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Terminology

The real estate industry has its own unique language that can sometimes be confusing. So, we've defined some common terms to help you during your real estate transaction. The terms are defined only in their real estate or title insurance contexts and may have completely different meanings in other contexts. For more precise definitions, you are advised to seek legal counsel.

Select the first letter of the word from the list below to jump to the appropriate section of the glossary.

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

Abandonment: When a homeowner leaves a house with no intention to return.

Acceleration Clause: Clause in a trust deed or a mortgage giving a lender the right to call all sums owing the lender to be immediately due and payable upon the happening of a certain event.

Alienation Clause: A clause in the deed of trust which states that upon sale or transfer of certain property, a loan is immediately due and payable. See Due on Sale

As Is: When a property is sold as is, the seller does not warrant or guarantee that the property is free of defects. The buyer accepts the property in its present condition, without modification.

Assessed Valuation: A valuation placed upon property by the Travis County Tax Assessors office as a basis for taxation.

Assessors Parcel Number: A number assigned by the county tax assessor to identify a parcel of real property.

Assignment of Rents: A procedure in which a borrower gives a lender the right to receive the rents collected from a tenant in a house owned by the borrower.

Appraisal: An estimate of a property's value made by a licensed appraiser who is usually presumed to be an expert.

Assumption of Mortgage: Occurs when a person takes title to property and assumes liability for the payment of an existing mortgage note and the original borrower is released from any liability.

Auction: The process of selling property at a public sale to the highest bidder. The person conducting the sale will call out the initial asking price and each price that anyone in the audience bids until no one will bid a higher price.

Automatic Stay: A bankruptcy court order. When bankruptcy is filed, the bankruptcy court will issue a court order that prevents any creditor from attempting to collect any debt from the person who declared bankruptcy. Creditors, even though they are owed money, may not undertake foreclosure, repossession, eviction or seizure, or even call or write the debtor demanding payment. Instead, they must all come to the bankruptcy court and seek the money they are owed together with the other creditors.

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Balance Owed on the Loan: The part of the original loan that remains unpaid by the borrower at a given point in time. This is not the same as the amount to pay off the loan, which would include back payments and late charges.

Bankruptcy: An action filed in a federal bankruptcy court that allows a creditor to reorganize or discharge credit obligations. A bankruptcy will temporarily stop the foreclosure sale.

Beneficiary: (1) Someone entitled to the benefit of a trust: (2) Someone who receives profit from an estate, the title of which is vested in a trustee: (3) The lender on a security of a note and deed of trust.

Beneficiaries Statement: ("Benny Statement") A written statement of the requirements to pay off the remaining balance of a loan secured by a deed of trust.

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Certificate of Sale: A document indicating that a property has been sold to a buyer at foreclosure, subject to a right of redemption for a set period after the foreclosure sale in certain situations.

Chapter 7: One of the chapters in the federal Bankruptcy Code. Chapter 7 is liquidation bankruptcy in which a debtor's nonexempt assets are gathered together and given up or sold for the benefit of creditors in order of the creditors priority. The Texas homestead exemption exempts a homeowners residence.

Chapter 13: One of the bankruptcy chapters in the federal Bankruptcy Code. Under Chapter 13, a wage earner can reduce debt payments through a bankruptcy court order according to the terms of a plan approved by the bankruptcy court.

Clear Title: Ownership rights to a piece of real estate that are not encumbered by liens, leases or judgments. No other ownership claims exist.

Closing Date: The date upon which the buyer takes over the property and seller receives his funds.

Condominium: Land ownership in which one owns an individual unit and a percentage of common acres.

Contract for Deed: A sales arrangement in which the seller holds title until the buyer finishes paying for the property. The terms of the sale and the payments are set in a written contract signed by the buyer and the seller. At the end of the payment period, the buyer gets title to the real estate by means of a deed. A contract for deed should be recorded

Conveyance: The process of transferring title or some interest in real estate to a new owner.

Cloud on the Title: An outstanding claim or encumbrance that, if valid, would affect or impair the owner's title. A foreclosure sale can clear clouds on title.

Cram-Down: A chapter 13 bankruptcy arrangement in which a plan to repay lenders and creditors, which was developed by the debtor's attorney, is ordered into effect by the bankruptcy court. It is crammed down on the sometimes unwilling creditors.

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Deed: The legal document commonly used to transfer ownership of real estate from one owner to another.

Deed of Reconveyance: An instrument that releases and discharges a deed of trust.

Deed in Lieu of Foreclosure: Rather than waiting for the lender to force the sale of the property, the borrower just deeds the property to the lender.

Deed of Trust: A deed given by the property owner to secure performance of an act (such as making payments on a loan). A deed of trust provides security for mortgage note.

Deed Restriction: A restriction imposed in a deed to limit the use of the land. A deed restriction may prevent certain type of usage or may prevent sub-division of the land.

Deficiency: Money a borrower who has lost real estate in foreclosure still owes to the lender because the foreclosure sale failed to generate enough to pay off the loan.

Deficiency Judgment: A court judgment that a defaulting borrower owes a deficiency.

Due on Sale: A clause in a mortgage that demands that the borrower pay off the loan in full if the house is ever sold. The lender can't prevent the sale, but it can demand payment in full on the loan balance, which often has the same practical effect. In the absence of a due on sale clause, the loan is assumable without the lender's consent.

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Earnest Money: Money presented by a purchaser of real estate as evidence of good faith which can be applied towards the down payment

Easement: A right that may be exercised by the public or individuals on, over, or through the property of others.

Encroachment: A building, part of a building, or obstruction that intrudes upon the property of another.

Encumbrance: Right to or interest in property interfering with its use or transfer, or subjecting it to an obligation. In connection with foreclosure property, the most likely encumbrances are mortgages and claims for unpaid taxes.

Equity: The excess of market value or sales price above the outstanding loan balance plus back payments if any.

Equity Loan: A subordinate loan (junior to a first mortgage) based on a percentage of the equity.

Estoppel Certificate: An instrument executed by the mortgagor setting forth the status of and the balance due on the mortgage as of the date of the execution of the certificate.

Eviction: The legal procedure to have a tenant forcibly removed from a dwelling.

Execution Sale: The sale of property by a sheriff pursuant to a court order.

Extension Agreement An agreement that extends the life of a mortgage.

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Fair Market Value: The value that a willing and knowledgeable buyer would pay, and a willing and knowledgeable seller would accept, in an arm's-length transaction for a property.

Fannie Mae: A government-chartered but privately owned corporation that buys mortgages from mortgage companies. Also know as Federal National Mortgage Association

FDIC: The entity set up by the federal government to insure deposits in banks and S&Ls. Also known as The Federal Deposit Insurance Corporation.

Federal Home Loan Mortgage Corporation: A government-chartered but privately owned corporation that buys mortgages from S&Ls, Banks and Mortgage Bankers Also called Freddie Mac.

FHA Mortgage Loan: Mortgage loan insured by the Federal Housing Administration

First Lien: A debt recorded in first position against a property.

First Mortgage: Mortgage that has priority as a lien over all other mortgages. In cases of foreclosures, the first mortgage must be satisfied before other mortgages are paid off.

Forbearance: A lender voluntarily accepts payments that are lower than originally agreed in the loan documents for a limited period of time in order to allow the borrower to recover financially. The borrower must eventually repay the missing or reduced payments, as well as all the other remaining payments on the loan.

Foreclosure: The forced sale of a piece of real estate to repay a debt.

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GNMA - Government National Mortgage Association: An arm of the federal government that guarantees the timely payment of mortgage backed securities.

Grace Period: Additional time allowed to perform an act or make a payment before a default occurs.

Grant: A term used in deeds of conveyance of land to indicate a transfer.

Grant Deed: A deed of conveyance that implies that the grantor (seller) is granting an actual interest and has not previously granted such interest to anyone else.

Grantee: The party to whom the title to real property is conveyed.

Grantor: The person who conveys real estate by deed; the seller.

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Holder in Due Course: A person or entity that obtains a note without notice of any borrower defenses to its enforcement may enforce payment of that note in a court despite any borrower defense or other reason for not paying.

Homestead: Special legal protection that Texas gives to a person's principal residence.

Housing and Urban Development: A department of the federal government that administers housing programs known as HUD.

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Impound Account: An account held by the lender that is used for the lender to advance payments of certain expenses or charges that are incidental to property ownership and that may protect the lender's security.

Involuntary Lien: A lien imposed against property without consent of the owner, e.g., taxes, special assessments, homeowners association dues.

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Joint Tenancy: Ownership of property by two or more persons, each of whom has an undivided interest with the right of survivorship.

Judgment: The final decision of a court.

Judicial Foreclosure: A foreclosure action that is executed by the court.

Junior Lienholder: A holder of a right to force the sale of property that is inferior and subordinate to another lienholder's right to do the same. A junior lienholder who forces the sale of the real estate must either pay off the senior lien or make arrangements to make payments on it to prevent it from being foreclosed. The foreclosure of a first lien destroys the right of a junior lienholder to foreclose, but the foreclosure of a junior lien does not affect the right of a senior lien to foreclose.

Junior Mortgage: A mortgage second or subsequent in lien to a previous mortgage.

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Late Payments: Payments that are made past their due dates according to the loan documents.

Lien: The right to force the sale of property to pay a debt.

Lienholder: A person or institution that controls a lien.

Liquidation Appraisal: An estimate of the value of property when it is sold quickly in a forced sale. Usually, this figure is lower than fair market value for a regularly conducted sale.

Lis Pendens: A recorded notice that tells the world that a lawsuit is in progress, the outcome of which could affect the title to a particular piece of land.

Loan Modification: A procedure in which a loan's terms, such as the interest rate, monthly payment or term, are altered with the approval of a lender.

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Mechanics Lien: A lien created to secure the money owed for labor and furnished for uncompensated improvement made to a property.

Metes and Bounds: A term used in describing land by setting forth all the boundary lines together with their uncompensated improvement.

Mortgage Lien: The right of a mortgage lender to force a sale of the mortgaged property if the borrower fails to repay the loan as agreed.

Mortgagee: The lender.

Mortgagor: The borrower.

Motion to Lift Stay: A formal request to a bankruptcy court to dissolve an automatic stay that prevents a lender from foreclosing. Once the motion is granted, the lender may proceed to foreclose unless the borrower can keep up the payments.

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Negative Equity: A position in which a borrower owes more on property than the property is worth.

Non-judicial Foreclosure: Foreclosure on a mortgage without filing a lawsuit or obtaining a court order. Generally such sales occur because the borrower has signed a document, such as a deed of trust, giving a trustee pre-authorization to sell the real estate to pay off the debt.

Notary Public: A person authorized to take acknowledgment to certain classes of documents, such as deeds, contracts, mortgages, and before whom affidavits may be sworn.

Note: The legal document that specifies the terms of the borrower's loan, such as the length of time to repay it, the interest rate, the monthly payment amounts and provisions to deal with the provisions to deal with the borrower's failure to pay on a timely basis.

Notice Of Default: Letter sent to a defaulting party as a reminder of the default. It may state a grace period and the penalties for failing to cure the default.

Notice Of Rescission: A document that is used to cancel a notice of default and declare that the default has been corrected.

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Partial Payments: Payments that are less than the full payment the borrower owes on a loan.

Posting: The act of placing a legal notice, such as a notice specifying the date, time and place of a foreclosure sale, on public display in the proper place for such notices.

Power Of Attorney: A written instrument (document) duly signed and executed by an owner of property that authorizes an agent to act on behalf of the owner.

Power Of Sale Clause: The clause in a deed of trust or mortgage, by which the borrower pre-authorizes the sale of a house to pay off the balance on a loan in the event of the borrower's default. Usually a trustee conducts the sale, although in some states the sheriff or constable does this.

Prepayment Clause: A clause in a mortgage that gives a mortgagor the privilege of paying the mortgage indebtedness before it becomes due.

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Quitclaim Deed: A deed that conveys simply the grantor's rights or interest in real estate; generally considered inadequate except when interests are being passed from one spouse to the other.

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Real Estate Owned: Property acquired by a lender through foreclosure and held in inventory; commonly referred to as REO.

Recasting: Restructuring a loan with a new interest rate and term. It may be the same loan from the same lender, but the terms change. FHA has a formal procedure to recast loans to assist home buyers to stay in their houses.

Recording: The act of writing or entering in a book of public record instruments affecting the title to real property.

Redemption: The right of a mortgagor to redeem property by paying a debt before sale at foreclosure; the right of an owner to reclaim his or her property after it has been sold to settle claims for unpaid taxes.

Release Of Liability: The document that relieves a person who is obligated to pay a loan of any further obligations. It may be obtained when a buyer takes over the payments on the seller's old loan, provided the buyer meets the lender's standards for income and creditworthiness. If granted, the release of liability means the seller will not be responsible if the buyer fails to pay.

Repayment Plan: A plan for repaying missed payments over time.

Right Of Survivorship: Right of the surviving joint owner to succeed to the interests of the deceased joint owner. This right is a distinguishing feature of a joint tenancy or tenancy by the entirety.

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Scire Facias: A court command to a borrower to show up at a hearing and show cause why a foreclosure should not be authorized.

Second Deed Of Trust: A Deed of Trust that is in a subordinate position to another Deed of Trust securing the same parcel.

Second Mortgage: A mortgage made by a home buyer in addition to an existing first mortgage.

Servicing: The process of administering a mortgage loan including collecting payments, maintaining insurance and undertaking special measures such as workouts and foreclosures when they prove necessary.

Short Payoff: A workout procedure in which the lender accepts less than the full balance due on the loan as part of a deal in which the borrower cooperates with the lender to obtain a quick sale. The lender skips foreclosure, which would take time, cost money and expose the house to vandalism, further declines in market value, and marketing costs for resale.

Simple Assumption:An assumption arrangement in which the seller conveys title to the property to the buyer and moves out while the buyer moves in and makes payments on the old loan. The lender does not approve the buyer's credit and income, so the deal may be called a no approval loan. However, the seller remains liable on the old loan under such circumstances. Only loans without strong "due on sale" clauses are assumable without approval. This includes DVA loans made before March 1, 1988, FHA loans made before December 15, 1989, and conventional loans made before 1973.

Special Assessment: An assessment made against a property to pay for a improvements to a property.

Subject To Clause: A clause in a deed that transfers title from a seller to a buyer in an assumption transaction, or in other paper work for the assumption transaction, in which the borrower refuses to accept legal liability to make payments, although the buyer expects to do so. The lender's remedy for nonpayment is limited to foreclosure, and neither the lender nor the seller can sue the defaulting buyer for missed payments on the loan balance.

Summary Judgment: A legal procedure in which one side wins a lawsuit without a trial by showing that the case involves no material fact issues, but only legal issues that can be decided by the judge. If the judge agrees, then one side wins by Summary Judgment.

Survey: Measurement of a parcel of land showing boundaries, easements, dwellings and improvements of any type. In Texas surveys must be obtained prior to obtaining title insurance.

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Tax Sale: Sale of property after a period of nonpayment of taxes.

TCAD: Travis County Appraisal District.

Temporary Injunction: A court order that freezes the status quo for an extended time period, typically until a full court trial on the merits of a case can be held. It often requires posting a bond.

Temporary Restraining Order: A court command that freezes the status quo for a short period of time until other legal relief is awarded or a settlement between the litigants can be reached.

Tenancy At Will: A license to use or occupy lands and tenements at the will of the owner.

Tenancy In Common: An ownership of realty by two or more persons, each of whom has an undivided interest without the right of survivorship.

Title: Evidence of the ownership of land.

Title Defect: Unresolved claim against the ownership of property that prevents presentation of a marketable title. Such claims may arise from failure of the owner's spouse, or former part owner, to sign a deed, current liens against the property, or an interruption in the title's records of a property.

Title Insurance: A policy of insurance that protects the holder from any loss caused by defects in the title. Title insurance policy can take exception to certain items which will not be covered.

Title Report:Document indicating the current state of the title, such as easements, covenants, liens, and any other defects. The title report does not describe the chain of title.

Title Search: An examination of the public records to determine the ownership and encumbrances affecting real property.

Trust Deed: A type of deed that gives a mortgage lender the power to foreclose and take title away from the borrower if borrower becomes delinquent on the mortgage loan payments.

Trustee: A person who is named in a deed of trust or other mortgage to conduct any foreclosure proceedings and sell the property to pay off the mortgage loan balance.

Trustees Sale: A non-judicial action whereby a trustee may auction and sell property secured by a Deed of Trust subsequent to a default in the terms and conditions of the loan.

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Under Water Home: A house that is worth less than what is owed on the mortgage.

Undivided Interest: Ownership of real estate by joint tenants or tenants in common under the same title.

Upside Down Home: A house that is worth less than what is owed on the mortgage it secures.

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Wage Earner Plan: A name for Chapter 13 bankruptcy.

Warranty Deed: A conveyance of land in which the grantor guarantees the title to the grantee.

Without Recourse: Words used in endorsing a note or bill to denote that the future holder is not to look to the endorser in case of nonpayment.

Wraparound Loan: A new junior loan encompassing any existing loans. The wraparound loan is responsible for making the payments for the underlying loans.

Writ of Execution: A court order authorizing the holder to seize and sell a debtor's property to pay off a judgment.

Writ Of Possession: A court document that authorizes a constable or other officer of the law to break down a tenant's door, drag the tenant from the premises and throw the tenant's belongings out of the house or apartment.

Wrongful Foreclosure: A foreclosure that was legally improper and that caused a borrower to suffer damages.

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