Insurance against losses resulting from the transmission of legally incorrect title, granted by a title insurance firm after a title search by that business has shown that legally valid title exists in the seller, who is then entitled to convey that title to the insured.
Insurance that pays monetary damages for property loss due to unforeseen superior legal claims or for title litigation. It is thought to be superior than the usual abstract with opinion as evidence of title because it also includes insurance.
A full indemnity contract in which a title insurance company promises to make up for any loss caused by flaws in the title to a piece of real estate or by liens or other claims. Title insurance is different from other types of insurance because it protects against losses that have already happened, like a forged deed somewhere in the chain of title. Other types of insurance protect against losses that might happen in the future, like a fire or car accident. Fannie Mae and Freddie Mac make sure that every loan they buy has title insurance.
The title company will give a policy if the investigation of public records and all other important facts is satisfactory. Most of the time, a title insurance policy protects the insured from losses caused by “hidden risks” like the following:
- Deeds, releases of dower, and mortgages were made to look like they were real.
- Unknown heirs; inability to act (minors)
- Wrong way for lawyers to read wills
- Misplaced papers and unofficial acknowledgments
- Confusion caused by names that sound alike
- Giving the wrong status of marriage; mental incompetence
Also, and this is the most important part, the title company will agree to defend the policyholder’s title in court if it is sued because of a problem covered by the policy. Usually, there are three parts to a title insurance policy:
- The contract to insure the title and cover losses
- A description of the insured estate and property
- A list of the conditions of coverage and the things it doesn’t cover
Most of the time, title defects like the ones below are not covered by insurance.
- The rights of people in possession that aren’t listed in public records, such as unrecorded easements
- Any information that a good survey would show (e.g., encroachments)
- Taxes and assessments not yet due or payable
- Zoning and rules from the government
- Mines without patents
- Some rights to water
Title insurance is done as of a certain date. Except for some policies, the premium is paid only once, and coverage stays in place until the property is sold to a new owner, even if that new owner is the insured’s wholly owned corporation. It is not connected to the land. So, coverage is only for as long as the named insured is alive and for some of the named insured’s legal heirs.
An owner’s policy is made for the owner, the owner’s heirs and devisees, or, in the case of a corporation, the corporation’s successors in the event of dissolution, merger, or consolidation. The policy cannot be given to someone else. Title companies will give an extended coverage owner’s policy for some properties for an extra fee to cover title problems that aren’t covered by the standard policy. Some of these title problems are the rights of parties in possession, questions about the survey, and liens that have not been recorded.
A lender’s policy protects both the mortgage lender and anyone who takes over the loan in the future. It protects the lender against the same defects that an owner’s policy covers, plus some more. However, the insurer’s liability is limited to the mortgage loan balance on the date of the claim, and liability under a lender’s policy decreases with each mortgage payment and ends when the loan is paid off and released. A lender’s policy usually costs less than an owner’s policy because the lender doesn’t have as much to lose. Under a mortgagee policy, the loss that has to be paid goes straight to the person who owns the mortgage.
When the property goes into foreclosure and the mortgagee buys it, the policy automatically becomes an owner’s policy. This protects the mortgagee against loss or damage caused by things that happened before the policy went into effect. Title companies also sell policies that cover the leasehold interests of a lessee, a lender under a leasehold mortgage, or a buyer under a contract for deed.
In the event of a loss covered by a mortgagee’s policy, the insurer pays the mortgagee the remaining balance on the loan. The owner no longer has to make payments on the loan. If the owner doesn’t pay a slightly higher premium for an owner’s policy, he or she will lose the property and the investment.
If a property’s value goes up, like when a costly improvement is made, it’s a good idea to increase the amount of title insurance to cover any possible losses. Newer policies have an add-on called “inflation guard” to cover price increases.
The American Land Title Association (ALTA) is made up of almost 2,000 title companies that all use the same ALTA title insurance policies.
Insurance against the loss or harm caused by faults in the title to a specific piece of property.
A title insurance policy guards the insured against financial loss brought on by a flaw in or uncertainty regarding the ownership of real estate.
A promise to write a title insurance coverage. One of the two basic types of title evidence.
A contract in which the title insurer undertakes to compensate the insured for damages caused by defective title.
A preliminary report of a property’s current record title. A title report, unlike an abstract of title, only shows the current state of the title and any recorded problems, like unpaid mortgages and easements. The title report is used to make the policy for title insurance. A preliminary report doesn’t make the insurer responsible for anything.
A document that shows the status of the title at the moment.
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A thorough examination of all paperwork and records pertaining to a property in the recorder’s office to establish if the seller has valid title to the property.
The task of investigating title evidence in public documents.
An examination of public records to see if there are any problems in the chain of title. This is usually done by a title company or abstracter with a lot of experience. Before an institutional lender will lend money backed by real estate, it will ask the borrower to pay for a title search to make sure that there are no other liens on the property that are higher than its mortgage.
The person doing the title search starts by looking at the original source of title, which is often a government patent grant or title award from 40 to 60 years ago, depending on local custom. After looking at the original source of title, the searcher “runs the title” in the recorder’s office and checks the records in other government offices, such as tax offices and assessment offices (for sewer or street assessments that may be in effect). Title searchers often come across names that sound the same but have different spellings. In this case, the law has a “rule of idem sonans” that says names that sound the same must refer to the same person, even if they are spelled slightly differently.
A title company will give you a title abstract, a preliminary report, a certificate of title, a continuation certificate of title, or a title insurance policy after it does a title search. Some of these different documents give opinions about the title, while others just list the facts that the search turned up.
An investigation of public data, legislation, and court rulings to find current facts about property ownership.
To find out if any other parties have legitimate claims against the subject property, a title search is a process that looks at local public documents, legislation, and relevant court decisions.
The lender obtains title to the mortgaged property, which matures upon failure.
The notion of a mortgage as a transfer of title from the borrower to the lender, according to this theory of mortgage law.
States where the mortgagee has legal title to the mortgaged property (typically in the form of a trust deed) and the mortgagor has equitable title. Title theory states, also known as conveyance or transfer theory states, follow the common-law approach that a mortgage is a defeasible conveyance subject to a subsequent condition. The payment of the mortgage debt when it becomes due is a condition of the defeasance. Thus, when a mortgage is obtained, the creditor obtains title to the property; when the debt is repaid, the debtor regains ownership. Upon default, a mortgagee has the right to possession and rents on the mortgaged property under title theory. In a lien-theory state, a mortgagee must foreclose in order to assert the same rights.
To transfer or cede ownership to another person.
The transfer of title to real property by deed is subject to a tax known as title transfer tax.
The part of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 that makes changes to real estate appraisal reform and gives states the power to license and certify appraisers.
They are used as floor joists and rafters.
To tilt the placement of a nail. How floor joists are fastened to the plate.
The act of slanting a nail into place. Floor joists are fastened to the plate using this procedure.
The stopping or pausing of the clock on the statute of limitations. For example, if the owner of a record is mentally ill, the clock may stop ticking on the time limit for what is called “adverse possession.”
A way to join two pieces of board together in which one piece has a tongue cut into one of its edges and the other piece has a groove cut to fit the tongue. The method is used to change any material, like tongue-and-groove lumber, that is ready to be joined in this way.
A truss’s upper or top member.
Top horizontal support for ceiling joists, rafters, or other parts of a frame wall.
A technique to market analysis that begins with aggregated data.
The contour is the nature of the land’s surface.
Hills, valleys, and other aspects of the land’s surface.
The most important part of a building’s design. This is sometimes shown by putting a branch of a tree on the very top of the project.
The topmost layer of the soil, with a high organic content.
A rarely used method of proving ownership.
A document proving property ownership. In certain states, government organizations issue them.
A method for registering real estate title that precisely detects the ownership of land as well as every lien and claim on it. Land title is registered in this system in much the same manner as title to a vehicle is.
A legal system for registering land that can be used to verify ownership and encumbrances (except for tax liens) without needing to search the public records again. The goal of the Torrens Act is to make sure that a property has a clear title that can’t be taken away. This way, people who deal with the property know that the only rights or claims they need to be aware of are those that are registered. The title is part of the Torrens system of registration. This is different from a title insurance policy, which is only proof of title. In other words, a person can’t own Torrens registered real property unless they register the title.
The most important thing about registered property is that the title does not change hands, and liens (like mortgages) do not affect the property until they are written on the registered certificate of title. If a government registrar makes a mistake that costs someone money, that person can get their money back from the state through an assurance fund. The registrar, on the other hand, won’t defend the landowner in court or pay for court costs. This is one reason why most mortgagees need title insurance, even for Torrens-registered titles.
Under the Torrens system, the owner of a piece of land first asks a state court to register it, giving notice to everyone who might be interested. After a search of title is filed with the court, there is usually a hearing to determine the status of the title, and the court’s decision is made in the form of a court decree. The steps are like those of a quiet title suit. You don’t have to use the Torrens system right away. But once a property is registered, it can’t be moved without following the same rules.
The Torrens system, which is popular in Canada, Australia, and Great Britain, has been used in about ten states. In some states, a general judgment lien can’t be put on Torrens-registered property, and the title can’t be lost through “adverse possession.”
The most prevalent form of freehold title in Australia, which includes a plan depicting the property’s location and measurements.
The concept of registering property titles with governments was established by Sir Robert Torrens of South Australia, and it is currently utilized in many countries of the world. There used to be titles like General Law or Common Law.
A title that gives someone the right to land.
A civil wrong, such as negligence, libel, nuisance, trespass, slander of title, or false imprisonment, is a wrongdoing caused by negligence or on purpose that breaks a duty set by law and not by a contract. For example, if an escrow agent doesn’t follow the escrow instructions because they were careless or on purpose, they could be held responsible in a tort action for the damage they caused. The escrow agent may also be in violation of its contract if it doesn’t do what it’s supposed to do.
PITI and other long-term debts are divided by the borrower’s gross monthly income; one of two popular ratios used by house mortgage lenders to estimate a borrower’s ability to pay a debt.
The average price per square foot paid by the lessee during the time frame under consideration. Total effective rate = Total effective rent Total rented square footage
The sum of money (cash flow) that the tenant will actually pay over the course of the analyzed time frame.
Total number of people who are employed and living in a specific area at a given time.
In the context of commercial real estate, “supply” refers to the existent and available stock, measured by the total number of units or total amount of space of a specific commercial property type in a given market at a given time.
Existing inventory plus planned additions minus removals for a given market area’s commercial properties of a given type.
The mix of capital growth and rental return achieved over time
Empty or occupied, new or old, planned or abandoned; all real estate in a given market over a given time frame.
A sort of dwelling unit that typically consists of two stories, with the living space and kitchen on the ground floor and the bedrooms on the second story; a sequence of independent dwellings that share architectural unity and a common wall. In cluster living, townhouses or row houses are particularly popular and frequently employ party walls and shared communal grounds. Frequently, townhouse complexes are planned unit developments (PUDs), with each owner holding fee title to the structure and land beneath the structure; the condominium form of ownership is prevalent. Typically, the surrounding land, including sidewalks, open areas, and recreational amenities, is held in common. The townhouse concept is a mix of the single-family home and the apartment, and is sometimes utilized in regions where height limitations prohibit the construction of high-rise buildings.
A structure that is classified as either a unit or a home depending on the title system in use, i.e. strata for units and Torrens for houses.
Single-family homes that are attached to each other by party walls. They are usually on a small lot with small front and back yards. Row Houses are also called that, but they are also called that.
A sort of attached or semi-detached row home that houses a single family.
A townhouse is a private home shared by another home on at least one wall.
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A six-mile-square region divided into 36 parts, each one mile square, utilized in the rectangular survey system of land description.
A six-mile-by-six-mile sector of the federal rectangular survey system that contains 36 completely detailed, one-square-mile parts.
A land area of six square miles.
A piece of land that is six miles square, has 36 sections that are each one mile square, and has a total area of 23,040 acres. It is part of the government’s (rectangular) survey system for describing land.
Asbestos, fibreglass, lead paint, radon, PCBs, leaking subsurface storage tanks, and other potentially hazardous elements
Prior operational results of a sponsor (or developer) or real estate project. When conducting a credit check, the creditor examines the debtor’s payment history with other creditors.
The background of a real estate syndicator This history must be disclosed in an offering for public or private placement.
A parcel or lot of land; a specific development. Usually refers to a large land area.
A subdivision of land that is numbered and documented with the county recorder’s office in various states.
A house that is mass-produced according to the builder’s blueprints, as one of many homes in a subdivision with similar styles, materials, and prices. It differs from a custom home, which is created to the homeowner’s requirements.
A list of title records based on the description of the property that was sold, mortgaged, or otherwise disposed of.
The geographical area from which the majority of a store’s or shopping center’s patronage is drawn.
The geographical area from which the majority of a retail facility’s clients are consistently drawn. Also known as a market area.
Zone bounded by the presence or absence of interactions with a central or dominant location; the interior of the zone relies on the location’s output to meet demand; the zone’s perimeter (for example, a localized area over which some specific activity or transaction takes place). It is important to remember that in the theory of the central place, the terms trade area and range are synonymous.
A market or city-wide gap analysis focused on a particular commercial district.
A piece of personal property that is added to or attached to leased property by the tenant because it is needed for the tenant’s business. Most fixtures must be left in place at the end of a lease. However, trade fixtures can be removed by the tenant before the end of the lease, and the tenant is responsible for any damage caused by their removal. But a tenant usually can’t take out new fixtures that were put in to replace old ones that were worn out. For example, if a tenant of a tavern replaces an old bar with a new one, the tenant cannot take the new bar with them when the lease is up. If the tenant doesn’t remove trade fixtures within a reasonable amount of time after the lease ends, the fixtures will be seen as abandoned and become the landlord’s property.
Personal property that is normally paid for by the renter and may be removed at the end of the lease.
Articles that a tenant installs under the conditions of a lease and then removes before the lease expiration.
Real estate kept in a trade or business activity for more than one year, including most income producing property, is taxable under Section 1231 of the Internal Revenue Code.
A consistent pattern of behavior in a specific trade, calling, occupation, or business. Any practice or method of dealing that is observed with such regularity in a place, vocation, or trade as to justify an expectation that it will be observed with regard to the transaction in question.
A deal where a builder or broker agrees to take a certain piece of real estate from a buyer as part of the price of another property. This is how it usually goes: A homeowner agrees to buy another home, and the builder of the other home or the selling broker agrees to buy the owner’s current home at a certain price if it hasn’t sold for that price or more within a certain time. This arrangement makes sure that the owner will have enough money to buy the new home.
Carpenters, plumbers, and other workers are classified as carpenters, plumbers, and so on.
The practice of committing to buy real estate and then assigning the purchase agreement to another buyer before closing to profit.
Buying or trading for an item that costs more than what is already owned.
A traffic consultant conducted a study to examine vehicular traffic patterns. An interior space planner conducted research into the interconnections between various departments and activities in order to improve function and communication.
An establishment that acts as a magnet for customers to a specific area (such as a department store or other anchor tenant in a shopping mall, which in turn benefits other businesses in the mall and in the surrounding area).
A list of people who have enquired about renting a home.
A person who helps a real estate transaction but is not a buyer or seller’s agent. A transaction broker is obligated to deal honestly and fairly with both parties and to carry out his or her duties with competence, care, and diligence.
A non-agency relationship is one that is allowed in states that have created a type of service where the agent doesn’t represent either the buyer or the seller, but instead treats them both as customers. Also known as non agency relationship or facilitation.
Brokerage costs, recording fees, transfer taxes, and legal expenses incurred in the course of a real estate transaction.
The fees connected with purchasing and selling real estate.
Transaction management is a four-step process that a manager is involved in on a continuous, cyclical basis, beginning with client qualification and ending with the manager adding value through closing.
The real price of a transaction; the result of a negotiation process between buyer and seller. Also known as the market price.
Prices paid for properties that have been sold.
The price range within which a transaction between an owner and a prospective buyer can take place. The lower level of the transaction range is determined by the owner’s subjective value, while the upper level is determined by the potential buyer’s subjective value.
Adjustments to comparable property transaction values based on the nature and terms of the transaction in an appraisal.
The amount of money necessary to finance normal business operations and meet day-to-day home obligations.
A land titles office-registered document indicating a change in ownership.
A second copy of a Torrens system title certificate. Under the Torrens system for registering property titles, the court gives the owner an original title certificate in his or her name once the owner has proven that he or she has the right to own the property. The certificate is made in two copies and lists the name of the owner, the date the property was registered, the Torrens documentation number, and any liens on the title. The original certificate is then kept on file, and the owner is given a copy ( or it is sometimes held by the mortgagee). When the original owner sells the property, he or she hands over a standard deed and a transfer certificate of title. The original certificate and the owner’s copy are then canceled, and the registrar gives the grantee a new transfer certificate of title.
Transportation costs between linked locations.
Unspent foreign currency is a form of financial aid given to a country’s economy (including social security, welfare and retirement benefits, interest dividends and rent on investments).
A land-use planning concept that considers land development rights to be part of the bundle of individual rights to land ownership. According to this concept, any of these rights can be separated from the others and transferred to someone else, leaving the original owner with all other ownership rights. Communities have significant power to direct growth, preserve landmarks or unique environmental features, and maintain adequate amounts of open space by viewing development rights as a separate economic entity. All of this is accomplished without imposing an undue financial burden on the community or the owners of the lands that will remain undeveloped in the public’s interest. TDR can be implemented in a variety of ways, but the end result is that the person acquiring the rights will reimburse the owner of the development rights for the rights that are given up.
TDR has been proposed or implemented in some form to promote various community values in various parts of the country. It has been used to preserve landmarks in New York and Chicago. It was proposed to protect Puerto Rico’s ecologically vulnerable Phosphorescent Bay. Southampton, New York, has implemented TOR to encourage the development of moderate- and low-income housing. The state of New Jersey, as well as counties in Virginia and California, have proposed using TDR as a primary system of land-use regulation and open space preservation.
A tax levied on the sale or transfer of an asset or a mortgage.
A state tax on the transfer or conveyance of real estate or any interest in real estate by deed, lease, sublease, assignment, contract for deed, or a similar document. One reason for the tax is to get accurate information about the fair market value of the property so that real property tax assessments can be more accurate. Most of the time, the tax is paid by the seller, the grantor, or the lessor.
As of December 31, 1967, there was no longer a federal tax on the sale of real estate. Since the federal tax was taken away, most states now write the amount of tax on the first page of the document instead of putting a stamp on it.
Each state that has a real estate transfer tax has set the amount of the tax, how the taxable consideration is calculated, and which deeds or transactions don’t have to pay the tax. Most of the time, but not always, the amount of the assumed mortgage can be subtracted from the full consideration to figure out the taxable consideration when a piece of real estate is sold with the unpaid balance of a mortgage made by the seller before the time of the sale and assumed by the buyer.
The tax is usually paid to the county recorder in the county where the deed is to be recorded at the time the deed is recorded. In many states, both the buyer and the seller or their agents must sign a transfer declaration form. Usually, this form needs information like the legal description of the property that was sold, the address, the date and type of deed, the type of improvement, and whether the sale was between strangers, between family members, or because of a court order.
When the transaction is exempt, the document must usually come with a form certificate that explains why it is exempt. Some transfers, like a deed of easement, are completely exempt, and the grantor does not even have to file an exemption certificate. Mortgages, correction deeds, real estate transfers where the tax was paid when the underlying contract for deed was recorded, transfers between husband and wife or parent and child, and transfers where the actual consideration is $100 or less are usually exempt from the tax. Gift deeds, correction deeds, conveyances to, from, or between governmental bodies, deeds of easement, deeds by charitable, religious, or educational institutions, deeds securing debts or releasing property as security for a debt, partition deeds, tax deeds, and deeds from subsidiary to parent corporations for cancellation of stock are also exempt from the tax.
Real Estate Glossary T [Part 4]