Acceleration Clause: A condition in a real estate financing instrument giving the lender the power to declare all sums owing lender immediately due and payable upon the happening of an event, such as sale of the property, or a delinquency in the repayment of the note.

Acknowledgment: A formal declaration made before an authorized person, e.g., a notary public, by a person who has executed an instrument stating that the execution was for his or her free act. In this state an acknowledgment is the statement by an officer such as a notary that the signatory to the instrument is the person represented to be.

Acre: A measure of land equaling 160 square rods, or 4,840 square yards, or 43,560 square feet, or a tract about 208.71 feet square.

Administrator: A person appointed by the probate court to administer the estate of a deceased person who died intestate. (Administratix, the feminine form.)

Affidavit: A statement or declaration reduced to writing sworn to or affirmed before some officer who has authority to administer an oath or affirmation.

Affidavit of Title: A statement, in writing, made under oath by seller or grantor, acknowledged before a Notary Public in which the affiant identifies himself or herself and affiant’s marital status certifying that since the examination of title on the contract date there are no judgments, bankruptcies or divorces, no unrecorded deeds, contracts, unpaid repairs or improvements or defects of title known to affiant and that affiant is in possession of the property.

Affirm: To confirm, to aver, to ratify, to verify. To make a declaration.

Agreement: An exchange of promises, a mutual understanding or arrangement; a contract.

Agreement or Deposit Receipt of Sale: A written agreement or contract between seller and purchaser in which they reach a “meeting of minds” on the terms and conditions of the sale. The parties concur; are in harmonious opinion.

Alienation: The transferring of property to another; the transfer of property and possession of lands, or other things, from one person to another.

Amortized Loan: A loan to be repaid, interest and principal, by a series of regular payments that are equal or nearly equal, without any special balloon payment prior to maturity. Also called Level Payments Loan.

Assessed Valuation: A valuation placed upon a piece of property by a public authority as a basis for levying taxes on the property.

Assessment: The valuation of property for the purpose of levying a tax or the amount of the tax levied. Also, payments made to a common interest subdivision homeowners-association for maintenance and reserves.

Assessor: The official who has the responsibility of determining assessed values.

Assignment: A transfer to another of any property in possession or in action, or of any estate or right therein.

Assignment of Rents: A provision in a deed of trust (or mortgage) under which the beneficiary may, upon default by the trustor, take possession of the property, collect income from the property and apply it to the loan balance and the costs incurred by the beneficiary.

Assignor: One who assigns or transfers property.


Assignees: Those to whom property or interests therein shall have been transferred.

Assumption Fee: A lender’s charge for changing over and processing new records for a new owner who is assuming an existing loan.

Attorney in Fact: One who is authorized by another to perform certain acts for another under a power of attorney; power of attorney may be limited to a specific act or acts or be general.

Balloon Payment: An installment payment on a promissory note, usually the final one for discharging the debt, which is significantly larger than the other installment payments provided under the terms of the promissory note.

Bargain and Sale Deed: Any deed that recites a consideration and purports to convey the real estate; a bargain and sale deed with a covenant against the grantor’s act is one in which the grantor warrants that grantor has done nothing to harm or cloud the title.

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

Bill of Sale: A written instrument given to pass title of personal property from vendor to the vendee.

Blanket Mortgage: A single mortgage which covers more than one piece of real property.

Bond: Written evidence of an obligation given by a corporation or government entity. A surety instrument.

Business Opportunity: The assets for an existing business enterprise including its goodwill. As used in the Real Estate Law, the term includes “the sale or lease of the business and goodwill of an existing business enterprise or opportunity.”

Bylaws: Rules for the conduct of the internal affairs of corporations and other organizations.

CC&Rs: Covenants, conditions and restrictions. The basic rules establishing the rights and obligations of the owners (and their successors in interest)

Caveat Emptor: Let the buyer beware. The buyer must examine the goods or property and buy at his or her own risk, absent misrepresentation.

Chain of Title: A history of conveyances and encumbrances affecting the title from the time the original patent was granted, or as far back as records are available, used to determine how title came to be vested in current owner.

Closing: (1) Process by which all the parties to a real estate transaction conclude the details of a sale or mortgage. The process includes the signing and transfer of documents and distribution of funds. (2) Condition in description of real property by courses and distances at the boundary lines where the lines meet to include all the tract of land.

Cloud on Title: A claim, encumbrance or condition which impairs the title to real property until disproved or eliminated as for example through a quitclaim deed or a quiet title legal action.

Community Property: Property acquired by husband and/or wife during a marriage when not acquired as the separate property of either spouse Each spouse has equal rights of management, alienation and testamentary disposition of community property.

Conditional Sale Contract: A contract for the sale of property staffing that delivery is to be made to the buyer, title to remain vested in the seller until the conditions of the contract have been fulfilled. (See definition of Security Interest.)

Conveyance: An instrument in writing used to transfer (convey) title to property from one person to another, such as a deed or a trust deed.

Covenant: An agreement or promise to do or not to do a particular act such as a promise to build a house of a particular architectural style or to use or not to use property in a certain way.

Deed: Written instrument which when properly executed and delivered conveys title to real property from one person (grantor) to another (grantee).

Deed in Lieu of Foreclosure: A deed to real property accepted by a lender from a defaulting borrower to avoid the necessity of foreclosure proceedings by the lender.

Deed of Trust: (See trust deed.)

Deferred Payment Options: The privilege of deferring income payments to take advantage of statues affording tax benefits.

Deficiency Judgment: A judgment given by a court when the value of security pledged for a loan is insufficient to pay off the debt of the defaulting borrower.

Deposit Receipt: A term used by the real estate industry to describe the written offer to purchase real property upon stated term and conditions, accompanied by a deposit toward the purchase price, which becomes the contract for the sale of the property upon acceptance by the owner.

Documentary Transfer Tax: A state enabling act allows a county to adopt a documentary transfer tax to apply on all transfers of real property located in the county. Notice of payment is entered on face of the deed or on a separate paper filed with the deed.

Documents: Legal instruments such as mortgages, contracts, deeds, options, wills, bill of sale, etc.

Due on Sale Clause: An acceleration clause granting the lender the right to demand full payment of the mortgage upon a sale of the property.

Easement: A right, privilege or interest limited to a specific purpose which one party has in the land of another.

Effective Interest Rate: The percentage of interest that is actually being paid by the borrower for the use of the money, distinct from nominal interest.

Encroachment: An unlawful intrusion onto another’s adjacent property by improvements to real property, e.g. a swimming pool built across a property line.

Encumbrance: Anything which affects or limits the fee simple title to pr value of property, e.g., mortgages or easements.

Equity Build-Up: The increase of owner’s equity in property due to mortgage principal reduction and value appreciation.

Escrow: The deposit of instruments and/or funds with instructions with a third neutral party to carry out the provisions of an agreement or contract.

Estate: As applied to real estate, the term signifies the quantity of interest, share, right, equity, of which riches or fortune may consist in real property. The degree, quantity, nature and extent of interest which a person has in real property.

Estate for Life: A possessory, freehold estate in land held by a person only for the duration of his or her life or the life or lives of another.

Estoppel: A legal theory under which a person is barred from asserting or denying a fact because of the person’s previous acts or words.

Exchange: A means of trading equities in two or more real properties, treated as a single transaction through a single escrow.

Executor: A man named in a will to carry out its provisions as to the disposition of the estate of a deceased person. (A woman is executrix.)

Fair Market Value: This is the amount of money that would be paid for a property offered on the open market for a reasonable period of time with both buyer and seller knowing all the uses to which the property could be put and with neither party being under pressure to buy or sell.

Fee Simple Estate: The greatest interest that one can have in real property. An estate that is unqualified, of indefinite duration, freely transferable and inheritable.

Financing Statement: The instrument which is filed in order to give public notice of the security interest and thereby protect the interest of the secured parties in the collateral. (See definition of Security Interest and Secured Party.)

First Mortgage: A legal document pledging collateral for a loan. (See “mortgage”) that has first priority over all other claims against the property except taxes and bonded indebtedness. That mortgage superior to any other.

First Trust Deed: A legal document pledging collateral for a loan (See “trust deed”) that has first priority over all other claims against the property except taxes and bonded indebtedness. That trust deed superior to any other.

Fixtures: Appurtenances attached to the land or improvements, which usually cannot be removed without agreement as they become real property; examples: plumbing fixtures, store fixtures built into the property, etc.

Foreclosure: Procedure whereby property pledged as security for a debt is sold to pay the debt in event of default in payments or terms.

Gift Deed: A deed for which there is no consideration.

Grant: A technical legal term in a deed of conveyance bestowing an interest in real property on another. The words “convey” and “transfer” have the same effect.

Grant Deed: A limited warranty deed using the word “grant” or like words that assures a grantee that the grantor has not already conveyed the land to another and that the estate is free from encumbrances placed by the grantor.

Grantee: A person to whom a grant is made.

Grantor: A person who transfers his or her interest in property to another by grant.

Homestead: A statutory protection of real property used as a home from the claims of certain creditors and judgments up to a specified amount.

Hypothecate: To pledge a thing as security without the necessity of giving up possession of it.

Incompetent: One who is mentally incompetent, incapable; any person who, though not insane, is, by reason of old age, disease, weakness of mind, or any other cause, unable, unassisted, to properly manage and take care of self or property and by reason thereof would be likely to be deceived or imposed upon by artful or designing persons.

Installment Note: A note which provides for a series of periodic payments or principle and interest, until amount borrowed is paid in full. This periodic reduction of principal amortizes the loan.

Institutional Lenders: A financial intermediary or depository, such as a savings and loan association, commercial bank, or life insurance company, which pools money of its depositors and then invests funds in various ways, including trust deed and mortgage loans.

Instrument: A written legal document; created to effect the rights of the parties, giving formal expression to a legal act or agreement for the purpose of creating, modifying or terminating a right. Real estate lenders’ basic instruments are: promissory notes, deeds of trust, mortgages, installment sales contracts, leases, assignments.

Interest: A portion, share or right in something. Partial, not complete ownership. The charge in dollars for the use of money for a period of time. In a sense, the “rent” paid for the use of money.

Interest Only Loan: A straight, non-amortizing loan in which the lender receives only interest during the term of the loan and principal is repaid in a lump sum at maturity.

Interval Ownership: A form of timeshare ownership. (See Timeshare Ownership.)

Involuntary Lien: A lien imposed against property without consent of an owner; example: taxes, special assessments, federal income tax liens, etc.

Joint Tenancy: Undivided ownership of a property interest by two or more persons each of whom has a right to an equal share in the interest and a right of survivorship, i.e.; the right to share equally with other surviving joint tenants in the interest of a deceased joint tenant.

Judgment Lien: A legal claim on all of the property of a judgment debtor which enables the judgment creditor to have the property sold for payment of the amount of the judgment.

Junior Mortgage: A mortgage recorded subsequently to another mortgage on the same property or made subordinate by agreement to a later recorded mortgage.

Land Contract: A contract used in a sale or real property whereby the seller retains title to the property until all or a prescribed part of the purchase price has been paid. Also commonly called a conditional sales contract, installment sales contract or real property sales contract. (See Real Property Sales Contract.)

Late Charge: A charge assessed by a lender against a borrower failing to make loan payments when due.

Lease: A contract between owner and tenant, setting forth conditions upon which tenant may occupy and use the property and the term of the occupancy. Sometimes used as an alternative to purchasing property outright, as a method of financing right to occupy and use real property.

Legal Description: A land description recognized by law; a descriptions by which property can be definitely located by reference to government surveys or approved recorded maps.

Lessee: One who contracts to rent, occupy, and use propoerty under a lease agreement; a tenant.

Lessor: An owner who enters into a lease agreement with a tenant; a landlord.

Lien: A form of encumbrance which usually makes specific property security for the payment of a debt or discharge of an obligation. Example: judgments, taxes, mortgages, deeds of trust, etc.

Life Estate: An estate or interest in real property, which is held for the duration of the life of some certain person. It may be limited by the life of the person holding it or by the life of some other person.

Liquidated Damages: A sum agreed upon by the parties to be full damages if a certain event occurs.

Lis Pendens: A notice filed or recorded for the purpose of warning all persons that the title or right to the possession of certain real property is in litigation; literally “suite pending”; usually recorded so as to give constructive notice of pending litigation.

Loan Closing: When all conditions have been met, the loan officer authorizes the recording of the trust deed or mortgage. The disbursal procedure of funds is similar to the closing of a real estate sales escrow. The borrower can expect to receive less than the amount of the loan, as title, recoding, service, and other fees may be withheld, or can expect to deposit the cost of these items into the loan escrow. This process is sometimes called “funding” the loan.

Market Value: The highest price in the terms of money which a property will bring in a competitive and open market and under all conditions required for a fair sale, i.e., the buyer and seller acting prudently, knowledgably and neither affected by undue pressures.

Mechanic’s Lien: A line created by statute which exists against real property in favor of persons who have preformed work or furnished materials for the improvement of the real property.

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. Metes (length or measurements) and Bounds (boundaries) description is often used when a great deal of accuracy is required.

Monument: A fixed object and point established by surveyors to establish land locations.

Negative Amortization: Occurs when monthly installment payments are insufficient to pay the interest accruing on the principal balance, so that the unpaid interest must be added to the principal due.

Net Lease: A lease requiring a lessee to pay charges against the property such as taxes, insurance and maintenance costs in addition to rental payments.

Notary Public: An appointed officer with authority to take the acknowledgement of persons executing documents, sign the certificate, and affix official seal.

Note: A signed written instrument acknowledging a debt and promising payment, according to the specified terms and conditions. A promissory note.

Option: A right given for a consideration to purchase or lease a property upon specified terms withing a specified time, without obligating the party who receives the right to exercise the right.

Ownership: The right of one or more persons to possess and use property to the exclusion of all others. A collections of rights to the use and enjoyment of property.

Power of Attorney: A written instrument whereby a principal gives authority to an agent. The agent acting under such a grant is sometimes called an attorney in fact.

Prepayment Penalty: The charge payable to a lender by a borrower under the terms of the loan agreement if the borrower pays off the outstanding principal balance of the loan prior to its maturity.

Principal: This term is used to mean the employer of an agent; or the amount of money borrowed, or the amount of the loan. Also, one of the main parties in a real estate transaction, such as a buyer, borrower, seller, lessor.

Promissory Note: Following a loan committment form the lender, the borrower signs a note, promising to repay the loan under stipulated terms. The promissory note establishes personal liability for its payment. The evidence of the debt.

Proration: Adjustments of interest, taxes, and insurance, etc., on a pro rata basis as of the closing or agreed upon date. Fire insurance is normally paid for three years in advance. If a property is sold during this time, the seller wants a refund on that portion of the advance payment that not been used at the time the title to the property is transferred. For example, if the property is sold two years later, seller will want to receive 1/3 of the advance premium that was paid. Usually done in escrow by escrow holder at time of closing the transaction.

Purchase Money Mortgage or Trust Deed: A trust deed or mortgage given as part or all of the consideration for real property. In some states the purchase money mortgage or trust deed loan can be made by a seller who extends credit to the buyer of property or by a third party lender (typically a financial institution) that makes a loan to the buyer of real property for a portion of the purchase price to be paid for the property. In many states there are legal limitations upon mortgagees and trust deed beneficiaries collectiong deficiency judgments agains the purchase money borrower after the collateral hypothecated under such security instruments has been sold through the foreclosure process. Generally no deficiency judgment is allowed if the collateral property under the mortgage or trust deed is residential property of four units or less with the debtor occupying the property as a place of residence.

Quite Title: A court action brought to establish title; to remove a cloud on the title.

Quitclaim Deed: A deed to relinquish any interest in property which the grantor may have, without any warranty of title or interest.

Real Property: In the strict legal sense, land appurtenances, that which is affixed to the land, and that which by law is immovable. It usually refers to the bundle of rights: inherent to ownership.

Real Property Sales Contract: An agreement to convey title to real property upon satifaction of specfied conditions which does not require conveyance within one year of formation of the contract.

Reconveyance: This instrument of transfer is commonly used to transfer the legal title from the trustee to the trustor (borrower) after a trust deed debt has been paid in full.

Recording: The process of placing a document on file with a designated public official for public notice. The public official is usually a county officer known as the County Recorder who designates the fact that a document has been presented for recording by placing a recording stamp upon it indicating the time of day and the date when it was officially placed on file. Documents filed with the Recorder are considered to be placed on open notice to the general public of that county. Cliams against property usually are given a priority on the basis of the time and the date they are recorded with the most preferred claim going to the earliest one recorded and the next claim going to the next earliest one recorded, and so on. This type of notice is called “constructive notice” or “legal notice”.

Redlining: A lending policy, illegal in California, of denying real estate loans on properties in older, changing urban areas, usually with large minority populations, because of alleged higher lending risks without due consideration being given by the lending institution to the credit worthiness of the individual loan application.

Refinancing: The paying-off of an existing obligation and assuming a new obligation in its place. To finance anew, or extend or renew existing financing.

Release Deed: An instrument executed by the mortgagee or the trustee reconveying to the mortgagor or trustor the real estate which secured the loan after the debt has been paid in full.

Right of Survivorship: The right of a surviving tenant or tenants to succeed to the entire interest of the deceased tenant; the distinguishing feature of a joint tenancy.

Seal: An impression made to attest the execution of an instrument.

Secondary Party: A loan secured by a second mortgage or trust deed on real property. These can be third, fourth, fifth, sixth mortgages or trust deeds, on and on ad infinitum.

Secured Party: This is the party having the security interest. Thus the mortgagee, the conditional seller, the pledgee, etc., are all now referred to as the secured party. (Uniform Commercial Code.)

Separate Property: Property owned by a married person in his or her own right outside of the community interest including property acquired by the spouse (1) before marriage, (2) by gift or inheritance, (3) from rents and profits on separate property, and (4) with the proceeds from other separate property.

Severalty Ownership: Owned by one person only. Sole ownership.

Simple Interest: Interest computed on the principal amount of a loan only as distinguished from compound interest.

Special Power of Attorney: A written instrument whereby a principal confers limited authority upon an agent to perform certain prescribed acts on behalf of the principal.

Special Warranty Deed: A deed in which the grantor warrants or guarantees the title only against defects arising during grantor’s ownership of the property and not against defects existing before the time of grantor’s ownership.

Specific Performance: An action to compel performance of an agreement, e.g., sale of land as an alternative to damages or rescission.

Statute of Frauds: A state law, based on an old English statute, requiring certain contracts to be in writing and signed before they will be enforceable at law, e.g., contracts for the sale of real property, contracts not be performed within one year.

Statutory Warranty Deed: A short-term warranty deed, which warrants by inference that the seller is the undisputed owner, has the right to convey the property, and will defend the title if necessary. This type of deed protects the purchaser in that the conveyor covenants to defend all claims against the property. If conveyer fails to do so, the new owner can defend said claims and sue the former owner.

Straight Note: A note in which a borrower repays the principal in a lump sum at maturity while interest is paid in installments or at maturity. (See Interest Only Note.)

“Subject To” A Mortgage: When a grantee takes title to real property subject to a mortgage, grantee is not responsible to the holder of the promissory note for the payment of any portion of the amount due. The most that grantee can lose in the event of a foreclosure is grantee’s equity in the property. (See also “assumption of mortgage”) In neither case is the original maker of the note released from primary responsibility. If liability is to be assumed, the agreement must so state.

Subordinate: To make subject to, or junior or inferior to.

Subordination Agreement: An agreement by the holder of an encumbrance against real property to permit that claim to take an inferior position to other encumbrances against the property.

Take-Out Loan: The loan arranged by the owner or builder developer for a buyer. The construction loan made for construction of the improvements is usually paid in full from the proceeds of this more permanent mortgage loan.

Tax Deed: The deed given to a purchaser at a public sale of land held for nonpayment of taxes. It conveys to the purchaser only such title as the defaulting taxpayer had.

Tenancy in Common: Co-ownership of property by two or more persons who hold undivided interest, without right of survivorship; interests need not to be equal.

Tenant: The party who has legal possession and use of real property belonging to another.

Tenants by the Entireties: Under certain state laws, ownership of property acquired by a husband and wife during marriage, which property is jointly and equally owned. Upon death of one spouse it becomes the property of the survivor.

Time-Share Estate: A right of occupancy in a time-share project (subdivision) which is coupled with an estate in the real property.

Time-Share Project: A form of subdivision of real property into rights to the recurrent, exclusive use or occupancy of a lot, parcel, unit, or segment of real property, on an annual or some other periodic basis, for a specified period of time.

Time-Share Use: A license or contractual or membership right of occupancy in a timeshare project which is not coupled with an estate in the real property.

Title: Indicates “fee” position of lawful ownership and right to property. “Bundle of Rights” possessed by an owner. Combination of all elements constituting proof of ownership.

Title Insurance: Insurance to protect a real property owner or lender up to a specified amount against certain types of loss, e.g., defective or unmarketable title.

Title Report: A report which discloses condition of the title, made by a title company preliminary to issuance of title insurance policy.

Townhouse: One of a row of houses usually of the same or similar design with common sidewalls or with a very narrow space between adjacent sidewalls.

Township: In the survey of public lands of the United States, a territorial subdivision six miles long, six miles wide and containing 36 sections, each one mile square, located between two range lines and two township lines.

Trade Fixtures: Articles of personal property annexed by a business tenant to real property, which are necessary to the carrying on of a trade and are removable by the tenant.

Transfer Fee: A charge made by a lending institution holding or collecting on a real estate mortgage to change its records to reflect a different ownership.

Trust Deed: Just as with a mortgage this is a legal document by which a borrower pledges certain real property or collateral as guarantee for the repayment of a loan. However, it differs from the mortgage in a number of important respects. For example, instead of there being two parties to the transaction there are three. There is the borrower who signs the trust deed and who is called the trustor. There is the third, neutral party, to whom trustor deeds the property as security for the payment of the debt, who is called the trustee. And, finally, there is the lender who is called the beneficiary, the one who benefits from the pledge agreement in that in the event of a default the trustee can sell the property and transfer the money obtained at the sale to lender as payment of the debt.

Trustee: One who holds property in trust for another to secure the performance of an obligation to the lender under terms of a deed of trust.

Trustor: One who borrows money from a trust deed lender, then deeds the real property securing the loan to a trustee to be held as security until the trustor has performed the obligation to the lender under terms of a deed of trust.

Truth in Lending: The name given to the federal statutes and regulations (Regulation Z) which are designed primarily to insure that the prospective borrowers and purchasers on credit receive credit cost information before entering into a transaction.

Uniform Commercial Code: Establishes a unified and comprehensive method for regulation of security transactions in personal property, superseding the existing statutes on chattel mortgages, conditional sales, trust receipts, assignment of accounts receivable and others in this field.

Urban Property: City property; closely settled property.

Usury: On a loan, claiming a rate of interest greater than that permitted by law.

Vendee: A purchaser; buyer.

Vendor: A seller.

Verification: Sworn statement before a duly qualified officer to correctness of contents of an instrument.

Void: To have no force or effect; that which is unenforceable.

Voidable: That which is capable of being adjudged void, but is not void unless action is taken to make it so.

Voluntary Lien: Any lien placed on property with consent of, or as a result of, the voluntary act of the owner.

Warranty Deed: A deed used to convey real property which contains warranties of title and quiet possession, and the grantor thus agrees to defend the premises against the lawful claims of third persons. It is commonly used in many states, but in others the grant deed has supplanted it due to the modern practice of securing title insurance policies which have reduced the importance of express and implied warranty in deeds.

Wrap Around Mortgage: A financing device whereby a lender assumes payments on existing trust deeds of a borrower and takes from the borrower a junior trust deed with a face value in an amount equal to the amount outstanding on the old trust deeds and the additional amount of money borrowed.