Abstract (Of Title)
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.
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
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.
payment plan which enables the borrower to reduce his debt gradually
through monthly payments of principal.
An expert judgment or
estimate of the quality or value of real estate as of a given date.
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
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.
"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.
"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
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.
(See Real Estate
Building Line or
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 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
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
on Notes Cost of Abstract Recording Deed and Mortgage Documentary
Stamps on Deed Escrow Fees Real Estate Commission
Attorney's Fee Recording Mortgage
Title Insurance Survey Charge
Appraisal and Inspection Escrow Fees
Survey Charge Attorney's Fee
agreement of sale negotiated previously between the buyer and the
seller may state in writing who will pay each of the above costs.
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.
An outstanding claim
or encumbrance which adversely affects the marketability of title.
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 % on houses, 10 % on land.
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.
Individual ownership of a dwelling unit and an individual interest
in the common areas and facilities which serve the multi-unit
project. Florida has many condominium projects.
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.
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
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.
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
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
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.
Decline in value of a house due to wear and tear, adverse changes in
the neighborhood, or any other reason.
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.
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 down payment amount and will acknowledge receipt of the down
payment. Down payment is the difference between the sales price and
maximum mortgage amount. The down payment may not be refundable if
the purchaser fails to buy the property without good cause. If the
purchaser wants the down payment 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 down payment and to pay interest and expenses incurred by 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 will be forfeited or lost unless
the binder or offer to purchase expressly provides that it is
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.
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.
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.
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.
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
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
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.
party in the deed who is the buyer or recipient.
party in the deed who is the seller or giver.
Protects against damages caused to property by fire, windstorms, and
other common hazards.
Department of Housing and Urban Development. Office of
Housing/Federal Housing Administration within HUD insures home
mortgage loans made by lenders and sets minimum standards for such
charge paid for borrowing money. (See Mortgage Note)
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
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
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.
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
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
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)
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.
lender in a mortgage agreement.
borrower in a mortgage agreement.
or chart of a lot, subdivision or community drawn by a surveyor
showing boundary lines, buildings, improvements on the land, and
Sometimes called "discount points." A point is one percent of the
amount of the mortgage loan. For example, if a loan is for $25,000,
one point is $250. Points are charged by a lender to raise the yield
on his loan at a time when money is tight, interest rates are high,
and there is a legal limit to the interest rate that can be charged
on a mortgage. Buyers are prohibited from paying points on HUD or
Veterans' Administration guaranteed loans (sellers can pay,
however). On a conventional mortgage, points may be paid by either
buyer or seller or split between them.
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.
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.
Agreement of sale.
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. (See
Real Estate Broker
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.
process of the same mortgagor paying off one loan with the proceeds
from another loan.
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.)
Agreement of sale.
special tax imposed on property, individual lots or all property in
the immediate area, for road construction, sidewalks, sewers, street
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
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
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.
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
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
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 or Examination
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.
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.)
acts of an authorized local government establishing building codes,
and setting forth regulations for property land usage.