Commonly Used Real-Estate Title Company
Lingo
Whether you are buying or selling, the language of real estate is often complex and confusing. Given below is a plain-language explanation of commonly encountered real-estate or title company-related lingo.
Title Insurance
How do you know for sure that a homeowner owns the place free and clear? And that they can sell it without some long-lost heir coming out of the woodwork to stake a claim? Enter title insurance which offers protection against any competing claims to your home.
How It Works
The insurer will run a title search of public records, seeking loose ends such as liens against the property or fraudulent signatures on ownership documents as part of the process. Note that there is separate title insurance to cover lenders and buyers, and it is suggested to get a policy for yourself. It establishes that you can truly “take title” to the property as the legal owner, which is entered in public records.
Title
Title to a property represents the ownership interest and is designated by the name(s) on certain legal documents such as mortgages and deeds. The title can be held by an individual, couple, or corporation.
Deed
A deed transfers ownership of property from one person or entity to another person or entity.
Mortgage
A mortgage is part of a loan that you take to buy property. It is an instrument that is recorded against the property to secure it as collateral for the loan.
Note
A note is part of a loan that represents your liability for the loan.
Clear Title
Clear title indicates that the property is free of liens or legal questions surrounding its ownership.
Chain of Title
The chain of title is the record of historical ownership of a property. The title company or real estate attorney typically reviews the record to determine the clear title.
Clouded Title
A property with an existing question regarding ownership, chain of title, or even liens may have a “clouded” title rather than a “clear” title. It may adversely impact the ability to obtain financing or properly record the title. Most clouded title issues require a release, court action, or legal intervention to remediate.
Escrow
Escrow can be a holding area for important funds and documents maintained by an attorney or a representative from the title company as the details of the sale are ironed out. Once the sale is finalized, the escrow agent disburses the payments and documents accordingly. There are many variations of escrow accounts, depending on the specifics of your deal. Consult the experts to know more about the salient points of your deal.
Prorations
Prorating is when certain fees or taxes are divided to align with the time of ownership between the buyer and seller. For example, if the annual property taxes on a home are $3,000 and the seller moves out one-third of the way through the year on April 1st, they are responsible for paying one-third of the taxes, or $1,000. And the buyer pays the rest.