Glossary of Title Insurance Terms
AABSTRACT — In real estate, an abbreviated list of all of the recorded deeds, mortgages, leases and instruments affecting the title to a particular piece of land.
ABUT — To adjoin or share a common boundary, or share even a small portion of a boundary.
ACCESS — The right to enter and leave a tract of land from a public way, often the right to enter and leave over the lands of another.
ACRE — A measure of land totaling 43,560 square feet. A square acre is 208.75 feet on each side.
ADMINISTRATOR — A person appointed by the probate court to carry out the administration of a decedent's estate when the decedent has left no will. If a woman is appointed, she is called an administratrix.
ADVERSE POSSESSION- The possession, by one person, of 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 his or her rights.
AFFIDAVIT — A written statement made under oath before a notary public or other judicial officer.
AIR RIGHTS — The right of the landowner to the space above his land, extending upward for a reasonable distance.
APPURTENANCE — Anything that is or becomes part of the property because it is attached or closely related to the land. It may be a structure such as a well, barn or garage; or it may be a right or interest enjoyed by the previous owner, such as an easement.
APPRAISAL — A written analysis of the estimated value of a property prepared by a qualified appraiser.
ASSESSMENT — The estimating of value of property for tax purposes, or a charge against real estate made by a unit of government or a condo association to cover the proportionate cost of an improvement such as streets, sewers, etc.
ASSESSOR — Municipal or county official who determines the value of property for taxation.
ATTORNEY IN FACT — A person given the right or authority to act on behalf of another to carry out business transactions and implement documents.
BILL OF SALE — An invoice signed by the seller reciting that he has sold to the buyer the personal property therein described.
BOUNDARIES — The perimeters or limits of a parcel of land as fixed by legal description which is usually a metes and bounds description.
BUILDING PERMIT — A document obtained from the local government, allowing for the construction of a structure in accordance with the terms of the permit.
CERTIFIED CHECK — A personal check drawn by an individual which is certified (guaranteed) to be good. The bank holds the funds to pay the certified check and will not pay any other checks drawn on the account if such payment would impede payment of the certified check. The bank also will not honor a stop payment of a certified check.
CHAIN OF TITLE — The successive ownerships or transfers in the history of title to a tract of land.
CLEAR TITLE — A title that is free of liens or legal questions as to ownership of the property.
CLOSING — The final step in the sale and purchase of a property, when the title is transferred from the seller to the buyer; the buyer signs the mortgage, pays the settlement costs, and any money due the seller or buyer is handed over
CLOSING AGENT — At the final stage in a real estate transaction, or the closing, a closing agent assures that all documentation, including sale related documents and loan/mortgage documents for the entire transaction, are completed and signed properly, including the title search and title insurance.
CLOSING COSTS — Fees paid at the time of your real estate closing, including any attorney’s fees, fees for preparing and filing a mortgage, fees for title search, taxes, and insurance, as well as origination fees, discount points, appraisal fee, survey, deed recording fee, credit report charges and other costs.
CLOSING STATEMENT — A summary, in the form of a balance sheet, showing the amounts of debits and credits to which each party to a real estate transaction is entitled at closing.
CLOUD ON TITLE — Any conditions revealed by a title search which affect the title to property; usually relatively unimportant items but which cannot be removed without a quitclaim deed or court action.
COLLATERAL — In a home loan, the property is the collateral. The borrower risks losing the property if the loan is not repaid according to the terms of the mortgage or deed of trust.
COMMERCIAL PROPERTY — Property intended for use or occupancy by businesses, rather than as a dwelling.
COMMISSION — Compensation paid to a real estate agent (usually by the seller) for services rendered in connection with the sale, exchange, or lease of property.
COMMITMENT — A document issued by a title insurance company that contains the conditions under which a policy of title insurance will be issued, also called a “binder”.
COMMON ELEMENTS — Lands or improvements on land that are designated for common use and enjoyment by all occupants, tenants or owners. A pool, tennis court, hot tub or common halls would all be part of the Common Area.
CONDITIONS AND RESTRICTIONS — A series of regulations set up by neighborhoods or housing developments that govern various construction features, such as setbacks, fence heights and types, house paint colors, etc.
CONTINGENCY — A condition that must be met before a contract is legally binding.
CONTRACT — A legally enforceable agreement between two or more competent parties made either orally or in writing.
CONVEY — To give, transfer, sell, deed or otherwise change the ownership of one's property.
CONVEYANCE — Legal term for transferring the title of a property from one party to another, typically by deed.
COVENANT — A clause in a mortgage that obligates or restricts the borrower and that, if violated, can result in foreclosure proceedings.
DEED — A written document which conveys ownership of land from one person to another.
DEED-IN-LIEU — Deeding property to the lender when a property owner is faced with an inevitable foreclosure and loss of property. The purpose is to avoid foreclosure notification being sent to the credit bureaus.
DEED OF TRUST — A type of security instrument conveying title in trust to a third party covering a particular piece of property.
DEPARTMENT OF VETERAN AFFAIRS — An independent agency of the federal government, the VA functions as a home loan guaranty program designed to encourage lenders to offer long-term, low down payment mortgages to eligible veterans by guaranteeing the lender against loss.
DESCRIPTION — Also described as a legal description, it is the exact location of a piece of real property stated in terms of lot, block, tract, part lot, metes and bounds, recorded instruments, or US Government survey.
DEVISE — A transfer of real property, usually by will or deed. In wills, “bequest” was used for personal property and “devise” for real property.
DOWER — The legal right or interest a wife acquires in property her husband held before or acquired anytime during marriage.
EARNEST MONEY — A buyer's partial payment to the seller as a show of good faith in completing the transaction.
EASEMENT — The right to use the land of another for a specific limited purpose. Examples include utility lines, driveways, and ingress and egress. Easements can be temporary or permanent.
EMINENT DOMAIN — The right of the government or a public utility to acquire property for necessary public use with proper compensation to the owner.
ENCROACHMENT — An 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.
ENCUMBRANCE — Any right to, or interest in, land that effects its value including outstanding loans, unpaid taxes, easements, or deed restriction also called a cloud on title.
ENTIRETY, TENANCY BY — A type of joint ownership of property available only to a husband and wife, which essentially provides an automatic right of survivorship.
ESCROW — The depositing of money or documents from a real estate transaction with an impartial third party (escrow agent), to be disbursed to the rightful party when all conditions of the transaction have been met.
ESTATE — All that a person or entity owns, including both real and personal property. Also, the property that one leaves after death, his collective assets and liabilities.
EXAMINATION OF TITLE — An inspection by a title company of public records and other documents to determine the chain of ownership of a property.
EXCEPTION — A provision in a title insurance policy that excludes liability for a specific title defect or an outstanding lien or encumbrance.
EXECUTOR — A person assigned to carry out the provisions of a will.
FAIR MARKET VALUE — The price a property will bring given that both buyer and seller are fully aware of market conditions and comparable properties.
FANNIE MAE — (Federal National Mortgage Association, FNMA) A government sponsored corporation owned solely by private investors, Fannie Mae operates under a congressional charter that directs their efforts to increase the availability and affordability of homeownership for low, moderate, and middle income Americans.
FEDERAL HOUSING ADMINISTRATION — (FHA) Assists home buyers by providing mortgage insurance to lenders to cover most losses that may occur if a borrower defaults. This encourages mortgage lenders to make home loans to borrowers who might not qualify for conventional mortgage loans.
FEDERAL TAX LIEN — An encumbrance registered on title to a property securing a tax debt owed by the property owner to the national government.
FEE SIMPLE — Outright true ownership of real estate, free of mortgages, liens or other claims against title.
FHA LOAN — A loan that is insured by the Federal Housing Authority. This type of loan is geared toward providing moderate to low income families mortgages, and is subject to the qualifying guidelines set forth by the Federal Housing Authority.
FIDUCIARY — A person who has a legal and ethical duty to act in the best interests of another person. Examples include an executor or a guardian.
FINANCE CHARGE — A finance charge is any fee or charge representing the cost of credit, or the cost of borrowing. It includes not only interest but other charges as well, such as transaction fees.
FIRST MORTGAGE — The mortgage that is in the first lien position. This means that should the property be foreclosed (or more typically when the property is sold), the first lien gets paid before any other liens.
FREE AND CLEAR TITLE — Title to real property which is absolute, unencumbered by any liens, mortgages, clouds or other encumbrances.
FRONTAGE — The extent of a building or of land along a road or a waterway.
GOVERNMENT SURVEY — The survey from which our present land description system of sections, townships, ranges, etc. was developed.
GRANT — The act of giving title to another.
GRANTEE — A person to whom a grant is made, or the person named in a deed to receive title to property.
GRANTOR — Person selling, granting, transferring or conveying property.
GUARDIAN — An individual appointed by the courts who is authorized to make legal and financial decisions for another individual.
HEIR — One who inherits the estate or property of another.
HOLD HARMLESS CLAUSE — A provision in a contract that relieves a party to the contract from liability.
HOMEOWNER’S ASSOCIATION — A group of homeowners within a community, neighborhood or complex who make decisions, pay to maintain and repair land and common areas and/or enforce community rules and covenants.
HOMESTEAD — The real estate occupied by the owner as his home. Also a property tax exemption in Michigan – claiming homestead on your primary residence substantially decreases the amount you pay in property taxes. Some states grant statutory exemptions, protecting homestead property against the rights of creditors.
HUD — (Department of Housing and Urban Development) HUD is a U.S. governmental agency which works to create decent homes and suitable living environments for all Americans. It does this by addressing housing needs, improving and developing American communities, and enforcing fair housing laws. A HUD statement (also known as a HUD-1 or settlement statement) is a summary of the financial portion of the real estate transaction required by the Department of Housing and Urban Development.
IMPOUND ACCOUNT — (Escrow Account) A reserve account often required by lenders to cover future payments of taxes, lease rent, insurance, etc.
INCOME PROPERTY — Real estate owned, operated, developed or improved to produce income rather than used as a primary residence for the owner.
INDEMNITY — Insurance against possible loss or damage. A title insurance policy is a contract of indemnity.
INDENTURE — A deed or other real estate contract executed between two or more parties, similar to a contract.
INSPECTION — An examination of a property by the buyer, agent, title insurance company, or other interested party.
INSURANCE — A contract in which one party agrees to compensate another party for any losses or damages caused by risks identified in a contract in exchange for the payment of a lump sum or periodic amounts of money. There are many types of insurance that apply to the mortgage process, such as hazard insurance, PMI (private mortgage insurance), title insurance and mortgage insurance.
INTESTATE — The situation in which a person dies without leaving a valid will.
JOINT TENANCY — A form of ownership in which the tenants own a property equally. If one dies, the other would automatically inherit the entire property.
JOINT TENANTS WITH FULL RIGHTS OF SURVIVORSHIP — In Michigan it is a type of tenancy which gives each owner a life estate in the property, and when one dies, the other is his or her remainder. Unlike simple joint tenancy, this tenancy cannot be severed by one party, both parties must deed out together. In most states this same language only creates joint tenancy.
JUDGMENT LIEN — A lien on the property of a debtor resulting from the decree of a court.
JUNIOR MORTGAGE — A mortgage that is subordinate to claims of a prior lien or mortgage.
LEGAL DESCRIPTION — A description of a specific parcel of real estate which is acceptable to the courts in that state, and which allows an independent surveyor to locate and identify it.
LENDER’S TITLE INSURANCE — An insurance policy which protects the lender against claims and losses that may arise if the title is unmarketable or defective.
LIBER — The legal book in which the deed is recorded at the County court house.
LIEN — A legal claim against a property that must be paid off when the property is sold.
LIFE ESTATE — A form of estate giving a beneficiary all property rights except the right to sell. The right to the estate is terminated upon the death of the beneficiary.
LIS PENDENS — The recording of a notice with the county records office that legal action is pending on a piece of property.
LOT — Generally, any portion or parcel of real property. Usually refers to a portion of a subdivision.
MAJORITY — The age at which a person is entitled to handle his own affairs.
MARKETABLE TITLE — Typically defined as such title that is insurable by a title company, it is a title free of liens and defects.
MECHANIC’S LIEN — A lien placed on real estate which secures the payment of debts that are due to persons who perform labor or services or furnish materials for the construction of buildings and improvements on real estate.
METES AND BOUNDS — A means of describing land by directions and distances rather than reference to a lot number. Generally used when land has not been subdivided into lots
MORTGAGE — A document signed by a borrower when a home loan is made that gives the lender a right to take possession of the property if the borrower fails to pay off the loan. Some states refer to it as a Deed of Trust.
MORTGAGEE — One who lends the money for the property.
MORTGAGOR — The borrower who pledges the property as security for the loan.
NOTE — A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.
OWNER’S TITLE INSURANCE — A policy of title insurance insuring an owner of real estate against possible loss from defects in, liens against, or unmarketability of the owner’s title.
OWNERSHIP — The right to possess and use property to the exclusion of others.
PLAT — A plan, map or chart of a tract or town site dividing a parcel of land into lots.
POLICY — In title insurance, an insurance policy, it is the finished contract insuring a party against loss due to a defective title.
POWER OF ATTORNEY — A legal document that authorizes another person to act on one’s behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.
PROBATE – A court whose jurisdiction not only determines who will inherit a decedent’s property but is also responsible for the settlement and supervision of the estate’s assets. It has come to be understood as the legal process whereby a dead person's estate is administered and distributed.
PRORATE — Usually at time of closing, it is the proportionate division of expenses based on days or time occupied or used by the seller and/or buyer, such as taxes, insurance, rent, or other items.
PRE-APPROVAL — The process of calculating how much money a potential homebuyer can borrow.
PROCESSOR — An employee of the title company, one who prepares real estate transaction documents in anticipation of closing. Working closely with brokers, agents and lenders, buyers and sellers to finalize details and see to the completion of all aspects necessary to ensure a successful closing day.
PURCHASE AGREEMENT — A written document in which the purchaser agrees to buy certain real estate and the seller agrees to sell under stated terms and conditions. (Also known as a Sales Agreement or Sales Contract.)
QUIET TITLE — The right to possess and use a property free from claims of other persons.
QUIT CLAIM DEED — A deed operating as a release of vested interest, intended to convey any title, interest, or claim which the grantor may have in the property to another. Differing from a warranty deed in that it only conveys interest if there is any.
RESPA — (Real Estate Settlement Procedures Act) A federal law governing real estate transactions. RESPA requires lenders to provide home mortgage borrowers in advance with information of known or estimated settlement costs. RESPA also limits the amount lenders can hold in escrow for real estate taxes and insurance. It requires the disclosure of known settlement costs to both buyers and sellers by the person conducting the settlement and outlaws certain referral fees.
REAL ESTATE — Land and all physical property on, below or attached to the land. Houses, sewers, trees and fences are all real estate.
REAL PROPERTY — Land, and generally whatever is erected or affixed to the land, such as buildings, fences and including light fixtures, plumbing and heating fixtures or other items which would be personal property if not attached.
RECORDER — A public official responsible for keeping record of all real estate transactions.
RECORDING — The act of entering a record of documents affecting or conveying interest in real estate in a county recorder's office. Until recorded, a deed or mortgage generally is not effective against subsequent purchasers or mortgages or other third parties.
RESTRICTIONS — Provisions in a deed or other instrument whereby an owner of land prohibits or restricts certain use, occupation or improvement of the land.
RIGHT OF INGRESS OR EGRESS — The right to enter or leave over another’s land.
RIGHT OF SURVIVORSHIP — In joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant.
RIGHT-OF-WAY — A privilege operating as an easement on property, whereby the owner gives, by grant or by agreement, another the right to pass over his land.
SEARCH — In the title industry, a careful exploration and examination of public records in an effort to find all recorded instruments relating to a particular chain of title.
SECOND MORTGAGE — A mortgage that has a lien position subordinate to the first mortgage. Upon the sale of a property, it is paid off only when the first mortgage is paid.
SECTION OR SECTION OF LAND — A parcel of land comprising one square mile or 640 acres.
SECURITY — Real or personal property that your creditor can claim in case you default on your obligation.
SET BACK LINES — Those lines which delineate the required distances for the location of structures in relation to the perimeter of the property.
SETTLEMENT / SETTLEMENT COSTS — Also known as closing costs, these costs are for services that must be performed before your loan can be initiated. Examples can include title fees, recording fees, appraisal fee, credit report fee, pest inspection, attorney's fees, taxes, and surveying fees.
SETTLEMENT STATEMENT — (Also called the HUD-1, or HUD) A closing document required by the Real Estate Settlement Procedures Act which shows all charges and fees and required disbursements of monies associated with a real estate transaction.
SOLE OWNERSHIP — Ownership of property by a single person or entity.
SUBDIVISION — A tract of land divided by the owner, known as the subdivider, into blocks, building lots, and streets according to a recorded subdivision plat, which must comply with state regulations and the local subdivision ordinance.
SURVEY — A document that illustrates the property boundaries and measurements, specifies the location of buildings on the property, and indicates any easements or encroachments.
TENANCY — When title to a property is held by two or more people, tenancy is the term used to determine and describe the rights and relationships of the property owners in respect to that property. Created in the wording of the Deed, the tenancies that exist in Michigan are tenants in common, joint tenants, joint tenants with full rights of survivorship, and tenants by the entirety.
TENANTS BY THE ENTIRETY — A form of tenancy in which a husband and wife jointly own property. After the death of one, the survivor takes the whole estate.
TENANTS IN COMMON — Tenancy in Common is the holding of property by two or more persons, either equal shares or unequal shares. Upon death, the deceased owner's interest becomes part of their estate and does not automatically pass to the surviving joint owners.
TESTAMENT — Another term for a will. Commonly referred to as "last will and testament."
TESTATE — The estate or condition of leaving a will at death. "To die testate."
TESTATOR — One who makes out a last will and testament. The feminine form is Testatrix.
TESTATRIX — A female who has set forth in a will her desires for the distribution of her property when she dies.
TITLE — A legal document that provides evidence of property ownership.
TITLE COMPANY — A company that specializes in title searches and insuring title to property. Title companies are a neutral third party in a transaction who does not work for any specific person in the transaction, in accordance with state law. It is a business firm that examines real property titles, reports its findings as to the legal status of these titles, and issues insurance policies to indemnify the owner and lender against financial loss resulting from unknown title defects or prior claims against the property.
TITLE DEFECT — Any title problem which “clouds” the property’s title. A title defect can be a lien, a person or entity who may have had interest in the property and never surrendered it, or any number of other situations making title less than perfect.
TITLE INSURANCE — Protection for lenders and homeowners against financial loss resulting from legal defects in or other claims against the property's title, essentially guaranteeing you and your lender's financial interest in the property. The cost of the policy is determined by the value of the property, and is a one-time fee due at the time of closing.
TITLE SEARCH — A review of all recorded documents affecting a specific parcel of land to determine the present condition of title. In a title search, an experienced title officer or an attorney reviews and analyzes all material relating to the search, then determines the sufficiency and status of title for issuance of a title insurance policy.
TOWNSHIP — A six mile square tract delineated by a government rectangular survey containing 36 sections. It is a major unit of the legal subdivision system.
TRANSFER OF OWNERSHIP — Any legal method by which the ownership of property changes hands.
TRANSFER TAX — A tax assessed by a city, county or state on the transfer of property that may be based on equity or value.
TRUST — A transaction in which the owner of real property or personal property (the trustor or settlor) gives ownership to a trustee, to hold and to manage it for the benefit of a third party, called the "beneficiary."
TRUSTEE — A person to whom the title of property has been conveyed for the immediate or eventual benefit of another, or the legal title holder and controller of funds in a trust account established under a trust agreement for the benefit of another.
VA MORTGAGE — A residential mortgage made to an eligible military veteran. The loan is guaranteed by the Department of Veterans Affairs to protect the lender against loss in the event of default.
VENDEE — A buyer, often in a land contract.
VENDOR — The seller in a land sale contract.
VETERANS ADMINISTRATION — (VA) An independent agency of the federal government. The VA home loan guaranty program is designed to encourage lenders to offer long-term, low down payment mortgages to eligible veterans by guaranteeing the lender against loss.
WARRANTY DEED – Offering the greatest protection of any property deed, a warranty deed legally assures that the title conveyed is good, free of legal claims and possession will be undisturbed.
WILL — A legal document created by an individual that names an executor (the person who will managed the estate) and beneficiaries (persons who will receive the estate at the time of death).
ZONING — Laws that govern specifically how a zoned area can be used. For example, an area may be zoned for single family residential, condominiums, commercial or retail, or a mix of two or more uses.