GLOSSARY OF REAL ESTATE TERMS
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
ABSTRACT OF TITLE
A condensed history or summary of all transactions affecting a particular parcel of real property.
ACKNOWLEDGEMENT
A formal declaration, made by a person signing a document, that he or she is in fact signing the document and that the signature is his or her free act and deed. The declaration is made before a duly authorized official – usually a notary public.
ACRE
A unit of land measurement equal to 43,560 square feet.
AD VALOREM
According to value. Ad valorem taxes on a parcel of real property are based on the assessed value of the parcel.
ADVERSE POSSESSION
A method of acquiring title to a parcel of real property, which title is superior to that of all others including the record owner, by means of performing certain acts over a period of time, as prescribed by statute. In Colorado, the adverse claimant must demonstrate actual, notorious, hostile, visible and continuous possession of the claimed property for 18 years.
ADJUSTABLE RATE MORTGAGE (ARM)
A loan characterized by an interest rate that may rise or fall periodically in accordance with a pre-selected index. Indexes may vary from lender to lender.
AFTER-ACQUIRED TITLE
A right or interest in property that inures to someone after he or she no longer owns the property. With regard to real property, certain deed forms (bargain and sale and warranty deeds) transfer after-acquired title automatically, such that the interest of a grantee is perfected when rights inure to a remote grantor.
AGENCY
A relationship that is created when one person (the principal) delegates to another (the agent) the right to act on the principal’s behalf.
AIR RIGHTS
The right to use and occupy the air space above the surface of a parcel of real property. Compare sub-surface rights. See real property.
A/K/A
Also known as.
ALL-INCLUSIVE DEED OF TRUST
See wrap-around financing.
AMERICAN LAND TITLE ASSOCIATION (ALTA)
A national association of title insurance companies, agents, abstractors and attorneys. The association establishes standardized title insurance policy forms and procedures.
AMORTIZED LOAN
A loan characterized by (1) uniform periodic payments (usually monthly); and (2) a payment amount sufficient to cause the entire debt (principle and interest) to be retired at the end of the loan term. During the life of the loan the principal and interest components of each payment will vary (initially the interest component makes up most of the payment), but the total remains constant. Most residential mortgages are amortized loans. A table showing the principal and interest components of each payment and the remaining balance after each payment is called an amortization schedule. Compare balloon loan.
ANNUAL PERCENTAGE RATE (APR)
A uniform measure of the cost of credit that includes interest, discount points and loan fees. Lenders are required by the Truth-in-Lending Act to disclose the APR of a loan to the borrower.
APPRAISAL
An independently and impartially prepared written statement expressing an opinion of the value of a parcel of real property as of a specific date that is supported by the presentation and analysis of relevant market information.
APPURTENANCE
A right or privilege that belongs to and passes with a parcel of real property, but is not necessarily a part of the property. For example, a back lot owner may have the right to travel over a designated portion of the land of the front lot owner to access the back lot. This right-of-way is an appurtenance of ownership of the back lot.
ARREARS
That which is unpaid although due to be paid. In Colorado, real property taxes are paid in arrears – that is, taxes accruing in a given year are not paid until the following year.
ASSESSED VALUE
The value that a taxing authority places upon property for the purpose of taxation.
ASSIGNMENT
The transfer of a right or interest in property from one person to another. For example, a tenant may transfer his or her rights under a lease by an assignment of lease. Or, a lender may transfer its interest in a loan by an assignment of mortgage.
BALLOON LOAN
A loan characterized by (1) periodic payments (usually monthly) that, except for the final payment, are uniform; and (2) a payment amount that leaves a substantial outstanding balance at the end of the loan term, which amount comprises the final payment. A typical balloon loan scenario is monthly interest-only payments and repayment of the entire principal at maturity. Compare amortized loan.
BARGAIN & SALE DEED
A written instrument used to transfer all of the right, title and interest of the grantor in and to a parcel of real property to the grantee. A bargain and sale deed does not include any warranties (promises), but ownership of the property by the grantor is implied by particular granting clause language. A bargain and sale deed will convey after-acquired title. Compare quitclaim deed and warranty deed.
BASIS
The original amount paid for property, plus capital expenditures for improvements, minus depreciation. Basis is the means by which the Internal Revenue Service determines taxable gains, losses and annual depreciation.
BEQUEST
A gift of personal property made by will. Compare devise.
BILL OF SALE
A written instrument by which one person transfers all right, title and interest in personal property to another.
BONA FIDE PURCHASER
One who purchases property in good faith for fair value and without notice of any adverse claim or right to the property by a third party.
CHAIN OF TITLE
The successive conveyances of a parcel of real property, beginning with the patent from the state or sovereign and running through the conveyance to the current owner.
CHATTEL
An item of tangible or intangible personal property.
CLEAR TITLE (MARKETABLE TITLE)
Title to property that is free from liens, defects or other encumbrances. Compare cloud on title.
CLOUD ON TITLE (TITLE DEFECT)
Any encumbrance, unreleased lien or outstanding claim against property which, if valid, would affect or impair title to the property. Compare clear title.
COMMON LAW
A system of jurisprudence, originated in England and later applied in the United States, which is based on judicial precedent rather than statutory laws (legislative enactments). Common law is distinguished from civil law, based on the Justinian Code, which prevails in most Western European countries.
COMPARABLE SALES (COMPS)
Parcels of real property, similar in size, location and configuration to a subject property, that have sold within a given time period and are used during the appraisal process to derive a value for the subject property.
CONDEMN
To declare as legally useless or unfit for habitation. A state or sovereign condemns a parcel of real property under its power of eminent domain.
CONDOMINIUM
A system of separate ownership of individual units in a multi-unit development. In addition to the ownership interest that one acquires in a particular unit, he or she is also a tenant in common with all of the other unit owners as to the common areas of the development and the land on which it is located. Compare cooperative.
CONDOMINIUM DECLARATION
A document describing the terms of condominium ownership. It defines the complex and the air spaces, the general common elements and the limited common elements and it establishes the basic rights and obligations of the unit owners. In addition, it provides for the creation of a management association with the authority to collect common expenses and otherwise act for the benefit of all unit owners.
CONFIRMATION DEED
The form of deed issued by a county public trustee or county sheriff following a foreclosure. Compare treasurer’s deed. See foreclosure.
CONSERVATOR (GUARDIAN)
A court-appointed custodian of property belonging to a person determined to be unable to properly manage such property.
CONSIDERATION
Something of value given in return for performance or a promise of performance by another, for the purpose of forming a contract. Without consideration, a contract may not be binding or enforceable.
CONSTRUCTIVE NOTICE (LEGAL NOTICE)
Notice that one exercising ordinary care and diligence as a matter of duty would possess. Constructive notice is imputed by law and is distinguished from actual notice.
CONTRACT
An agreement between two or more parties that creates in each party a duty to do or not do something and a right to performance of the other’s duty, or a remedy for the breach of the other’s duty. A valid contract requires (1) competent parties; (2) a proper subject-matter; (3) mutuality of agreement; (4) consideration; and (5) mutuality of obligation.
CONTRACT FOR DEED
See installment land contract.
CONVEY
To transfer property from one to another. With regard to real estate transactions, it is generally understood to mean the transfer of title to property by means of a deed.
COOPERATIVE
A multi-unit development owned by a corporate or business trust, which trust grants rights of occupancy to individual units by means of proprietary leases or other arrangements. Compare condominium.
COVENANT
Generally, a promise to do or not do a particular thing. With regard to real estate, covenants are limitations on the use of property. Covenants often address landscaping, or the size, height, color and style of structures permitted on property. They are recorded in the county in which the affected property is situate, and may take the form of a deed reservation (applicable to a single parcel), or a stand-alone agreement – covenants, conditions and restrictions, or “CC&R’s” (associated with condominiums and planned unit developments). A covenant must “run with the land” to be enforceable against remote grantees. Restrictive covenants relating to race, gender, sexual orientation or religion are not enforceable.
CURTESY
A husband’s right, at common law, upon the death of his wife, to a life estate in all of the parcels of real property that she owned or inherited during their marriage, provided that she bore him a child capable of inheriting the property. Abolished in Colorado. Compare dower.
D/B/A
Doing business as.
DEDICATION
A grant of a parcel of real property from a private owner to the public and an acceptance of the property by the proper public authorities on behalf of the public.
DEED OF TRUST
A written instrument that, when duly recorded in the appropriate county records, creates a lien against a parcel of real property, which lien secures consensual debt. By signing a deed of trust, the debtor (borrower) transfers legal ownership of the property to a trustee, to be held in trust, for the benefit of the creditor (lender). The trustee re-conveys legal ownership to the debtor when the debt is paid-in-full; or, if the debtor defaults, then the trustee sells the property on behalf of the creditor. In Colorado, the trustee is a public office. Compare mortgage. See lien.
DEFAULT
A failure to do something required by duty, which duty arises pursuant to a contract or by law. Two common examples of default with regard to real estate are non-performance of the terms of a purchase and sale agreement and non-compliance with the terms of a loan agreement (especially with regard to repayment of the debt).
DEVISE
A gift of real property made by will. Compare bequest.
DOCUMENTARY TRANSFER FEE
A tax, based on sales price, which is collected by the State of Colorado upon the transfer of a parcel of real property.
DOWER
A wife’s right, at common law, upon the death of her husband, to a life estate in one-third (one-half in some states) of all of the parcels of real property that he owned or inherited during their marriage. Abolished in Colorado. Compare curtsey.
DUE-ON-SALE CLAUSE
A clause in a mortgage (or deed of trust) that gives the lender the right to demand payment-in-full (acceleration) when the parcel of real property encumbered by the mortgage changes ownership.
EARNEST MONEY
A cash deposit paid by a prospective buyer of property as evidence of good faith and to bind the sale of the property. Earnest money constitutes consideration under a contract.
EASEMENT
The right of an owner of a parcel of real property to make lawful and beneficial use of a parcel of real property belonging to another. The right may be created by an express or implied agreement. The “used” property is referred to as the servient estate, in contrast to the dominant estate. Among other types, easements may be (1) of necessity, as when the owner of landlocked property needs to cross another’s property to access his or her own; (2) negative, as when the servient estate owner is restricted from doing certain acts; or (3) public, as when the beneficial use is enjoyed not by a dominant estate owner, but rather, by everyone.
EGRESS
A place or means of going out or exiting. Also, the act of going or coming out. Compare ingress.
EMINENT DOMAIN
The right of a state or sovereign to take a parcel of real property for public use without the consent of the owner of the property. Under state and federal laws, just compensation must be paid to the owner. See condemn.
ENCROACHMENT
Generally, the intrusion of part of a building or other structure or improvement, over or upon a parcel of real property belonging to another.
ENCUMBRANCE
Any impediment to clear title. For example, a lien, lease or easement.
ENDORSEMENT
A written change to, or a modification of, a title insurance commitment or a title insurance policy.
EQUITY
The fair market value of property less the debt that encumbers it.
ESCHEAT
The reversion of a person’s property to the state or sovereign when the person dies without a valid will or heir.
ESCROW
A procedure whereby documents, money and other things or value are deposited with a neutral third party (the escrow agent) pursuant to a contract or other agreement. Upon completion of the mutual obligations arising under the agreement, the escrow agent distributes each of the items held in escrow to the appropriate party as set forth in the agreement. The sale and purchase of a parcel of real property is typically handled through escrow.
ESTATE
In a narrow sense, the degree, quantity, nature and extent of a person’s interest in a parcel of real property. As used in this sense, an estate is either freehold or leasehold. In a broader sense, all of the property (real and personal) that a person owns.
EXCEPTIONS (B2’s)
With regard to a title insurance commitment, a list of items that, absent removal by discharge, extinguishment or endorsement, will be limitations on coverage under the title insurance policy. The list includes standard exceptions related to unpaid taxes, parties in possession, easements, boundary line conflicts, encroachments and mechanic’s liens, as well as any additional defects or encumbrances discovered upon an examination of the record title of the subject parcel of real property.
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC)
“Freddie Mac” is a government sponsored enterprise that purchases conforming loans from approved mortgage lenders, pools (securitizes) the loans and then sells the mortgage backed securities (“MBS”) in the secondary market. A Freddie Mac MBS guarantees timely payment of principal and interest on the underlying mortgage loans. Though the guarantee is not backed by the full faith and credit of the U.S. Government, it is widely perceived to be because of the unique nature of the issuing entity. Freddie Mac earns money by charging a premium for the guarantee. Freddie Mac was chartered by Congress in 1970 and competes with Fannie Mae. Compare Government National Mortgage Association. See Federal National Mortgage Association.
FEDERAL HOUSING ADMINISTRATION (FHA)
The FHA is a division of the Department of Housing and Urban Development that insures residential mortgage loans made by approved mortgage lenders.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA)
“Fannie Mae” is a government sponsored enterprise that trades “conforming” loans from approved mortgage lenders, either for cash or for mortgage backed securities (“MBS”). Fannie Mae also pools (securitizes) loans in its own portfolio and sells those MBS in the secondary market. A Fannie Mae MBS guarantees timely payment of principal and interest on the underlying mortgage loans. Though the guarantee is not backed by the full faith and credit of the U.S. Government, it is widely perceived to be because of the unique nature of the issuing entity. Fannie Mae earns money by charging a premium for the guarantee. Compare Government National Mortgage Association. See Federal Home Loan Mortgage Corporation.
FIDUCIARY
A person in a position of trust, responsibility and authority (e.g., an agent) who obligates him or herself to act on behalf of another and who assumes a duty to act in good faith and with care, candor and loyalty in fulfilling the obligation.
FINANCING STATEMENT
A written instrument that, when duly filed or recorded, creates a security interest in fixtures or personal property. Akin to a chattel mortgage, financing statements are a product of the Uniform Commercial Code. See lien.
FIXTURE
Personal property that is permanently attached (affixed) to a parcel of real property and, as such, is or becomes a part of the real property.
F/K/A
Formerly known as.
FORECLOSURE
With regard to real estate, the process by which the holder of a lien causes the “auction” of the subject property in order to satisfy the underlying debt evidenced by the lien. Foreclosure extinguishes the interest of the property owner and those parties with secured interests junior to that of the foreclosing party (senior lien interests survive foreclosure). The underlying debt is satisfied (1) by funds from the auction high-bidder; or (2) if there are no competitive bids, by funds from the sale of the property after foreclosure. In Colorado, prior to auction, the owner can stop the process by paying the debt current (“curing”) or by paying it off entirely. A junior lien holder protects its interest by “redeeming” the property after auction – that is, by paying the bid amount of the foreclosing party (or the auction high-bidder, or a prior redeeming lien holder). A redeeming junior lien holder (1) becomes the owner of the property (and can sell it to satisfy its own debt); or (2) has its own debt paid by a latter redeeming junior lien holder. In Colorado, foreclosure pursuant to a deed of trust is handled by the public trustee for the county in which the property is situate. Foreclosures pursuant to other encumbrances (e.g., judgments, mechanics’ liens) are handled through the courts. Compare tax sale.
FREEHOLD ESTATE
Generally, an ownership interest in a parcel of real property; as opposed to a mere possessory interest. Freehold estates are further classified as “fee” estates, or “life” estates. The largest fee estate, as measured by the bundle of rights associated with it, is called “fee simple absolute” – an interest of potentially infinite duration, subject only to rights of mortgage or other lien holders (i.e., the power to take property by foreclosure), adverse possession and the state’s power of eminent domain. Rights of use are subject only to zoning, easements and restrictive covenants. The interest is freely transferable, inheritable or devisable. Other smaller fee estates include fee simple conditional, fee simple determinable and fee tail. A life estate is of limited duration; the duration being measured by the life of the owner or by the life of another (“pur autre vie”). Compare leasehold estate.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA)
“Ginnie Mae” is a U.S. Government owned corporation within the Department of Housing and Urban Development that pools (securitizes) federally insured loans (e.g., FHA or VA loans) and then sells the mortgage backed securities (“MBS”) in the secondary market. A Ginnie Mae MBS guarantees timely payment of the principal and interest on the underlying mortgage loans and that guarantee is backed by the full faith and credit of the U.S. Government. Ginnie Mae earns money by charging a premium for the guarantee. Compare Federal Home Loan Mortgage Corporation and Federal National Mortgage Association.
GRANTEE
One who acquires property or an interest in property by deed or other written instrument. The purchaser of a parcel of real property. Compare grantor.
GRANTOR
One who conveys a property or an interest in property by deed or other written instrument. The seller of a parcel of real property. Compare grantee.
HEREDITAMENT
Any property (real or personal, tangible or intangible) that can be inherited.
HIDDEN DEFECT
An encumbrance on a title to a parcel of real property that is not apparent in the public records; for example, an unknown heir, a secret marriage or a forged deed.
HOMESTEAD
The house, outbuildings and surrounding land owned and used as a dwelling (residence) by the head of a family. A declaration of homestead as to qualifying parcel of real property effectuates a homestead exemption whereby creditors are prevented from levying against the property (up to an amount set by state statute).
HYPOTHECATE
To use property to secure a debt without giving up possession of it.
IMPOUND ACCOUNT (ESCROW ACCOUNT OR RESERVE ACCOUNT)
An account maintained by a lender on behalf of an owner who has given the lender a security interest in a parcel of real property. The account is used to pay property taxes, mortgage insurance premiums and/or future insurance policy premiums required by the lender to protect the security interest. The impound account is funded with a portion of the monthly mortgage payment.
IMPROVEMENTS
Additions to vacant land such as buildings, roads, fences, pipelines, etc. Improvements tend to increase the value of vacant land.
IMPROVEMENT LOCATION CERTIFICATE (ILC)
A drawing of a parcel of real property prepared by a licensed surveyor that shows the location of improvements to, and easements across the property; as well as encroachments onto the property by improvements located on adjoining properties. An ILC is not a survey of the property.
INDEMNIFY
To insure against loss or damage that may occur in the future, or to provide compensation for loss or damage already suffered.
INGRESS
The power or liberty of access. Also, the act of entering. Compare egress.
INJUNCTION
An equitable remedy in the form of a court order compelling a party to do or refrain from doing a specified act.
INSTALLMENT LAND CONTRACT
A method of selling and financing a parcel of real property whereby the seller retains title to the property, but the buyer takes possession and makes periodic payments toward the purchase price. The seller delivers a deed to the property when the total periodic payments equal the full purchase price, or as much of the purchase price as is agreed to between the parties.
INTESTATE
One who dies without leaving a valid will.
JOINT AND SEVERAL LIABILITY
A form of liability arising in situations involving two or more parties, whereby the entire amount of the liability can be collected from any party. Most mortgages include a “joint and several liability” clause.
JOINT TENANCY
A form of co-ownership of property whereby each owner holds an undivided and equal interest in the property and there exists a right of survivorship. Upon the death of a joint tenant, his or her interest in the property passes to the surviving joint tenant(s). Joint tenancy must be specifically designated in an instrument of conveyance and is never presumed without such a designation. Compare tenancy in common.
JUDGMENT
A final determination of the rights of parties to a lawsuit. A “deficiency judgment” is a judgment in favor of a secured creditor for the balance of a debt that is not satisfied in-full by the sale of the proffered security. A “money judgment” is a judgment in which one party is ordered to pay a sum of money to another. Recordation of a transcript of judgment will create a non-consensual lien against any and all real property owned by the adjudged party and located in the county in which the transcript is recorded. See lien.
LEASEHOLD ESTATE
A possessory interest in a parcel of real property created by a lease agreement and generally of a fixed duration. Notable leasehold estates include the tenancy at will (characterized by an uncertain lease term and a right of either party to the lease to terminate upon proper notice) and the tenancy at sufferance or holdover tenancy (characterized by a tenant who remains in possession of the leased property after the expiration of the lease term). Compare freehold estate.
LEGAL DESCRIPTION
A description of a parcel of real property that is sufficient to locate and identify it. Unplatted land is described by relation to known monuments, baselines and meridians. Such a description proceeds by courses and distances (metes and bounds). Platted and subdivided land is generally described by lot and block.
LESSEE
A tenant. The holder of a leasehold estate by virtue of a lease agreement. Compare lessor.
LESSOR
A landlord. One who grants a lease to another, thereby transferring an exclusive right of possession of certain land, subject only to the rights expressly retained by the lessor in the lease agreement. Compare lessee.
LETTERS
With regard to real estate, a written instrument evidencing the authority (by court order) of an individual or entity to act on behalf of another. Letters of conservatorship authorize one to act on behalf of a protected person – one who is legally incompetent to manage his or her own affairs. Letters testamentary or letters of administration authorize one to act on behalf of a deceased person (the former if the decedent left a will and the latter if he or she did not).
LIEN
A hold or claim that one person has upon the property of another to secure payment of a debt or other obligation. A lien may be voluntary (consensual), as in the case of a deed of trust, financing statement or mortgage; or it may be involuntary (non-consensual), as in the case of a judgment, mechanics’ lien or tax lien. The holder of the lien may enforce the right to payment by foreclosing on the property. See foreclosure and tax sale.
LIFE ESTATE
See freehold estate.
LINE OF CREDIT
A financing arrangement characterized by (1) the ability to draw funds periodically from an available loan balance; and (2) the ability to repay the outstanding balance in-full without terminating the loan agreement or discharging the security instrument. A line of credit is essentially a secured credit card.
LIQUIDATED DAMAGES
A sum of money stipulated in a contract and agreed to by the parties thereto, which sum is a reasonable estimation of damages owing to one party in the event of a breach by the other. Compare specific performance.
LIS PENDENS
Litigation pending. When a third party acquires an interest in property from someone involved in a lawsuit, that third party holds the interest subject to adjudication of the rights of the litigants. For example, a purchaser of real property would have an interest in the property by virtue of a signed contract. However, the purchaser’s rights under the contract are subject to the court’s decree or judgment. Recordation of a “notice of lis pendens” effectuates this legal doctrine.
LLC
Limited liability company.
LLP
Limited liability partnership.
LOAN ASSUMPTION
A financing arrangement whereby the purchaser of a parcel of real property takes over the debt obligation of the seller (to the seller’s lender). By assuming a mortgage rather than taking title subject-to it, the purchaser becomes personally liable on the underlying debt. A necessary pre-condition of a formal loan assumption is an assumable loan. Most conventional loans are not assumable. Compare subject-to mortgage and wrap-around financing.
LOST INSTRUMENT BOND
A surety bond issued to a Colorado public trustee by an insurance company as a substitute for a lost original promissory note. Colorado law provides that the release form submitted to a public trustee to discharge the lien of a deed of trust must be accompanied by the original promissory note secured thereby. Certain qualifying entities (lending institutions) may indemnify the public trustee in lieu of presenting an original note.
MECHANICS’ LIEN
A non-consensual lien against a parcel of real property, created by recording a written instrument (a “statement of lien”) in the county records where the property is situate; which lien runs in favor of someone who has supplied labor or materials for the improvement of the property, and which lien is for the purpose of securing payment. A mechanics’ lien can be foreclosed through the courts. See lien.
METES AND BOUNDS
A method of describing a parcel of real property. Metes are measures of length and bounds are boundaries. A metes and bounds description begins from a known or established “point of beginning” and proceeds along courses and distances, eventually returning to the point of beginning. For example, from point A, North 100 feet, then East 90 degrees 100 feet, then South 90 degrees 100 feet, then Wet 90 degrees 100 feet to the point of beginning.
MINOR
A person under 18 years of age.
MORTGAGE
A written instrument that, when duly recorded in the appropriate county records, creates a lien against a parcel of real property, which lien secures consensual debt. A mortgage is an agreement between two parties (mortgagor and mortgagee); in contract to a deed of trust, which involves three (grantor, beneficiary and trustee). Mortgages are treated as either (1) a conveyance of legal title to the property (title theory), in which case legal title is re-conveyed to the owner when the obligation is fully satisfied; or (2) a lien against the property (lien theory), in which case the lien is released when the obligation is satisfied. The distinction is important in the event of default – in a lien theory jurisdiction the mortgagee is not entitled to possession of the property until it has pursued its remedy in foreclosure. A purchase money mortgage is given to a lender to secure a loan for all or some of the purchase price of a parcel of real property. The lien evidenced by a purchase money mortgage is, by law, superior to that of a judgment against the mortgagor; notwithstanding the fact that a transcript of judgment may have been recorded before the purchase money mortgage. Compare deed of trust. See lien.
MORTGAGE BACKED SECURITIES (MBS)
A debt obligation that represents a claim on the cash flow from mortgage loans – typically residential mortgage loans. Mortgage loans are purchased from banks, mortgage companies and other loan originators. The loans are assembled into pools (securitized) and interests in the pools are sold (e.g., as bonds). The pooling and sale may be done by a government agency (e.g., Ginnie Mae), by a government-sponsored enterprise (e.g., Fannie Mae), or by a private entity. The issuer guarantees timely payment of the principal and interest on the underlying mortgage loans and charges a fee for the guarantee.
N/K/A
Now known as.
NOTARY PUBLIC
A person authorized by law to attest and certify certain documents by his or her hand and official seal.
NOTICE OF ELECTION AND DEMAND
In Colorado, a document (1) indicating that a lender is the beneficiary of a deed of trust encumbering a parcel of real property; (2) stipulating that the borrower is in default on the underlying obligation; and (3) requesting that the public trustee commence foreclosure proceedings to satisfy the debt. The document is submitted to the public trustee (and recorded) and marks the beginning of the foreclosure process.
O&E
An acronym for ownership and encumbrance. An O&E is a limited search of record title for a parcel of real property. One requesting an O&E will receive a copy of the last deed in the chain of title and pertinent pages of mortgages that have not been discharged. An O&E may involve a name search, in which case proffered documents would include copies of non-consensual liens (e.g., judgments, tax liens) against the grantee named in the last deed. An O&E does not involve a full search of the chain of title, nor does it involve an examination of the proffered documents. Compare title insurance commitment.
OPTION
A right, given for consideration, to purchase or lease a parcel of real property upon specified terms within a specified time.
PARTY WALL
A dividing wall between adjoining parcels of real property with different owners.
PATENT OF LAND
An instrument by which a state or sovereign conveys a fee simple interest in land to another.
PERSONAL PROPERTY
Things that are temporary or movable by nature. Also chattel or personalty. Compare real property.
PERSONAL REPRESENTATIVE
Someone appointed by a probate court to administer the estate of a deceased person. The appointment is evidenced by “letters testamentary” (if the decedent left a valid will), or by “letters of administration” (if the decedent died intestate). With regard to the sale of real property, a personal representative signs a “personal representative’s deed” to effectuate the transfer.
POWER OF ATTORNEY
A written instrument by which one person (the principal) appoints another (the agent or attorney-in-fact) and confers upon the agent the authority to perform certain specified acts. A power of attorney may be general (authorizing the agent to carry on all of the business of the principal) or specific (authorizing the agent to carry out a specific business transaction). A power of attorney that becomes effective upon the disability or incapacity of the principal is a durable power of attorney. All powers of attorney expire upon the death of the principal.
PROMISSORY NOTE
A written instrument acknowledging a debt and promising repayment.
PRORATE
To allocate the proportionate share of an obligation paid or due to be paid between a buyer and a seller.
PUBLIC TRUSTEE
In Colorado, a government office created by statute for the purpose of releasing deeds of trust and administering foreclosure proceedings related to deeds of trust. There is a trustee for each county in the state and a given county public trustee handles all releases and foreclosure proceedings related to properties located in the county. In other states, these duties are handled by a private trustee (e.g., a title company).
QUIT CLAIM DEED
A written instrument used to release all of the right, title and interest of the grantor in and to a parcel of real property to the grantee. A quitclaim deed does not include any warranties (promises) and there is no implication that the grantor even has any right, title or interest in the property. A quitclaim deed does not convey after-acquired title. Compare bargain and sale deed and warranty deed.
REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA)
A federal law enacted in 1974 to standardize real estate settlement procedures in the United States.
REAL PROPERTY
Land, together with the fixtures and improvements located thereon. Ownership of a parcel of real property generally includes rights to use and occupy the space above (air rights) and rights to the earth below the surface. However, air rights and mineral rights may be severed from the property and owned separately. Compare personal property.
RECEIVER
A court-appointed custodian who administers property for the court, pending final disposition of a matter before the court.
RECORDING
With regard to real estate, the filing of certain documents (e.g., deeds, mortgages) with a designated public office (e.g., the county clerk and recorder), which office is authorized to receive the documents for the purpose of establishing a public record. A given county clerk and recorder receives documents related to property located in the county. Documents are “stamped” with the date and time received and a unique recording number (e.g., a book and page). Recorded documents provide notice to the general public as to the matters set forth therein. In addition, the recording stamp provides a method for assigning priority to liens against property.
REFINANCE
To repay existing debt with new debt funds. The owner of a parcel of real property may refinance his or her mortgage debt to take advantage of more favorable interest rates, to change the loan term and/or to increase the loan amount.
RELEASE OF DEED OF TRUST
An instrument executed by the beneficiary and trustee (in Colorado, the public trustee) of a deed of trust indicating that the debt secured thereby has been fully-paid and satisfied and that the lien created thereby is to be released and discharged from the subject property. See deed of trust.
RELEASE OF LIEN
An instrument executed by the owner and holder of a lien that, when duly recorded in the appropriate county records, effectuates the discharge or release of the lien as to all of the property it encumbers or as to some specific (defined) portion. See lien.
REQUIREMENTS
With regard to a title insurance commitment, the conditions that must be satisfied before the title insurance company will issue an owner’s policy insuring marketable title or a loan policy insuring the sufficiency and priority of a mortgage lien.
RIGHT OF FIRST REFUSAL
The right to have the first opportunity to lease or purchase property at terms equivalent to those offered by a third party or at predetermined terms, which right arises upon the owner’s decision to lease or sell.
RIGHT OF WAY
An easement for passage or access upon or across a parcel of real property belonging to another.
SEAL
An impression made to attest the execution of an instrument, for example, a notary seal or a corporate seal.
SECURED PARTY
The owner and holder of evidence of debt (e.g., a promissory note), which debt is secured by a lien against the debtor’s property. In the event of non-payment, the property can be foreclosed to satisfy the debt, pursuant to rights created by the lien instrument. With regard to real estate, the most common secured party is a lender, whose loan is secured by a mortgagee (or a deed of trust).
SECTION
With regard to real estate, a parcel of property approximately one mile square in size (640 acres). Thirty-six contiguous sections defining a 6x6 square constitute a township.
SEISIN
In early English property law, seisin described the interest in land of one who held a freehold estate. One did not “own” real property – the sovereign (king) was the owner of all English lands. However, seisin was more than mere possession. Today the term is synonymous with ownership.
SETTLEMENT STATEMENT
With regard to real estate sales, a document, usually prepared by a title company and signed by the buyer and seller, that sets forth charges against, credits to and adjustments between the parties. Settlement statements are prepared and signed as a part of refinance transactions as well. For some transactions (generally, those involving residential real estate), RESPA requires the use of a standardized form known as the HUD-1 Settlement Statement.
SHORT SALE
With regard to real estate, a sale transaction in which the seller’s lender receives from closing proceeds an amount less than the full amount that is owed according to the terms of the seller’s loan. A short sale is predicated on the fact that secured debt exceeds the property’s value and that the seller has some hardship that makes repayment of the full amount of the debt impossible.
SPECIAL ASSESSMENT
A charge against a parcel of real property imposed by a public authority to pay the cost of public improvements such as street lights, sidewalks or curbs and gutters.
SPECIFIC PERFORMANCE
A remedy available to an aggrieved party to a contract compelling the defaulting party to fulfill the exact terms of his or her promise or obligation. Compare liquidated damages.
STATUTE OF FRAUDS
A state law (in Colorado and elsewhere), patterned after an old English law and providing that certain contracts must be in writing in order to be enforceable. Contracts for the sale and purchase of a parcel of real property and long term (more than one year) lease agreements are covered by the statute of frauds.
SUBJECT-TO MORTGAGE
A purchase arrangement whereby the buyer of a parcel of real property agrees that a mortgage against the property to be purchased shall be permitted to remain a lien upon sale. Unlike a loan assumption, the subject-to buyer does not become personally liable on the underlying debt. However, the buyer does assume the risk of the consequence of non-payment of the debt (foreclosure) by the seller. Compare loan assumption and wrap-around financing.
SUBORDINATE
To assign a lower priority. With regard to real estate, the holder of a lien accorded higher priority by virtue of time of recording may agree to a lower priority relative to another lien. Such an agreement (a subordination agreement) is made and entered into between the respective lien holders and is recorded so as to provide notice of the changed order of priority.
SUBROGATION
An equitable doctrine holding that when a third party pays a creditor on behalf of their debtor, the third party succeeds to the creditor’s rights against the debtor.
SUB-SURFACE RIGHTS
Ownership or rights of use of the earth (generally the minerals) below the surface of a parcel of real property. Compare air rights. See real property.
SURETY (GUARANTOR)
One who agrees to pay money or perform other acts in the event that his or her principal fails to do so.
TAX-DEFERRED EXCHANGE (1031 EXCHANGE)
A transaction, provided for under Section 1031 of the Internal Revenue Code, whereby the owner of business or investment property (real or personal) can defer recognition of capital gains taxes associated with the sale of such property by reinvesting the equity from the sale into other “like-kind” property of equal or greater value.
TAX LIEN
A non-consensual lien, arising pursuant to state statute, against a parcel of real property; which lien is imposed by the taxing authority (the county treasurer) for unpaid property taxes, and which lien gives the taxing authority a security interest in the property. If not paid within the time provided by statute, the property will be sold at tax sale and a treasurer’s deed will issue to the purchaser. See lien.
TAX SALE
The sale of a parcel of real property by the county treasurer for the county in which the property is situate to satisfy a debt resulting from the nonpayment of general or special property taxes. Compare foreclosure.
TENANCY IN COMMON
A form of co-ownership of property whereby each owner holds an undivided interest in some percentage (not necessarily equal) of the property. Tenancy in common does not include a right of survivorship. Upon the death of a tenant in common, his or her interest in the property descends to heirs or passes by will. Compare joint tenancy.
TITLE INSURANCE POLICY
A form of insurance issued by a title insurance provider that is applicable to a parcel or parcels of real property and insures (1) the property owner as to vesting, clear title, access and marketability, and/or (2) a lender with a lien secured against the property as to the sufficiency and priority of the lien. Coverage provided by a title insurance owner’s or loan policy is limited by exclusions (set forth on the policy jacket) and exceptions. Coverage under any policy may be expanded by endorsement.
TITLE INSURANCE COMMITMENT (COMMITMENT OR BINDER)
A report issued by a title insurance company, or its agent, showing the current condition of title to a parcel of real property and setting forth the requirements, including payment of the premium, that must be satisfied in order to issue a title insurance policy. Compare O&E. See title insurance policy.
TREASURER’S DEED
The form of deed issued by a county treasurer following a tax sale. Compare confirmation deed. See tax sale.
USURY
An unconscionable or exorbitant rate of interest. A usurious loan carries and interest rate in excess of that permitted by law.
VEST
To create a present (non-contingent) right, title or interest in something. With regard to real estate, vesting denotes ownership (e.g., “the property is vested in…”) or the form of ownership (e.g., joint tenants).
VOID
To have no legal force or effect.
WAIVE
To intentionally and voluntarily relinquish a right or privilege. To refrain from enforcing or requiring performance of a duty by another.
WARRANTY DEED
A written instrument that includes certain warranties (promises) and that is used to transfer all of the right, title and interest in and to a parcel of real property from the grantor to the grantee. The usual warranties are (1) “seisin” – the grantor is the possessor and owner of the property and he or she has the right to convey it; (2) quite enjoyment – the grantee will not be disturbed by someone claiming an interest in the property; (3) no encumbrances – the grantor is delivering clear title except as otherwise stated in the deed; (4) further assurance – if necessary, the grantor will procure and deliver additional documents necessary to perfect the grantee’s title; and (5) forever defend – the grantor will bear the expense of defending the grantee’s title against future ownership claims. Warranty deeds may be general or special (in which case the warranties are limited to those claiming by, through or under the grantor). Compare bargain & sale deed and quitclaim deed.
WRAP-AROUND FINANCING
A financing arrangement whereby debt secured by an existing (senior) mortgage is incorporated into a new loan secured by a junior mortgage. A common “wrap” scenario is as follows – as part of a sale transaction, the purchaser takes over payment of the seller’s existing loan and borrows and additional amount from the seller. The purchaser makes a single payment to the seller (junior lender) and from that payment the seller pays the original lender. The instrument securing the new loan from the seller is called a wrap-around mortgage or an all-inclusive deed of trust. There are risks associated with the wrap-around financing (default on the senior loan or a senior loan with a due-on-sale clause), but if the senior loan carries a low interest rate and prevailing rates are high, the arrangement allows the purchaser to receive the benefit of the lower rate. Compare loan assumption and subject-to mortgage.
WRIT OF EXECUTION
A court order authorizing and directing an officer of the court, usually a sheriff, to carry into effect a judgment or decree of the court.