Title FAQS / Glossary
Title FAQS / Glossary
If those questions are on your mind, you’ve come to the right place: we’ve rounded up some of the most frequently asked questions in our industry and answered them for you below.
Keep in mind that title rates, laws, and customs vary based on location. If you have more specific questions related to where you live, consult your realtor and/or attorney.
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1. Is Title Insurance Required?
Lender’s title insurance is required by most lending institutions as a way to insure their security interest in the property. Owner’s title insurance is an optional purchase, although it comes strongly recommended.
2. Why Do I Need Title Insurance?
The basic purpose of title insurance is to protect a property buyer from any issues that may arise with the title on the property. Common problems with title include errors in public records; unknown liens or easements on the property; unknown, undisclosed or missing heirs; fraud; and more.
3. What Does Title Insurance Cost?
Title insurance is a one-time payment made when purchasing a home or commercial property. Typically, the total cost of a title insurance policy is between 0.5% and 1.0% of the purchase price of the property. As such, the cost of title insurance is really determined by the value of the property and the strength of the local property market.
For example, a 2,000 square foot home that sells for $500,000 in one area may have a title insurance cost of between $2,500 and $5,000, while insurance on a similar home purchased for $350,000 in another area would only cost between $1,750 and $3,500
Keep in mind that rates vary from state to state and are negotiable in some cases.
4. Who Is Responsible for Paying Title Insurance Costs?
5. Why Are There Two Types of Insurance in My Closing Costs?
Lender’s Policy
If you’ve ever mortgaged a home, chances are you were required to purchase a title insurance policy. This policy protects the bank or other lending institution for as long as they maintain an interest in the property (typically until your mortgage is paid off).
Owner’s Policy
As a buyer, you also want to protect your investment—and the ownership rights that come with it. This is why it’s wise to purchase an owner’s policy of title insurance, which will protect your rights as the homeowner for as long as you or your heirs have an interest in the property.
Both title insurance policies not only pay valid claims and legal fees to defend against hidden title issues, but also help to decrease ownership risks by providing a thorough title search prior to the issuance of either policy.
6. What Does the Title Search Process Include?
Any real estate transaction involves an in-depth title search and underwriting process. The search process involves searches for many different types of information, including:
- Mortgage information
- Street and sewer assessments
- Liens
- Taxes and levies
- Easements, judgments, and other court proceedings
- Boundary issues
7. Do I Need Title Insurance When Refinancing?
However, there is no need to purchase a new owner’s policy when refinancing, because an owner’s policy provides coverage for as long as you or your heirs hold an interest in the property.
The National real estate glossary reflects common terms and definitions used across the nation. Not all of the content may be relevant to every state. Emerald Title Group makes no express or implied warranty respecting the information presented and assumes no responsibility for errors or omissions. If you have questions regarding a term or definition, please contact your local Emerald Title Group office for assistance.
A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z
A
Abandonment
The voluntary relinquishment of rights of ownership or another interest (such as easement) by failure to use the property, coupled with an intent to abandon.
Abstract
A summary.
Abstract of Judgment
A summary of money judgement obtained in court.
Abstract of Title
A summary prepared by a licensed abstractor of all documents recorded in public records relating to the property.
Abatement
A reduction or decrease, usually referring to a decrease in assessed valuation of taxes.
Acceleration Clause
A clause in a mortgage or deed of trust that allows the lender to demand full repayment if certain conditions occur.
Accommodation Recording
Recording of instruments by a title company as a convenience without responsibility for correctness.
Acknowledgment
A formal declaration before a notary public confirming the execution of an instrument.
Adjustable Mortgage Loans (AML’s)
Mortgage loans where the interest rate is periodically adjusted according to market rates.
Administrator
A person appointed by probate court to administer the estate of a deceased person who left no will.
Adverse Possession
Acquiring title to property by possession for a statutory period.
Affidavit
A written statement sworn before an authorized officer.
Agent
A person authorized to act for another party.
Agreement of Sale
A written contract between seller and buyer for sale of property on installment payments.
All-Inclusive Rate
A rate including title insurance, search fees, and examination fees.
ALTA (American Land Title Association)
An organization of title insurance companies that sets industry standards.
Amendment
A change made to a document without altering its main purpose.
Amortized Loan
A loan repaid through regular payments of principal and interest.
Annual Percentage Rate (APR)
The yearly interest rate reflecting the true cost of borrowing.
Appraisal
An estimate of property value based on analysis.
Approved Attorney
An attorney whose title opinion is accepted by a title company.
Assumption
Taking title to property while assuming responsibility for an existing mortgage.
B
Back Title Letter or Certificate
See Starter.
Bankruptcy
A legal proceeding where a debtor’s property is administered to pay creditors.
Beneficiary
The lender in a deed of trust.
Blanket Mortgage or Trust Deed
A mortgage covering more than one parcel of property.
Bona Fide Purchaser
A buyer who purchases property in good faith, for value, without notice of other claims.
Branch
A subordinate office of a title company.
Breach of Contract
Failure to perform the terms of a contract.
Building Contract
An agreement between an owner and contractor regarding construction.
Buydown
A payment reducing the interest rate of a loan during early years.
C
Capitalization Rate
The percentage used to determine the value of income property through capitalization.
Certificate of Title
A written opinion by an attorney stating that title is vested as stated in the abstract.
Close of Escrow
The date documents are recorded and title passes from Seller to Buyer.
Closing
The final procedure in a real estate transaction where documents are executed.
Cloud on Title
An irregularity or claim which could impair title.
Coinsurance
A transaction where multiple insurers share liability for a risk.
Collateral
Additional security pledged for a loan.
Collateral Security
Security in addition to the borrower’s personal obligation.
Commitment
A binding contract by a title company to issue a title insurance policy.
Community Driveway
A driveway jointly owned and used by two or more property owners.
Community Property
Property acquired by husband and wife during marriage.
Comparable Sales
Similar property sales used in appraisal analysis.
Condemnation
Government taking of private property for public use with compensation.
Conservator
A person appointed by court to manage affairs of an incompetent adult.
Constructive Notice
Notice given through recorded public documents.
Conveyance
A written instrument transferring property ownership.
Corporation
A legal entity created by law and owned by shareholders.
Covenant
A formal agreement or promise between parties.
Covenants, Conditions and Restrictions (CC&Rs)
Recorded rules governing use of property in subdivisions.
D
Debt
Money owed by one person to another.
Debtor
One who owes a debt.
Decree of Distribution
A probate court order determining distribution of a deceased person's estate.
Deed
A written document transferring interest in real property.
Deed of Trust
A document conveying property to a trustee as security for a loan.
Deed Restrictions
Limitations placed on property use through a deed.
Defect
A flaw or irregularity in title.
Defective Title
Title lacking the necessary elements to transfer ownership.
Demand Note
A note payable whenever the lender demands payment.
Deposit
Earnest money showing good faith in a transaction.
Description
The legal description identifying property boundaries.
E
Earnest Money Deposit
Money given by a buyer to show serious intent to purchase.
Easement
A right to use another person's land for a specific purpose.
Effective Demand
Demand supported by financial ability to pay.
Eminent Domain
Government's right to take private property for public use.
Encroachment
An improvement that extends onto neighboring property.
Encumbrance
A claim or liability attached to property.
Endorsement
A modification to a title insurance policy.
Equity
Value of property minus outstanding debts.
Escheat
Property reverting to the state when no heirs exist.
Escrow
A neutral third party holding documents and funds until transaction conditions are met.
Estate
An interest in property.
Execution
A court order enforcing a judgment against property.
Executor
A person appointed to carry out the terms of a will.
F
Fee Simple
Complete ownership of property.
File and Use
System where insurers file rates with the state before using them.
Fixed Rate Mortgage
A mortgage with an interest rate that remains constant.
Foreclosure
Sale of property used as security after default.
Forfeiture of Title
Loss of property due to violation of deed conditions.
Full Disclosure
Revealing all known facts affecting property value.
G
Good Faith Clause
A clause protecting lenders who act without knowledge of violations.
Good Faith Purchaser
One who buys property without knowledge of claims against it.
Grant
Transfer of property ownership by deed.
Grantee
Person receiving property in a deed.
Grantor
Person transferring property.
Grant Deed
A deed containing warranties against prior encumbrances.
Guardian
A court-appointed person managing affairs of someone legally incompetent.
H
Hazard Insurance
Insurance protecting property against damage such as fire or storms.
Homestead
Legal protection of a homeowner's residence from creditors.
I
Impounds
Funds collected by a lender to pay taxes and insurance.
Indemnity
Protection against loss.
J
Judgment Lien
A lien placed on property to secure payment of a court judgment.
L
Land Contract
An installment contract for the sale of land.
Lease
Agreement granting possession of property for a period of time.
Legal Description
A description identifying property boundaries recognized by law.
Lender
Person or institution providing loan funds.
Lien
A claim against property for payment of debt.
M
Mechanics Lien
A lien for labor or materials used in property improvement.
Mortgage
A loan secured by real property.
Mortgagee
The lender in a mortgage transaction.
Mortgagor
The borrower in a mortgage transaction.
N
Note
A written promise to repay borrowed money.
O
Obligee
Person to whom an obligation is owed.
Obligor
Person legally bound to pay a debt.
Original Cost
The purchase price paid by the current owner.
Owner’s Policy
Title insurance protecting the property owner.
P
Parcel
A defined piece of land.
Partnership
Association of two or more persons conducting business.
Party Wall
A wall shared by two adjoining properties.
Patent
Government grant transferring land ownership.
Personal Property
Property not classified as real estate.
PITI
Principal, Interest, Taxes and Insurance payment.
PLAT
A map dividing land into lots.
Power of Attorney
Document authorizing someone to act on another’s behalf.
Preliminary Report
A title report showing the condition of title.
Priority
Order determining which claims take precedence.
Public Domain
Land owned by the government.
Public Records
Recorded legal documents affecting property ownership.
Q
Quitclaim Deed
A deed transferring whatever interest the grantor has without warranty.
Quiet Title
Court action used to remove claims against title.
R
Real Property
Land and improvements permanently attached to it.
Reconveyance
Transfer of title back to the borrower after a loan is paid.
Recording
Filing documents in public records.
Reinsurance
Insurance purchased by an insurer to reduce risk.
Restrictions
Limitations on property use.
Right of Way
Right to pass across another’s property.
S
Sale and Leaseback
A transaction where the seller leases the property from the buyer.
Search
Examination of public records to determine title history.
Separate Property
Property owned by one spouse alone.
Squatter
A person occupying land without legal claim.
Starter
A copy of the last title report used to begin a new title search.
Street Improvement Bonds
Bonds issued to finance street improvements.
Subdivision
Land divided into smaller lots for development.
Subordination Agreement
Agreement making one lien lower priority than another.
Surface Rights
Rights to use the surface of land.
Survey
Measurement defining property boundaries.
T
Tax Deed
A deed issued after property is sold for unpaid taxes.
Tax Sale
Transfer of property to government for unpaid taxes.
Testate
Dying with a valid will.
Title
Legal right to own property.
Title Insurance
Insurance protecting against title defects.
Title Report
See Preliminary Report.
Title Search
Review of public records to determine title status.
Trustee
Party holding title in a deed of trust.
Trustor
Borrower in a deed of trust.
U
Underwritten Company
A title firm that issues policies on behalf of a title insurer.
V
Variable Interest Rate
Interest rate that fluctuates with market rates.
Vendee
Buyer in a sale agreement.
Vendor
Seller in a sale agreement.
Vendor’s Lien
Lien for unpaid purchase price.
Venue
Location where legal proceedings occur.
Vesting
The manner in which title is held.
W
Waive
To voluntarily give up a known right.
Warranty Deed
A deed guaranteeing clear title.
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