Abstract of Title – A written history of the transactions or conditions bearing on the title to a designated parcel of land. It cov ers the period from the original source of title to the present and summarizes all documents of public record.
Acceleration Clause – A clause requiring the Purchaser to pay the entire principal balance due if certain conditions of the con tract are violated. A few examples of these conditions are a failure to make regular installment payments, non-payment of property taxes, and non-payment of hazard insurance premiums. This clause most often appears in land contracts under the heading “Enforce ment on Default” or “Acceleration Clause.”
Accrued Interest – Interest that has been earned but not paid.
Add-Back Escrow – In a land contract that utilizes an Add-Back escrow, the Purchaser includes an extra amount with each month’s payment in order to cover future tax and/or insurance bills pay able by the Purchaser. The Seller then pays property taxes and/or insurance premiums and adds back the amounts paid to the cur rent principal balance owed. Add-Back escrows in contracts are usually worded as follows: “The Purchaser is to pay monthly, in addition to the monthly pay ment hereinbefore stipulated, the sum of $ __, which is an es timate of the monthly cost of the taxes, special assessments, and insurance premiums for the land, which shall be credited by the Seller on the unpaid principal balance owed on the contract. If Purchaser is not in default under the terms of this contract, Seller shall pay for Purchaser’s account the taxes, special assessments, and insurance premiums mentioned above when due and before any penalty attaches, and submit receipts therefore to Purchaser upon demand. The amounts so paid shall be added to the principal balance of this contract.
Addendum – An addition to a written document. Addenda is the plural.
Agent – One who undertakes to transact business or to manage an affair for another, with the authority of the latter.
Amendment- An alteration to a contract.
Amortization – The length of time it will take to pay off a debt at the mutually agreed upon interest rate and payment amount. An example of an amortization schedule for a $23,000 balance with payments of $250 at 11% interest is shown below.
|Payment #||Payment||Interest||Principle||Total Balance|
Appurtenance – Something outside the property itself but considered part of the property that adds to its greater enjoyment, such as the right to cross another’s land.
Assessments – The amount of tax or special payment due to municipality or association.
Assignee – The person or corporation to whom an agreement contract is assigned; one to whom real property or an interest real property is transferred or set over.
Assignment – A transfer from one party to another.
Assignor – A party who assigns or transfers an agreement or contract to another.
Balance Due – The amount currently owed on debt; the principal balance due.
Balloon – The final payment on a mortgage, trust deed or a contract when that payment is greater than the preceding installment payments and pays the loan in full.
Bankruptcy – The financial inability to pay one’s debts when due The debtor seeks relief through court action that may work out erase debts.
Breach of Contract – A violation of the terms of a legal agreement.
Buyer – One who purchases the property; also referred to as “Vendee or “Purchaser.”
Certificate of Title – A written statement furnished by an abstract or title company or an attorney stating that the title to piece of property is legally vested in the present owner.
Certification – The act of showing evidence of ownership or debt
Chain of Title – The history of all the documents transferring title to a parcel of real estate, starting with the earliest existing document and ending with the most recent.
Chattel – Anything owned and tangible other than real estate, for example, furniture, automobiles, and jewelry.
Clear Title – Title not encumbered or burdened with defects such as mortgages, unpaid taxes, or underlying liens.
Cloud on Title – Any condition revealed by a title search that adversely affects the title to a property. Usually, cloud on title cannot be removed except by a quit claim deed, release or court action.
Collateral – Property pledged as security for a debt.
Commit Waste – To neglect property or allow it to be used in a way that lessens its value.
Consideration – A legal right or promise exchanged for the act, promise or property of another person. For example, in a con tract for the purchase of a piece of property, the property itself and the money paid (or promised to be paid) are the consider ations made by the property seller and the new property owner, respectively.
Convey – To deed or transfer title to another.
Conveyance – The document, such as a deed, lease or mortgage, used to effect a transfer of property.
Covenant – A legally enforceable promise or restriction in a con tract. For example, a purchaser on a mortgage, trust deed or land contract may covenant to keep the property in good repair and adequately insured against fire and other casualties. The breach of a covenant usually creates a default and can be the basis for foreclosure.
Deed – A written document that conveys or transfers title from one party to another. These are various types of deeds; however, the two most commonly used are warranty and quitclaim.
Deed of Trust – An instrument used in many states in place of a mortgage. Legal title to the property is vested in one or me trustees to secure the repayment of the loan.
Default – A failure to perform on one or more of the terms of the note or of the covenants of a mortgage or land contract.
Delinquent Payment – A payment not paid on a specified payment date. For example, if a payment is due on the first day every month and it is not received until the fifth day of the mom that payment is delinquent. If a mortgage, trust deed or land co tract has a 10-day grace period, then payment would not be considered “delinquent” until the 11th day after the due date.
Devise – A gift of real estate by a will or last testament.
Dispossess – To obtain physical possession of the property from another by due process of law.
Dower – Under common law, the legal right of a wife or child a part of a deceased husband’s or father’s estate, regardless of the provisions in his will.
Down Payment – The amount of money paid at the execution of a mortgage or a land contract. This lump sum of money is subtracted-acted directly from the original sales price. The remaining principal balance then begins to accrue interest at the specified interest rate.
Due-On-Sale Clause – A clause set forth in some mortgages a land contracts whereby the Lender or Seller has the right to “call in” the balance upon the sale or transfer of the property by the Borrower or Purchaser to a third party.
Earnest Money – A deposit made by a Purchaser to demonstrate good faith; a down payment.
Easement – A right created by grant, reservation, agreement, pre scription, or necessary implication, which one has in the land of another. For example, the right of public utility companies to lay their lines across another’s property is a utility easement.
Encumbrance – Any right to or interest in land that affects its value, including outstanding mortgage loans, unpaid taxes, ease ments, or deed restrictions; a cloud on the title.
Equity – The difference between fair market value and current indebtedness (balance due). For example, if a person owes $10,000 on his home and the market value is now $50,000, he now has 80% equity in his home ($40,000 out of $50,000).
Escrow – An agreement between two or more parties providing that certain instruments or property be placed with a third party for safekeeping, pending the fulfillment or performance of a speci fied act or condition.
Escrow Account – An account in which a prescribed amount of money is deposited each time a payment is collected to be used for paying real estate taxes and/or insurance. For example, a mort gage, trust deed or land contract may require a monthly payment of $260 with an additional $40 to pay taxes and insurance. This $40 goes into an escrow account which, technically, belongs to the Purchaser.
Fee Simple – The highest and best form of ownership recognized by law. Owner is entitled to the entire property with unconditional power to sell it.
First Mortgage – A real estate loan that creates a primary lien against real property.
Fixtures – Improvements or personal property so attached to the land as to become part of the real estate. For example, a porch would be considered a fixture, whereas a ceiling fan may just be personal property.
Foreclosure – A termination of all rights of a mortgagor in the property covered by a Mortgage. Statutory foreclosure is effected without recourse to courts but must conform to applicable laws.
Forfeiture – The loss of money or anything else of value be cause of failure to perform under the contract. For example, because the prospective Purchaser failed to keep up payments under the land contract, he or she forfeited all of his or her rights to the property.
Free and Clear Title – Title to property without encumbrances. It is generally used to refer to a property free of mortgage debt.
Grace Period – The period during which one party may fail to perform without being considered in default.
Grantee – The person to whom an interest in the property is conveyed. For example, in a land contract sale, the Grantee is most often referred to as the Purchaser.
Grantor – The person conveying an interest in the property. Ex ample, in a land contract sale, the Grantor is most often referred to as the Seller.
Guaranty – A written promise by one party to pay a debt or perform an obligation contracted by another in the event that the origi nal obliger fails to pay or perform as contracted. For example, a parent may guarantee payments owed by a son or daughter.
Hazard Insurance – A type of insurance bought to ensure property against losses due to fire, theft, vandalism, etc. Most land contracts require the Purchaser to carry hazard insurance at all times to protect the Seller from insurable losses.
Heir – One who inherits property.
Hereditaments – Any property, whether real or personal, tangible or intangible, that may be inherited.
Homeowner’s Policy – An insurance policy designed especially for homeowners. Usually protects an owner from losses by com mon disasters, theft, etc.
Improvements – Those additions to undeveloped land such as buildings, streets, sewers, etc., that tend to increase its value.
Installments – Parts of the same debt, payable at successive periods as agreed; payments made to reduce a mortgage.
Insurance Premium – The amount paid for the purchase of insurance.
Interest Rate – The percentage of money charged for its use. For example, a Seller may charge a Purchaser 10% interest on the unpaid balance of a mortgage, trust deed or land contract.
Judgment – A decree of a court stating that one individual is indebted to another for a certain fixed amount.
Judgment Lien – A lien upon the property of a debtor resulting from the decree of a court
Judicial Foreclosure – Having a defaulted debtor’s property sold at a price the court approves.
Land Contract – A real estate installment sale arrangement whereby the buyer may use, occupy and enjoy the land, but no deed is given by the Seller (so no title passes) until all or a specified part of the sale price has been paid.
Late Charge – An additional fee charged to a person for a payment that is delinquent. The most common methods of charging late fees are to charge a fixed dollar amount or a percentage of the payment.
Lease – A contract in which, for a payment called rent, the one entitled to the possession of real property transfers those right to another for a specified period.
Legal Description – A property description recognized by law which is sufficient to locate and identify the property. A typical legal description will identify the county, township, and septic of the township where the land is located.
Legatee – One who receives property by a will.
Lessee – One who receives property by a lease. Lessor – One who leases the property to a lessee.
Liability – A debt or financial obligation.
Liable – Responsible or obligated. For example, one who borrowed on a mortgage generally becomes personally liable for repayment.
Lien – A charge against property making it security for the payment of a debt, judgment, mortgage or taxes. A Lien is a type of’ encumbrance. A specified lien is against certain property only. A general lien is against all of the property owned by the debtor.
Maturity – The date on which an instrument of indebtedness, such as a mortgage or land contract, becomes due and payable.
Mortgage – A pledge of real property as security for the payment of a debt. With a mortgage, the Borrower retains posses sion and use of the property. A mortgage is typically signed si multaneously with a note.
Mortgagee – The party lending the money and receiving the mortgage.
Mortgagor – The party borrowing money secured by real estate and giving a mortgage.
Notary Public – One who is authorized by the state or federal government to administer oaths and attest to the authenticity of signatures.
Notice of Default – A letter sent to a defaulting party as a reminder of the default. Such notice may state a grace period and the penalties for failing to cure the default.
Opinion of Title – A certificate, generally from an attorney, as to the validity of the title of property being sold.
Outstanding Balance – The amount currently owed on a debt.
Parcel – A piece of property under one ownership; a lot in a subdivision.
Parcel Number – A number that is given to a piece of property by the county for tax purposes.
Payment – An agreed upon dollar amount paid in regular installments by a Purchaser. The most common installment method of land contract payments is monthly payments.
Per Annum – In or for each year annually.
Personal Property – Any property that is not real property. For example, personal property is appliances, cash, securities, furniture, and mobile homes not permanently affixed to a site.
Plat – A plan or map of a specific land area.
Plat Book – A public record containing maps of land and showing the division of the land into streets, blocks, and lots and indicating the measurements of the individual parcels.
Power of Attorney – An instrument authorizing a person to an as the agent of the person granting it.
Premises – Land; an estate; the subject matter of a conveyance
Principal – The original amount of the total due on a mortgage, trust deed or land contract; the principal portion of a payment that portion which is not interest. (See “Amortization” for an example of a payment having both principal and interest portions
Principal Balance – The unpaid balance owed on a mortgage or land contract.
Principal and Interest Payment – A periodic payment, usually paid monthly, that includes the interest charges for the period plus an amount applied to the amortization of the principal balance.
Purchase Money Mortgage – A mortgage given by the Purchaser of real property to the Seller as part of the consideration in the sales transaction.
Purchaser – One who purchases a property; also referred to as “Vendee” or “Buyer.”
Quit Claim Deed – A deed that transfers only such interest, title or right as a Grantor may have at the time the conveyance is ex ecuted; a deed without representations or warranties as to the na ture of the rights conveyed.
Real Estate – Land and everything attached to it. Real Property – Real estate.
Representations – Descriptions as to the quality or character of something. For example, a building may be represented as being free from structural defects.
Sales Price – The mutually agreed upon dollar amount to be paid for a particular piece of property.
Section – One square mile in a government rectangular survey. There are 36 sections in a six-mile-square township.
Security – Something is given as a pledge to payment.
Seller – Individual who has sold real estate; also referred to as Vendor.
Sidwell Number – See “Parcel Number”.
Subordinate – One who moves to a lower priority, as a Lien would if it changes from the first mortgage to a second mortgage.
Successor – One who receives title to the property.
Tenements – Possessions that are permanent and fixed; structures attached to the land.
Term – The amount of time (usually computed in months) until the balance of a mortgage or land contract is due and payable. For example, a land contract may fully amortize over a 10-year period (120 months). However, the contract may also call for a balloon payment to be made at the end of the fifth year (60th month). In this case, the term of the land contract would be 60 months or five years.
Title – Evidence that the owner of the land is in lawful possession thereof.
Title Insurance – A form of insurance purchased to protect against any losses or defects in the title of a particular piece of property.
Title Search – An examination of public records, law, and court decisions to disclose the past and current facts regarding the owner ship of real estate.
Township – A six-mile-square tract delineated by a government rectangular survey.
Trust Deed – A claim against real estate similar to a mortgage but title is held by a third party called a Trustee for the Beneficiary.
Trustee – One who holds property in trust for another to secure the performance of an obligation.
Underlying Debt – An original loan that is still in existence. This loan may be owed on a mortgage, trust deed or land contract.
Use Restrictions – A clause in a deed which places limitations or restrictions on the property’s use. For example, “this property can never be used to sell liquor” or “this property can never be used to raise farm animals.” These limitations “run with the land” and are therefore binding on subsequent owners.
Vendee – A person who buys property; another word for “Purchaser.”
Vendor – A person who transfers property by sale; another word for “Seller.”
Warranties – Promises contained in a contract. For example, a Seller may warranty that a property sold is structurally sound.
Warranty Deed – A deed that conveys or transfers title from one party to another with covenants assuring that the title transferred is free from all encumbrances.
Waste – See “Commit Waste.”
Yield – The rate of return on investment. For example, if one invests $100 and receives $15 after the first year, one’s yield is 15% on the invested cash for the first year.