Common Real Estate Terms
Here are some of the most common real estate-related terms. If you run across others you don’t understand, ask your attorney; he or she is your best source of thorough explanations.
Appraisal: A report made by a certified or licensed expert that states an opinion of the fair market value and quality of the property, following a personal visit and examination of the property.
Bill of Sale: An instrument conveying title to personal property.
Closing (Settlement): A meeting of the parties to the transaction at which the legal (“closing”) documents (e.g. deed, note, mortgage, affidavits) are executed and funds disbursed in accordance with the terms of the sales contract or loan commitment.
Commitment Letter: A written agreement in which the lender agrees to lend money if the borrower meets certain conditions.
Deed: The formal written document which transfers real property ownership rights from the seller to the buyer. It should contain an accurate, specific legal description of the property and is delivered at closing.
Escrow (impound): Money that is set aside so that the lender can pay taxes; hazard, flood, and mortgage insurance; and other special costs connected with owning property.
Foreclosure: When the lender gets a judgment ordering a public sale of the property to pay off the loan, because the borrower has defaulted on the mortgage payments.
Hidden Defect: Any claim on a property that does not appear in the public records, for example, an unknown heir or an unrecorded municipal utility lien.
Inspection: Examination of a property to see that it meets the standards of the contract, of the lender, and of the buyer.
Lien: A legal claim on the property that acts as a security for the payment of a debt. If the debt is not repaid as promised, the lender or the lien holder can foreclose its claim on the property and force a public sale to pay the debt.
Marketable Title: Property is said to have marketable title when the title, or rights to a property, has no problems or only minor problems that any well-informed and prudent buyer would accept.
Mortgage: A document that places a lien on property. The lender holds the lien as security for the money borrowed.
Mortgagee Policy: A title insurance policy issued to the lender. It protects the lender for the amount of the mortgage loan.
Owner’s Policy: A title insurance policy issued to a property’s owner; it protects the owner’s equity against hidden title defects.
Purchase Contract: A contract in which the buyer agrees to purchase specific property and the seller agrees to sell under stated conditions. Also called a sales contract, a binder, or an earnest money contract.
Survey: A procedure whereby land is located and measured and its boundaries are verified by a registered land surveyor.
Title: Title can refer to two things: 1) The rights of ownership and possession of a particular property; 2) The document that shows evidence of those rights.
Title Agency: Similar to other insurance agents, a title agency is authorized to issue title policies and prepare documents in connection with transactions for which it issues policies. Staff members of the title agency do not represent either party and cannot give legal advice.
Title Defect: Any legal right to a property claimed by a person other than the owner. Examples include unpaid real estate taxes or claims to the property such as those of an unknown heir.
Title Examination: An examination of legal documents located in public records which affect property to determine that a property’s seller is the legal owner.
Title Insurance: A type of insurance that protects the policyholder against loss sustained through title defects.
A type of insurance that protects the policyholder against loss sustained through title defects.