To help you understand some of the terminology used in real estate transactions and closings, we are providing this list of legal terms. The definitions provided, however, should never be a substitute for competent legal advice.
ABSTRACT OF TITLE — A summary or digest of all transfers, conveyances, legal proceedings, and any other facts relied on as evidence of title, showing continuity of ownership, together with any other elements of record which may impair title.
ACCELERATION CLAUSE — A condition in a real estate financing instrument giving the lender the power to declare all sums owing lender immediately due and payable upon the happening of an event, such as sale of the property, or a delinquency in the repayment of the note.
ACCEPTANCE — The act of agreeing or consenting to the terms of an offer thereby establishing the “meeting of the minds” that is an essential element of a contract.
ACCESS RIGHT — The right of an owner to have ingress and egress to and from owner’s property over adjoining property.
ACKNOWLEDGMENT — A formal declaration made before an authorized person, e.g., a notary public, by a person who has executed an instrument stating that the execution was his or her free act. In this state an acknowledgment is the statement by an officer such as a notary that the signatory to the instrument is the person represented to be.
ADVERSE POSSESSION — A method of acquiring title to real property through possession of the property for a statutory period under certain conditions by a person other than the owner of record.
AFFIDAVIT OF TITLE — A statement, in writing, made under oath by seller or grantor, acknowledged before a Notary Public in which the affiant identifies himself or herself and affiant’s marital status certifying that since the examination of title on the contract date there are no judgments, bankruptcies or divorces, no unrecorded deeds, contracts, unpaid repairs or improvements or defects of title known to affiant and that affiant is in possession of the property.
AGREEMENT — An exchange of promises, a mutual understanding or arrangement; a contract.
ASSESSMENT — The valuation of property for the purpose of levying a tax or the amount of the tax levied. Also, payments made to a common interest subdivision homeowners- association for maintenance and reserves.
ASSIGNMENT — A transfer to another of any property in possession or in action, or of any estate or right therein. A transfer by a person of that person’s rights under a contract.
ASSUMPTION FEE — A lender’s charge for changing over and processing new records for a new owner who is assuming an existing loan.
ASSUMPTION OF MORTGAGE — The taking of a title to property by a grantee wherein grantee assumes liability for payment of an existing note secured by a mortgage or deed of trust against the property, becoming a co-guarantor for the payment of a mortgage or deed of trust note.
ATTORNEY IN FACT — One who is authorized by another to perform certain acts for another under a power of attorney; power of attorney may be limited to a specific act or acts or be general.
BUILDING RESTRICTIONS — Zoning, regulatory requirements or provisions in a deed limiting the type, size and use of a building.
CAPITAL ASSETS — Assets of a permanent nature used in the production of an income, such as land, buildings, machinery and equipment, etc. Under income tax law, it is usually distinguishable from “inventory” which comprises assets held for sale to customers in ordinary course of the taxpayer’s trade or business.
CERTIFICATE OF TAXES DUE — A written statement or guaranty of the condition of the taxes on a certain property made by the County Treasurer of the county wherein the property is located. Any loss resulting to any person from an error in a tax certificate shall be paid by the county which such treasurer represents.
CERTIFICATE OF TITLE — A written opinion by an attorney that ownership of the particular parcel of land is as stated in the certificate.
CHATTEL MORTGAGE — A claim on personal property (instead of real property) used to secure or guarantee a promissory note. (See definition of Security Agreement and Security Interest.)
CLOSING — (l) Process by which all the parties to a real estate transaction conclude the details of a sale or mortgage. The process includes the signing and transfer of documents and distribution of funds. (2) Condition in description of real property by courses and distances at the boundary lines where the lines meet to include all the tract of land.
CLOSING COSTS — The miscellaneous expenses buyers and sellers normally incur in the transfer of ownership of real property over and above the cost of the property.
CLOSING STATEMENT — An accounting of funds made to the buyer and seller separately. Required by law to be made at the completion of every real estate transaction.
CLOUD ON TITLE — A claim, encumbrance or condition which impairs the title to real property until disproved or eliminated as for example through a quitclaim deed or a quiet title legal action.
COMMON AREA — An entire common interest subdivision except the separate interests therein.
COMMUNITY PROPERTY — Property acquired by husband and/or wife during a marriage when not acquired as the separate property of either spouse. Each spouse has equal rights of management, alienation and testamentary disposition of community property.
CONDEMNATION — The act of taking private property for public use by a political subdivision upon payment to owner of just compensation. Declaration that a structure is unfit for use.
CONDOMINIUM — An estate in real property wherein there is an undivided interest in common in a portion of real property coupled with a separate interest in space called a unit, the boundaries of which are described on a recorded final map, parcel map or condominium plan. The areas within the boundaries may be filled with air, earth, or water or any combination and need not be attached to land except by easements for access and support.
CONTRACT — An agreement to do or not to do a certain thing. It must have four essential elements — parties capable of contracting, consent of the parties, a lawful object, and consideration. A contract for sale of real property must also be in writing and signed by the party or parties to be charged with performance.
CONVEYANCE — An instrument in writing used to transfer (convey) title to property from one person to another, such as a deed or a trust deed.
COVENANT — An agreement or promise to do or not to do a particular act such as a promise to build a house of a particular architectural style or to use or not use property in a certain way.