Some Useful Terms

Abstract of Title 
A condensed history or summary of all transactions affecting a tract of land.

Balloon payment 
A scheduled payment due at the end of a loan term that is substantially greater than the regular monthly payments.

 

Beneficiary
The person or financial institution that you name in a life insurance policy to receive the proceeds.

Blanket Mortgage/Trust Deed
A mortgage or trust deed that covers more than one lot or parcel of real property, and often an entire subdivision. As individual lots are sold, a partial reconveyance from the blanket mortgage is obtained.

Bona Fide Purchaser
One who buys property in good faith, for fair value, and without notice of any adverse claim or right of third parties.

Buydown
A payment to the lender from the seller, buyer, third party, or some combination of these, causing the lender to reduce the interest rate usually for the first one to five years of the loan.

CC&R - Declaration of Covenants, Conditions and Restrictions
The CC&R declarations are a set of rules designed to protect the value of your property and that of your neighbors. Also known as deed restrictions, CC&R declarations are contractual limitations of your rights as a property owner. These restrictions were placed on your property deed, filed with County, and made a condition of the purchase of your lot by the original developer. These restrictions are passed on to any new owner, because they are attached to the property deed.

Certificate of Title
In areas where attorneys examine abstracts or chains of title, a written opinion, executed by the examining attorney, stating that title is vested as stated in the abstract.

Close of Escrow
The date the documents are recorded and title passes from Seller to Buyer. On this date, the Buyer becomes thCloud on Title
An irregularity, claim, or encumbrance which could adversely affect or impair the title.

Commitment
A binding contract with a title company to issue a specific title policy, showing only those exceptions contained in the commitment and any intervening matters after the date of the commitment and prior to the effective date of the policy. The commitment contains all information included in the preliminary title report, plus a list of the title company's requirements to insure the transaction. It also includes the standard exceptions from coverage that will appear in the policy.

Conveyance
An instrument in writing, such as a deed or trust deed, used to transfer (convey) title to property from one person to another.

Covenant
(1) A formal agreement or contract between two parties in which one party gives the other certain promises and assurances. (2) Agreements or promises contained in deeds and other instruments for performance or nonperformance of certain acts, or use or nonuse of property in a certain manner

Deed of Trust or Trust Deed
A written document by which the title to land is conveyed as security for the repayment of a loan or other obligation. It is a form of mortgage. The landowner or debtor is called the “trustor.” The party to whom the legal title is conveyed (and who may be called on to conduct a sale if the loan is not paid) is the “trustee.” The lender is the “beneficiary.”

Defective Title
(1) Title to a negotiable instrument obtained by fraud.
(2) Title to real property which lacks some of the elements necessary to transfer good title.

Easement 
A right or interest in the use of the land which entitles the holder to some use or privilege, such as to place pole lines, pipe lines or roads on the property.

Encroachment
The presence of an improvement such as a building, wall, fence or other fixture which overlaps onto the property of an adjoining owner.

Endorsement
Addition to or modification of a title insurance policy which expands or changes coverage of the policy, fulfilling specific requirements of the insured.

Equity
The interest or value which an owner has in real estate over and above the debts against it.

Escrow
1) A procedure whereby an independent third party handles legal documents and funds on behalf of a seller and buyer. 2) Money that is kept by the mortgage company to ensure that taxes can be paid in full when due. This is paid up front at settlement and is added to the mortgage payment monthly over the principal and interest.

Forfeiture of Title 
A common penalty for the violation of conditions or restrictions imposed by the seller upon the buyer in a deed or other proper document.

Lien
A claim upon a piece of property for the payment or satisfaction of a debt or obligation.

Note
A written promise to pay a certain maount of money, at a certain time, or in a certain number of installments. It usually provides for payment of interest and its payment is at times secured by a mortgage.

Real Estate Settlement Procedures Act (RESPA)
A consumer protection law that requires lenders to give borrowers advance notice of closing costs.

Title
A document that gives evidence of an individual's ownership of property.

Title Insurance
A policy, usually issued by a title insurance company, which insures a home buyer against errors in the title search. The cost of the policy is usually a function of the value of the property, and is often borne by the purchaser and/or seller. Policies are also available to protect the lender's interests.

Title Insurance Binder or Commitment
A report issued by a title insurance company binding or committing the title insurance company to issue the form of policy designated in the commitment or binder upon compliance with and satisfaction of requirements set forth in the commitment or binder.

Title Search
An examination of public records and court decisions to determine the legal ownership of property. Usually performed by a title company.

Wraparound Mortgage
Results when an existing assumable loan is combined with a new loan, resulting in an interest rate somewhere between the old rate and the current market rate. The payments are made to a second lender or the previous homeowner, who then forwards the payments to the first lender after taking the additional amount off the top.

 

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