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Dictionary of Escrow Terms
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| The following list defines most of the terms you will come
across in your real estate transactions. Individual matters
should be discussed with an attorney whenever there is a legal
question. |
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| ABSTRACT OF JUDGMENT: A summary of the essential
provisions of a court judgment, which when recorded in the county
recorder's office, creates a lien upon the property of the defendant
in that county, both presently owned or after acquired. |
| ACCELERATION CLAUSE: This clause in a note and trust
deed permits the payee or beneficiary to declare the entire unpaid
balance immediately due and payable when a fiben condition occurs.
Such a condition can be the sale of the land. This clause is
sometimes called an "alienation clause". |
| ACCOMMODATOR (INTERMEDIATE): a party to an IRC S1031
exchange transaction who, pursuant to an Exchange Agreement,
acquires relinquished property, holds money from the sale of the
relinquished property, acquires replacement property to the
Exchanger. |
| AD VALOREM: Literally, "according to value."
This term is usually used in reference to real property taxes which
are assessed according to value, i.e., ad valorem. |
| AGENCY: Any relationship in which one party (agent)
acts for or represents another (principal) under the authority of
the later. Agency involving real property should be in writing, such
as listings, trusts, powers of attorney, etc. |
| ALL INCLUSIVE TRUST DEED (AITD/WRAP-AROUND): A junior
Deed of Trust securing a promissory note, the face amount of which
is the sum of the liability secured by prior Trust Deeds plus the
cash or equity advanced by the AITD lender |
| AMORTIZATION: Provision for the payment of a debt as to
both principal and interest in equal installments over a period of
time. |
| APPRAISAL: An opinion as to the fair market value of
land and the improvements on it. |
| ASSESSED VALUE: The value placed on land and
improvements as a basis for taxation. In California this is usually
accomplished by the county assessor's office, and the assessed
values for real estate taxes are usually one quarter of market
value. |
| ASSESSMENTS: Special and local levies upon property in
the immediate vicinity of improvement. Assessments can be imposed by
such entities as flood control districts, street lighting districts
and air pollution control districts which serve an area. |
| ASSIGNEE: One to whom a transfer of interest is made.
For example, the assignee of a Deed of Trust or contract. |
| ASSIGNMENT: The transfer, in writing, of a person's
interest to another person or entity in an asset, such as an
assignment of stock, a Deed of Trust or contract. |
| ASSIGNOR: One to who makes an assignment. For example,
the assignee of a Deed of Trust or contract. |
| ASSUMPTION: An agreement by one party to pay an
obligation previously owned by another. For example, the assumption
of an existing Trust Deed by a new owner may occur when property is
sold. |
| ATTORNEY IN FACT: One who holds a power of attorney
from another allowing him to act on behalf of the grantor of the
power. |
| BENEFICIARY: In Trust Deed, the lender is designated as
the beneficiary. He obtains the benefit of the security. |
| BENEFICIARY'S STATEMENT: A report from the lender,
usually in writing, setting forth the terms and conditions of a loan
already of record, such as amounts still owed, interest rate,
monthly payments, etc. |
| BILL OF SALE: A document that attest to the transfer of
ownership of personal property. |
| BORROWER: One who obtains a loan and owes money to a
lender. |
| BUYER: One who purchases or acquires property. |
| COLLECTION SERVICE: A service performed by a neutral
third party in receiving and disbursing loan payment as instructed
by the parties concerned. |
| CONDEMNATION: The exercise of the power of eminent
domain by which property is taken for public use upon payment of
just compensation. Condemnation can also refer to the condemning of
unsafe structures. |
| CONTINGENT: Dependent upon conditions or events
specified but not yet accomplished. Property may be sold contingent
upon the seller or buyer meeting a predetermined condition. |
| CONVEYANCE: A written document that transfers title to
an asset from one person to another. A deed and an assignment |
| COUNTY ASSESSOR: One who sets value of property for
taxation purposes |
| DEED: A Written Document which conveys ownership of
land from one person to another. |
| DEED OF TRUST: A document executed by the owner of land
by which the land is given as security for the payment of a note or
other performance of an obligation. In California and some other
states the Deed of Trust is usually used in place of a mortgage. |
| DEFAULT: Failure to perform a duty or to pay an
obligation. |
| DEFICIENCY JUDGMENT: A personal judgment in a judicial
foreclosure action for the remaining amount due after a sale of the
security. |
| DEMAND/BENEFICIARY'S DEMAND: A statement from a lender
showing the amount due on a loan. |
| DISCLOSURE: In real estate, revealing all the known
facts which may affect the decision of a buyer or tenant. A broker
must disclose known defects in the property for sale or lease. A
builder must give to a potential buyer the facts of his new
development (are there adequate school facilities?; an airport
nearby?; etc.). A broker cannot charge a commission to buyer and
seller unless both know (disclosure) and agree. |
| EARNEST MONEY: An amount of money given as part of the
purchase price of property to bind the agreement between buyer and
seller. |
| EASEMENT: A right or interest in the land of another,
such as a right to cross over another person's property to reach
yours. |
| EMINENT DOMAIN: A right or power of a governmental body
to take property |
| EQUITY: Market value of property, less any encumbrance
or other liens on it. |
| ESCROW: According to section 17003 of the State of
California Financial Code: "...any transaction wherein one
person, for the purpose of effecting the sale, transfer,
encumbering, or leasing of real or personal property to another
person, delivers any written instrument, money, evidence of title to
real or personal property, or other thing of value to a third person
to be held by such person until the happening of a specified event
or the performance of a prescribed condition, when it is then to be
delivered by such third person to the grantee, grantor, promisee,
promisor, obligee, obligor, bailee, bailor, or any agent or employee
of any of the latter." |
| EXCEPTION: An interest in real property which is
excluded form the conveyance and remains in the grantor or which had
been excluded in a prior conveyance. |
| EXCHANGE: a reciprocal transfer of real property which
has certain tax advantages over a sale. Definite procedures must be
followed in order to qualify the transfer as an exchange. |
| FIRE INSURANCE: Insurance against loss or damage by
fire to specific property. |
| FIRPTA:Under the Foreign Investment of Real Property
Act, every buyer must, unless an exemption applies, deduct and
withhold 10% of the gross sales price from seller's proceeds and
send it to the Internal Revenue Service, if the seller is a "foreign
person" under that statute. |
| FORECLOSURE: A proceeding to enforce a lien by the sale
of the property in order to satisfy the debt. |
| GRANTEE: The buyer of a deed.. |
| GRANTOR: The seller of a deed. |
| IMPOUND ACCOUNT: An account held in trust by the lender
in which the borrower is required to place monthly deposits for
taxed, insurance and other purposes. |
| LAND SALE CONTRACT: An agreement to sell and purchase
wherein legal title is withheld from the purchaser until such time
as the required payments to the seller have been completed. |
| LEASE OPTION (LEASE WITH OPTION TO PURCHASE): A lease
containing an option giving the lessee the right to purchase the
property. The price and terms of the purchase must be set forth for
the option to be valid. The option may run for the length of the
leases or only for a portion of the lease period. |
| LENDER: One who lends money to borrowers. |
| LESSEE: The tenant under a lease. |
| LESSOR: The landlord under a lease. |
| LEGAL DESCRIPTION: Description of real property, as
used in legal documents in contrast to a street address by which the
property is commonly known. Legal descriptions usually refer to
recorded maps, surveys, or other public documents. |
| LIEN: A security interest in real or personal property
which places the holder in a position prior to the rights of the
general creditors of the owner. Examples include Trust Deeds,
mortgages, special assessments, recorded judgments, mechanic's lien,
taxes, etc. |
| LIS PENDENS: a notice recorded in the official records
of a county to indicate that a lawsuit is pending affecting the
lands described in the notice. |
| MARKET VALUE: The price that real property would
reasonably be expected to bring were it to be offered for sale with
a reasonable sales effort over a reasonable period of time |
| METES AND BOUNDS: A term used in describing the
boundary lines of land setting forth all the boundary lines together
with their terminal points and angles. |
| MORTGAGE: A written document executed by the owner of
land by which the land is given as security for the payment of a
debt or performance of an obligation (rarely used in California). |
| NOTE: Written evidence of a debt by a borrower that
included a promise of payment in accordance with specified terms. a
valuable document which must not be lost even when paid in full. In
real property transactions, a note is usually secured by a Deed of
Trust. |
| NOTICE OF COMPLETION: A notice which should be recorded
to indicate completion of work of improvement to real property. A
valid notice of completion limits the time for filing valid
mechanic's liens. |
| NOTICE OF DEFAULT: Recorded notice that a default has
occurred under a Deed of Trust and/or note. |
| OFFSET STATEMENT: A statement furnished to an escrow
from an owner of land subject to an incumbrance (note) as to the
balance due. Not to be confused with a beneficiary's statement. This
can also be provided by a tenant regarding his rights of possession. |
| OPEN END DEED OF TRUST: A Deed of Trust which secures
additional notes for funds that a lender may advance to a trustor,
subsequent to the execution of the original loan. |
| OWNER CARRY BACK: A term used to indicate that the
seller is willing to take back a purchase money mortgage. |
| PAYEE: One who receives payments. |
| PAYER: One who makes payments. |
| PERSONAL PROPERTY: All property which is not land or
improvements permanently affixed to land. Example: stocks, bonds,
furniture, automobiles, clothing, promissory notes, etc. Items of
tangible personal property are often referred to as chattels. |
| PMI (PRIVATE MORTGAGE INSURANCE): Insurance against a
loss by a lender in the event of default by a borrower (mortgagor).
The insurance is similar to insurance by a governmental agency such
as FHA, except that is issued by a private insurance company. The
premium is paid by the borrower and is included in the mortgage
payment. |
| POINTS: A charge made by a lender. One point equals one
percent of the loan. |
| POWER OF ATTORNEY: A written authorization to an agent
to preform specified acts on behalf of his principal. this may be
granted as either a general or a limited power. |
| PRELIMINARY TITLE REPORT: A report from a title company
of the present condition of title made prior to the issuance of a
title policy. |
| PREPAYMENT PENALTY: An agreement to pay a penalty for
the payment of a note before it actually becomes due. |
| PRORATION: The allocation of property taxed, interest,
insurance premiums, rental income, etc. between buyer and seller
proportionate to time of use. |
| QUALIFIED INTERMEDIARY: A party to an IRC S1031
exchange transaction who satisfies the "safe harbor"
requirements of Reg.S1.1031 (k)-1g(4); A Qualified Intermediary will
not be attributed to the Exchanger. |
| QUIT CLAIM DEED: A deed which conveys whatever right,
title, or interest the grantor may have in property at the time of
conveyance. There is no guarantee implied in a quit claim deed. |
| REAL PROPERTY: Land or improvements permanently affixed
to land. |
| RECONVEYANCE: The document that is
evidence that the Deed of Trust affecting real property has been
paid in full and that the lender and the trustee no longer have any
interest in the property. |
| RECORDATION: Filing for record in the office of the
county recorder, a very necessary process in dealing with real
property |
| REQUEST FOR NOTICE OF DEFAULT: A recorded request for
notification of a recorded notice of default on a Deed of Trust. |
| RESERVATION: Right reserved by the grantor in conveying
property, or a right which had previously been reserved. |
| RESTRICTIONS: This is often referred to as covenants,
conditions, and restrictions (CC&R) in regard to a piece of
property, setting limitations on its use. |
| RIGHT OF WAY: The right of another to cross over, under
or through a parcel of land. |
| SELLER: One who sells property to another. |
| SHORT PAY (SHORT SALE): A short sale is the sale of
real property where the fair market sale price is less than the loan
balance. |
| SUBJECT TO: Usually referred to as the condition of
title that exists at the time of acquisition by the buyer, such as
subject to a Deed of Trust or record. |
| SUBORDINATION AGREEMENT: An agreement by which a prior
lien is made inferior to an otherwise junior lien. |
| TAX COLLECTOR: One who collects the taxes on the
property. |
| TITLE: Evidence of a person's right to or the extent of
his interest in property. |
| TITLE INSURANCE: Insurance against loss or damage
resulting from defects in title to a particular parcel of real
property. |
| TRUST DEED: A Deed of Trust. (See Deed of Trust) |
| TRUSTEE (IN DEED OF TRUST): The entity to which
property is conveyed in trust, not to be confused with the
beneficiary. |
| TRUSTOR (IN A DEED OF TRUST): The borrower under a Deed
of Trust. |
| VENDEE: One who is purchasing property under a land
sale contract. |
| VENDOR: One who is selling property under a land sale
contract |
| VESTING: The manner in which the owner of real property
holds title. For example, John Jones a single man. |
| ZONING: Local government regulations relating to the
use of property |
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