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.

A B C D E F G H I J K L M N
O P Q R S T U V W X Y Z #

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 legal counsel.

- A -

Abstract: A history of all transactions shown in the public records affecting a particular tract of land.
Acceleration: A clause in a deed of trust that allows the loan balance to be fully due and payable.
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 property.
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.
Affidavit: A written statement made under oath before a notary public or other judicial officer.
Agreement: A legally binding contract made between two or more persons.
Alienation: 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.
Amortization: Payment to reduce the principal of a debt in regular, periodic installments.
Appraisal: A report from an independent third party detailing the estimate value of real estate.
Appurtenance: 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.
Assessment: (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.

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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.
Bankruptcy: A proceeding in U.S. District Court wherein assets of an insolvent debtor are protected and distributed in an equitable manner.
Beneficiary: In a deed of trust, the party that lends the proceeds of a loan to the grantor.
Binder: 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.

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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.
Claim: 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 or claims.
Closing: 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.
Collateral: Security that can be liquidated if the debt is not repaid.
Commitment: 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.
Condemnation: (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 institution.
Conveyance: The transfer of title of property from one person to another.
Covenant: 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.

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Dedication: The setting aside of certain land by the owner and declaring it to be for public use (e.g., streets, sidewalks and parks).
Deed: 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, grantor (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.
Defect: A blemish, imperfection or deficiency. A defective title is one that is irregular and faulty.
Department of Housing and Urban Development: The federal department responsible for the major housing programs in the United States.
Department of Veterans Affairs: 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.
Depreciation: Loss in value occasioned by ordinary wear and tear, destructive action of the elements, or functional or economic obsolescence.
Device: 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.

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Earnest Money: A deposit of funds by the purchaser of a piece of real estate as evidence of good faith.
Easement: 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.
Encroachment: Any building, improvement or structure located on one property (such as a wall, fence or driveway) that intrudes upon the property of another.
Encumbrance: 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.
Equity: The market value of real property, less the amount of existing liens.
Escheat: The reversion of property to the state when an owner dies leaving no legal heirs, devisees or claimants.
Escrow: A method of closing a real estate transaction in which all required documents and funds are placed with a third party for processing and disbursement.
Estoppel: A legal restraint that stops or prevents a person from contradicting or reneging on their previous position or previous assertions or commitments.
Examination: 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.
Exception: A provision to the title insurance binder or policy that excludes liability for a specific title defect or an outstanding lien or encumbrance
Execute: To sign a legal instrument. A deed is said to be executed when it is signed, sealed, witnessed and delivered.

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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.
Federal 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.
FHA: See Federal Housing Administration.
Fixed Rate Mortgage: A mortgage having a rate of interest that remains the same for the life of the mortgage.
Fixtures: Personal property that is attached to real property and is legally treated as real property while it is so attached. (e.g., chandeliers).
Forbearance: 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.
Foreclosure: A legal proceeding in which real estate secured by a mortgage or deed of trust is sold to satisfy the underlying debt.
Freddie Mac (FHLMC): See Federal Home Loan Mortgage Corporation

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General Lien: A general lien is directed against a person and attaches to all of their property. See also Specific Lien.
Ginnie Mae (GNMA): See Government National Mortgage Association.
Government National Mortgage Association: A federal association working with the FHA that offers special assistance in obtaining mortgages and purchases mortgages in the secondary market.
Grant: To bestow or confer, with or without compensation, a gift such as land or money by one having control or authority over the gift.
Grantee: One to whom a grant is made
Grantor: One who makes a grant. In a deed of trust, the party that borrowers the loan proceeds from the beneficiary.

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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.
HUD: See Department of Housing and Urban Development.

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Index: (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.
Instrument: Any written document having a legal effect that performs a specific function.
Interest Only Note: A note where payments of interest are made with a final payment of principal due upon maturity. Also see Balloon Note.
Involuntary Alienation: See Alienation.

- J -

Judgment: 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 on real property by means of court supervision. The court will determine, usually from an appraisal, an upset price below which no bids will be accepted.
Junior Mortgage: A mortgage lower in lien priority than another.

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- L -

Leasehold: The right to possession and use of land for a fixed period of time. The lease is the agreement that creates the right.
Lessee: A tenant holding a leasehold.
Lessor: A landlord; one who gives a leasehold to lessee.
License: Permission to go upon or use the land of another, the permission being a personal privilege and not constituting an interest in the land.
Lien: 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, or beneficiary 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.

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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.
Mortgage: 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 and mortgagor.
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.
Mortgagee: The holder of a mortgage. The party to whom a mortgage is made, generally the lender.
Mortgagor: A person who executes a mortgage, generally the property owner.
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.

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Non-Judicial Foreclosure: A method of foreclosure that does not require court action. The beneficiary on a deed 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.
Note: 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 the sale.

- O -

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.

- P -

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.
Points: 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 note.
Premium: 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.
Principal: (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 or endorser.
Promissory Note: A contract containing a promise to pay a debt.
Property Tax: Money levied by the government against personal or real property.
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.

- Q -

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.

- R -

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.
Reconveyance: An instrument that releases a deed of trust.
Recording: 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.
Release: (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.
Restrictions: 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.

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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.
Search: A careful exploration and perusal of the public records in an effort to find all recorded instruments relating to a particular chain of title.
Second Mortgage: A mortgage ranking in priority immediately below a first mortgage.
Settlement: See Closing.
Specific Lien: A lien against a specific parcel of land. See also General Lien.
Subordination: The act of process by which a person's rights are ranked below the rights of others.
Surety: (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.

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Trustee: 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 to execute a reconveyance (release).
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.
Title: (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 of title.
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.
Trustor: See Grantor.

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Underwriter: 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.

- V -

VA: See Department of Veterans Affairs.
Value: See Market Value or Assessed Value
Vendee: The purchaser or buyer of real property in a contract for deed or real estate contract.
Vendor: The seller of real property in a contract for deed or real estate contract.
Void: Having no legal force or binding effect.
Voluntary Alienation: See Alienation.

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Waiver: 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 real property.
Will: A testamentary disposition of property, usually in a form prescribed by law, that takes effect upon death.
Work-Out: See Forbearance.

- X -

X: 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.

- Y -

Yield: The return on an investment or the amount of profit, stated as a percentage of the amount invested; the rate of return.

- Z -

Zoning: 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.