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Glossary of Real Estate Terms
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Abstract
A history of all transactions shown in the public records affecting a
particular tract of land.
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Abstract Plant
See Title Plant.
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Adjustable Rate Mortgage (ARM)
Mortgage loans 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.
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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.
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Affidavit
A written statement made under oath before a notary public or other judicial
officer.
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Agreement
A legally binding contract made between two or more persons.
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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.
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Amortization
Payment to reduce the principal of a debt in regular, periodic installments.
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Appraisal
A report from an independent third party detailing the estimated value of real
estate.
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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. Water rights are also an
example.
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Assessment
(1) The valuation of real estate for purpose 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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Assignment
(1) The act of transferring an interest, such as a loan secured by a mortgage,
from one person to another. (2) The instrument or paper by which one person
transfers such ownership to another.
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Attorney's Opinion
A statement by an attorney as to the validity of a title, arrived at after
investigation of the history of the title as recorded in the public records.
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Back Title Letter
Also called "back title certificate" in some areas, and "starter" in others.
When titles previously have been examined up to a certain date by reliable
examiners, title companies sometimes give subsequent examiners of such titles a
letter that sets forth the condition of the title at the time of the previous
examination and authorizes them to begin their subsequent examination with the
terminal date of the previous examination.
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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.
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Bankruptcy
A proceeding in U.S. District Court wherein assets of an insolvent debtor are
protected and distributed in an equitable manner.
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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 when 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.
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Chain
In real estate measurements (surveying), a chain is 66 feet long or 100 links,
each link being 7.92 inches. The measurement may change when used in fields
other than surveying.
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Chain of Title
The successive ownerships or transfers in the history of title to a tract of
land.
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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.
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Clear Title
Real property ownership free of liens, defects, encumbrances or claims.
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Closing
Also called "settlement." A meeting of all parties involved in a property
transaction during which the transaction is consummated.
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Clouded Title
An irregularity, possible claim or encumbrance that, if valid, would adversely
affect or impair the title.
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Coinsurance
Two or more policies of title insurance issued by different insurers, each
covering a portion of the same risk, which together provide total coverage of
the risk.
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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.
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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 the 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.
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Conventional Loan
A loan secured by a mortgage or deed of trust for which the loan-to-value ratio
is within an acceptable range for a particular lending institution.
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Conveyance
The transfer of title to property from one person to another.
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Courtesy
A right that a husband has in his wife's property at her death. It does not
exist in all states.
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Covenant
A formal agreement or contract between two parties in which one party gives the
other certain promises and assurances, such as covenants of warranty in a
warranty deed.
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Dedication
The setting aside of certain land by the owner and declaring it to be for public
use. Examples: streets, sidewalks and parks.
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Deed
A document through which a conveyance of property is effected.
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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.
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Defect
A blemish, imperfection or deficiency. A defective title is one that is
irregular and faulty.
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Depreciation
Loss in value occasioned by ordinary wear and tear, destructive action of the
elements, or functional or economic obsolescence.
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Devise
A gift of real estate made by a will.
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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.
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Dower
A right that a wife has in her husband's property at the time of his death. Does
not exist in all states.
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Earnest Money
A deposit of funds by the purchaser of a piece of real estate as evidence of
good faith.
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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.
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Eminent Domain
The right of a government to take privately owned property for public purposes
under condemnation proceedings subject to payment of its fair market value.
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Encroachment
Any building, improvement or structure located on one property (such as a wall,
fence or driveway) that intrudes upon the property of another.
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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.
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Equity
The market value of real property, less the amount of existing liens.
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Escheat
The reversion of property to the state when an owner dies leaving no legal
heirs, devisees or claimants.
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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.
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Estoppel
A legal restraint that stops or prevents a person from contradicting or reneging
on his previous position or previous assertions or commitments.
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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.
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Exception
A provision in a title insurance binder or policy that excludes liability for a
specific title defect or an outstanding lien or encumbrance.
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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)
Federal National Mortgage Association. A private corporation dealing in the
purchase of first mortgages.
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Fee Simple Deed
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.
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FHA (Federal Housing Administration)
A federal agency that insures first mortgages, enabling lenders to lend a very
high percentage of the sale price.
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Fixed Rate Mortgage
A mortgage having a rate of interest that remains the same for the life of the
mortgage.
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Fixtures
Personal property that is attached to real property and is legally treated as
real property while it is so attached. Examples: medicine cabinets, window
blinds and chandeliers.
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Foreclosure
A legal proceeding in which real estate secured by a mortgage or deed of trust
is sold to satisfy the underlying debt.
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Forgery
The fraudulent signing of another's name to an instrument such as a deed,
mortgage or check.
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Freddie Mac (FHLMC)
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.
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Ginnie Mae (GNMA)
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.
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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.
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Grantee
One to whom a grant is made.
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Grantor
One who makes a grant.
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Hereditaments
Any and all kinds of estates, interest and rights in real estate that can be
inherited.
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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.
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HUD (Department of Housing and Urban Development)
The federal department responsible for the major housing programs in the United
States.
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Index
(1) An alphabetical 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 descriptions, known as a geographic
index. (3) The alphabetical 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, powers of attorney, wills and probate
proceedings. Such indexes are known by various names, such as "general index,"
"judgment index" and "name index."
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Instrument
Any written document having a legal effect.
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Judgment
The determination of a court regarding the rights of parties in an action. A
judgment of debt on a property owner can create a lien on all of that owner's
land within a certain jurisdiction.
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Junior Mortgage
A mortgage lower in lien priority than another.
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Leasehold
The right to possession and use of land for a fixed period of time. The lease is
the agreement that creates the right.
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Lessee
A tenant holding a leasehold.
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Lessor
A landlord; one who gives a leasehold to a lessee.
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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.
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Lien
A monetary charge imposed on a property, usually arising from some debt or
obligation.
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Lien Waver
Also called "waiver of liens." A waiver of mechanics' lien rights, signed by
contractors or subcontractors.
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Link
In surveying, a length of 7.92 inches.
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Lis Pendens
A legal notice intending to bind third parties of litigation claiming an
interest in real estate.
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Loan Policy
Also called "mortgage policy." A title insurance policy insuring a
mortgagee, or beneficiary under a deed of trust, against loss caused by
invalidity or unenforceability of a lien, or loss of priority of the mortgage or
deed of trust.
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Lot
Generally, any portion or parcel of real property. Usually refers to a
portion of a subdivision.
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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.
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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.
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Metes and Bounds
A land description in which boundaries are described by courses, directions,
distances and monuments.
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Mortgage
A conditioned pledge of property to a creditor as security for the payment
of a debt.
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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.
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Mortgagee
The holder of a mortgage. The party to whom a mortgage is made, generally
the lender.
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Mortgagee Policy
See Loan Policy.
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Mortgagor
A person who mortgages property. A person who executes a mortgage, generally
the property owner.
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Multiple Listing
The pooling in a central bureau of listings of properties for sale. These
listings are held individually by members of a group of real estate brokers,
with the agreement that any member of the group may sell the properties and, in
the case of a sale, the commission will be divided between the broker making the
sale and the broker who filed the listing.
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Muniments of Title
Written evidence (documents) that an owner possesses to prove his or her
title to property.
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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.
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Owner's Policy
A policy of title insurance insuring an owner of real estate against loss
occasioned by defects in, liens against or unmarketability of the owner's title.
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Plat
Also called "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.
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Point
Also called "commission points" or "discount points." One percent of the
amount of the loan.
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Premium
The amount payable for an insurance policy.
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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 use
for the statutory period, for example 20 years.
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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.
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Purchase Money Mortgage
A mortgage given by a purchaser to a seller on the subject property to
secure payment of a part of the purchase price.
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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.
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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.
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Recording
The noting in a public office of the details of a legal document - such as a
deed or mortgage - affecting the title to real estate. When such an instrument
is properly 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.
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Reinsurance
A contractual relationship between two insurance companies under which one
insurer assumes a portion of the risk of the insurance policy written by the
other.
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Release
(1) To relieve from debt or security or abandon a right, such as the release
of a mortgage lien from a part or all of the land mortgaged. (2) The instrument
effecting a release.
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Restrictions
Limitations on the use of property imposed or created by deeds or other
documents in the chain of title. A restriction, for example, may prohibit the
placement of trailer or the construction of a commercial structure on the
property.
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Riparian Rights
The rights of owners of lands 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.
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Sale and Leaseback
The sale of an asset to a buyer who immediately leases it back to the
seller.
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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.
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Second Mortgage
A mortgage ranking in priority immediately below a first mortgage.
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Subordination
The act or process by which a person's rights are ranked below the rights of
others. For example, a second mortgagee's rights are subordinate to those of the
first mortgagee.
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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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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 rights of ownership recognized
and protected by the law.
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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. A group of such covenants known as "common
law covenants" includes: covenants against encumbrances; covenants for further
assurance (in other words, to do whatever is necessary to rectify title
deficiencies); covenants of good right and authority to convey; covenants of
quiet enjoyment; covenants of seisin; covenants of warranty. (See Warranty or
Covenant.)
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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.
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Title Insurance Policy
A contract of title insurance under which the insurer, in keeping with the
terms of the policy, agrees to indemnify the insured against loss arising from
claims against the insured interest.
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Title Plant
Also called "abstract plant" in some areas. 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.
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Underwriter
An insurance company that issues insurance policies to the public or to
another insurer.
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Variable Interest
Rate
Also called "flexible interest rate." An interest rate that fluctuates as
the prevailing rate moves up or down. In mortgages, there are usually maximums
as to the frequency and amount of fluctuation.
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Veterans Administration (VA) Loans
Housing loans to veterans by banks, savings and loans, or other lenders that
are guaranteed by the Veterans Administration, enabling veterans to buy a
residence with little or no down payment.
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Waiver
The voluntary and intentional relinquishment of a known right, claim or
privilege.
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Warranty
In a broad sense, an agreement or undertaking by a seller to be responsible for
present or future losses of the purchaser occasioned by deficiency or defect in
the quality, condition or quantity of the thing sold. In a stricter sense, the
provision or provisions in a deed, lease or other instrument conveying or
transferring an estate or interest in real estate under which the seller becomes
liable to the purchaser for defects in or encumbrances on the title. (See Title
Covenants.)
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Will
A testamentary disposition of property, usually in a form prescribed by law,
that takes effect upon death.
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Zoning
Laws passed by local governments regulating the size, type, structure,
nature and use of land or buildings.
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