by an open, notorious,
adverse and continuous used for the statutory period.
- (1) A sum of money owed as a debt on which interest is payable.
(2) A person who empowers another to act as his representative
or agent. (3) The person having prime responsibility for
an obligation as distinguished from one who acts as a surety
- A contract containing a promise to pay a debt.
- Property Tax
- Money levied by the government against personal or real
- Purchase Money Mortgage
- Also called a carry back. A mortgage given by
a purchaser to a seller on the subject property to secure payment
of a part of the purchase price.
- Quit Claim Deed
- A deed that does not imply that the grantor holds title, but
that surrenders and gives to the grantee any possible interest
or rights that the grantor may have in the property.
- Real Estate
- Also called real property. (1) Land and anything permanently
affixed to the land, such as building, fences and those things
attached to the buildings, such as light fixtures, plumbing and
heating fixtures, or other such items that would be personal property
if not attached. (2) May refer to rights in real property
as well as the property itself.
- An instrument
- The noting in public office of the details of a legal document
(e.g., mortgage, deed of trust). When such an instrument is property
recorded, it is considered to be a matter of public record.
Legally, that means that all subsequent purchasers are deemed
to have constructive knowledge of that information.
- (1) to relieve from debt or security or abandon a right, such
as the release of a deed of trust from part or all of the encumbered
land. (2) The instrument effecting a release.
- Limitations on the use of property imposed or created by deeds
or other documents in the chain of title. A restriction
may prohibit the placement of a trailer or the color of paint
for a house.
- Riparian Rights
- The rights of owners of land bordering watercourses which relate
to the water and its use.
- Sale Agreement
- A contract entered into between a buyer and seller, setting
forth the terms, provisions and conditions of a sale of real estate.
- Sale and Leaseback
- The sale of an asset to a buyer who immediately leases it back
to the seller.
- A careful exploration and perusal of the public records in an
effort to find all recorded instruments relating to a particular
- Second Mortgage
- A mortgage ranking in priority immediately below a first mortgage.
- See Closing.
- Specific Lien
- A lien
against a specific parcel of land. See also General
- The act of process by which a person's rights are ranked below
the rights of others.
- (1) A person who agrees to be responsible for a debt or obligation
of another. (2) The pledge or agreement by which one undertakes
responsibility for the debt or obligation of another.
- A party in a deed
of trust that holds naked legal title to the property pending
the grantor paying off the underlying debt. The functions
of a trustee is to sell the property at a foreclosure auction
if requested by the beneficiary when the debt is not paid, and
- Trustee's Sale Guarantee
- When the beneficiary
orders the trustee
to foreclosure on a grantor,
the trustee must notify all junior lien holders that have an interest
in the real property. Junior lien holders are given the
opportunity to protect their interest before they are divested
by the foreclosure. If the trustee fails to notify a junior
lien holder of the foreclosure, their lien position is usually
secure. The trustee determines junior lien holders by purchasing
a Trustee's Sale Guarantee (TSG) from a title company. Like
a title policy, a TSG provides a guarantee to the trustee
and beneficiary that their report shows all junior lien holders
that require notice of the foreclosure.
- (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 right of ownership recognized and protected by the law.
- Title Covenants
- Covenants ordinarily inserted in conveyances and in transfers
of title to real estate for the purpose of giving protection to
the purchaser against possible insufficiency of the title received.
- 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
- Title Insurance Policy
- A contract of title insurance under which the insurer, in keeping
with the terms of the policy, agrees to indemnify the insurance
against loss arising from claims against the insured interest.
- Title Plant
- A geographically filed assemblage of title information that
helps in expediting title examinations, such as copies of previous
attorneys' opinions, abstracts, tax searches and copies or take-offs
of the public records.
- See Grantor.
- An insurance company that issues insurance policies to the public
or to another insurer.
- Upset Price or Bid
- A minimum price set by a court in a judicial foreclosure.
- See Department
of Veterans Affairs.
- See Market Value or Assessed Value
- The purchaser or buyer of real property in a contract for deed
or real estate contract.
- The seller of real property in a contract for deed or real estate
- Having no legal force or binding effect.
- Voluntary Alienation
- See Alienation.
- The voluntary and intentional relinquishment of a known right,
claim or privilege
- Warranty Deed
- A deed in which the grantor fully warrants clear title to the
- A testamentary disposition of property, usually in a form prescribed
by law, that takes effect upon death.
- See Forbearance.
- When an individual cannot write their name, they can indicate
their intention to sign by making an X or thumb print in the place
for their signature.
- The return on an investment or the amount of profit, stated
as a percentage of the amount invested; the rate of return.
- Laws passed by local governments regulating the size, type,
structure, nature and use of land or buildings.
- 1031 Exchange
- The Internal Revenue Code section 1031 allows the deferral of
tax when like property is exchanged.
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