Addendum: An addendum is a document that alters or changes a part of the purchase contract. Some of these changes can include the amount of earnest money deposited, the purchase price of the property, changing deadline dates, or adding seller credits. Both the buyer and the seller must agree to the terms listed on the addendum.
Agents: This term can refer to settlement agents (such as escrow officers) or real estate agents.
Bankruptcy/BK: If someone is selling/refinancing their property and they filed for bankruptcy, the title company insuring the owner’s policy must receive an order from the judge/court stating that it is okay to proceed. You can learn about the different types of bankruptcies here.
CD: A CD, or closing disclosure, is a form that provides final details about your loan. It includes your monthly payment amount and a breakdown of all closing fees. A CD must be issued to the borrower 3 days before the “closing” can occur.
Closing: “Closing” is the term used when you sign the documents needed to either sell, purchase, or refinance a property.
CPL: A Closing Protection Letter is a document given to the lender that promises that the title company will issue a title policy and will adhere to the closing instructions.
Disbursing: This describes the process of wiring out funds and cutting checks to the appropriate parties. Some of these parties include home warranty companies, real estate agents, the seller, and the title company itself.
Easements: An easement is a right to use or enter onto real property that you do not own. You can find more information here.
Escrow: This term refers to a third party who acts as an agent for the seller/buyer/lender and performs whatever duty they are instructed to in regards to disbursing funds and distributing documents.
Foreclosure: Foreclosure is the process of the lender (beneficiary) taking possession of a property that the mortgagor has failed to keep up with mortgage payments on.
FSBO: This acronym stands for “For Sale By Owner.” In other words, a real estate agent is not assisting the seller with the transaction.
Funding: Funding, in title terminology, is the same as disbursing. It is the process of wiring out funds and cutting checks to the appropriate parties.
Hard Money: Hard money is a short-term loan secured by real estate. It is typically funded by private investors and the process of taking out a “hard money loan” can be completed in a much quicker time frame than when using a traditional lender (such as a bank).
HELOC: This stand for Home Equity Line of Credit. It is a loan that is set up as a line of credit for a maximum draw amount, rather than a fixed amount. For instance, with a normal loan, you might take out $150,000 which is paid to you in full at closing. You must pay interest on $150,000. With a HELOC, you can draw up to $150,000 and you only pay interest on the money that you currently have drawn out.
HUD: This document itemizes all charges/credits for the seller/buyer in a real estate transaction.
ISAOA/ATIMA: This stands for ‘Its Successors And/Or Assigns/ As Their Interests May Appear”. In other words, this clause allows the lender to assign the loan to another beneficiary with all terms remaining the same.
Judgment: A judgment can be filed against a person for many different reasons, such as a child support judgment or federal tax lien. These judgments must be paid off (normally done through closing) in order to sell property.
Legal Description: The legal description is how the property is described according to the public land survey system. It identifies the boundaries and location of the property.
Lender: The lender (or beneficiary) is a third party in a transaction who loans out money in exchange for a lien on the property.
Listing Agent: The listing agent is the real estate professional who helps the seller with the purchase transaction.
LLC: This stands for Limited Liability Company. One main reason for purchasing/selling real estate through an LLC is to avoid personal liability for transactions/debts of the business.
Mortgage: A mortgage is a loan in which real estate property is used as the security instrument (aka collateral).
Notary: A notary is a licensed official who acts as an impartial witness in regards to the signing of important documents. You can learn more here.
Notice of Interest: A Notice of Interest (also known as a “NOI”) is a document recorded on public record stating that you have an equitable interest in the property. This NOI is a lien against the property which must be taken care of in order to issue a clear title policy.
Policy: There are two different types of policies you can receive from a title company, the owner’s policy and the lender’s policy. The Homeowner’s policy insures that the seller is giving the buyer a property that is free and clear of any liens/defects. The lender’s policy (loan policy) insures that the lender’s interest in the property. You can learn more about policies here.
PR: A PR, Preliminary Report, and Title Commitment are the same thing. This document is provided by the title company and lays out details of the property such as who currently owns it, any mortgages on the property, and the legal description. More importantly, it is the title company agreeing to provide you with a policy as long as certain requirements are met.
Reconveyance: A reconveyance document is the only way to show that a lender/beneficiary has been satisfied. It is the beneficiary’s responsibility to request the reconveyance upon receipt of payment, and to quickly sign the document and have it recorded on county records.
Recording: Recording is when documents are “posted” to county records. Some of the things that you are record are Warranty Deeds, Trust Deeds, NOI’s, or even Notice’s of Default.
REPC: REPC stands for ‘Real Estate Purchase Contract’. It’s a document that lays out the terms of the real estate transaction and includes the purchase price, seller credit, home warranty credit, real estate agent information, along with other information.
Rights of Way: A Right of Way is an easement that allows someone else to travel through your property. The most common right of way is a road or path through your property.
Searcher: A Searcher is someone who searches the property to find the current legal description/tax ID, any liens/easements, and who also searches the buyer/seller to see if any judgments are applicable.
Security Instrument: A Security Deed, or Trust Deed, is a document that is recorded on public record indicating that the borrower owes money to the lender and that the lender has placed a lien on the property. See “Trust Deed.”
Seller Credit: A seller credit is when the seller offers to pay a certain amount of the closing costs for the buyer.
Settlement Statements: A document that summarizes all of the fees and charges that a borrower/seller/lender face during a transaction.
Split Title: This term refers to when one title company is closing the seller and a different title company is closing the buyer.
Tax ID: A Tax ID (or parcel number) is another way of identifying a property. This number is assigned by the county Assessor and is used for record keeping as well.
Title Commitment: A Title Commitment, PR, and Preliminary Report are the same thing. This document is provided by the title company and lays out details of the property such as who currently owns it, any mortgages on the property, and the legal description. More importantly, it is the title company agreeing to provide you with a policy as long as certain requirements are met.
Trust: A fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary.
Trust Deed: A Trust Deed, is a document that is recorded on public record indicating that the borrower owes money to the lender and that the lender has placed a lien on the property.
Warranty Deed: A deed used to transfer ownership of real property. This document is recorded on county records.
Wire: This is a method of electronic funds transfer from one person or entity to another.
1031 Exchange: A 1031 exchange allows an investor to sell a property and reinvest the proceeds into another investment property and to defer all capital gains taxes. You can learn more here.