Chapter 8 - Escrow & Closing Vocabulary Flashcards
Chap 8 Vocab (121 cards)
1
Q
1 month
A
For escrow purposes, 30 days.
2
Q
1 year
A
For escrow and proration purposes, 360 days, 12 months, or 52 weeks.
3
Q
A.L.T.A. owner’s policy
A
An owner’s extended title insurance policy.
4
Q
A.L.T.A. title policy
A
A type of title insurance policy issued by title insurance companies that expands the risks normally insured against under the standard type policy to include unrecorded mechanic’s liens; unrecorded physical easements; facts a physical survey would not show; water and mineral rights; and rights of parties in possession, such as tenants and buyers under unrecorded instruments.
5
Q
abstractor
A
A person who, historically, searches out anything affecting the title to real property and summarizes the information in the findings.
6
Q
Acre
A
A measure of land area that is equal to 43,560 square feet. One square mile contains 640 acres. or 4,840 square yards
7
Q
Ad Valorem
A
Latin phrase meaning “according to value,” used to refer to taxes assessed on the value of property.
8
Q
adjusted cost basis
A
Original basis plus capital improvements and costs of the sale, less depreciation if income producing.
9
Q
American Land Title Association (ALTA)
A
A national association of title companies, abstractors, and attorneys. Members agree to promote uniformity, quality, and professional standards in title insurance policies. Policies issued by ALTA members follow specific guidelines.
10
Q
Arrears
A
- Owing payment on things for which one has the use of but has not yet paid for, such as property taxes or mortgage interest that is paid in arrears. 2. Not on time; late in making payments or completing work.
11
Q
assessment roll
A
A list of all taxable property showing the assessed value of each parcel; establishes the tax base.
12
Q
base and meridian
A
Imaginary lines used by surveyors to find and describe the location of public or private lands.
13
Q
Baseline
A
Main east-west line designated and named throughout the country for use with the rectangular survey system of legal land description.
14
Q
Benchmark
A
A bronze disk permanently placed and precisely identified by government survey teams.
15
Q
beneficiary statement
A
A statement of the unpaid balance of a loan and describes the condition of the debt.
16
Q
Bounds
A
Refers to boundaries; used with the word “metes” in the metes and bounds method of land description.
17
Q
C.L.T.A. standard policy
A
A policy of title insurance covering only matters of record.
18
Q
calendar year
A
Starts on January l and continues through December 3l of the same year.
19
Q
California Land Title Association
A
A trade organization of the state’s title companies.
20
Q
Capital Expense
A
An expense incurred to improve property. Also called Reserves for Replacement.
21
Q
capital gain
A
At resale of a capital item, the amount by which the net sale proceeds exceed the adjusted cost basis (book value). Used for income tax computations. Gains are called short or long term based upon length of holding period after acquisition. Usually taxed at lower rates than ordinary income.
22
Q
certificate of title
A
A document prepared by an attorney stating the attorney’s opinion of the status of the title to a piece of property, after performing a title search and reviewing the public records. Also called Opinion of Title. – A written opinion by an attorney that ownership of the particular parcel of land is as stated in the certificate.
23
Q
Closing
A
The transfer of real property ownership from seller to buyer, according to terms and conditions in a sales contract or escrow agreement; the final stage in a real estate transaction. Also called Loan Consummation or Settlement. – (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.
24
Q
closing costs
A
The miscellaneous expenses buyers and sellers normally incur in the transfer of ownership of real property over and above the cost of the property.
25
Closing Disclosure
A standardized document that presents a final, detailed accounting for a real estate transaction, listing each party’s debits and credits and the amount each will receive or be required to pay at closing; required for all RESPA-related transactions. Also called Settlement Statement.
26
closing statement
An accounting of funds made to the buyer and seller separately. Required by law to be made at the completion of every real e state transaction.
27
Co–Insurance
A common clause or provision in building insurance policies under which the insured agrees to maintain insurance on his or her property in an amount equal to at least 80% of the replacement cost. If the property is not insured to that amount and a loss is incurred, the insurance company will make the insured share in the loss on a pro–rata basis.
28
complete escrow
All terms of the escrow instructions have been met.
29
Comprehensive Loss Underwriting Exchange (C.L.U.E.)® Report
A report available from Lexis/Nexis® that tracks insurance claim history on real property and automobiles.
30
Continuance
A title search performed just prior to settlement to bring a preliminary title report up to date and ensure that no intervening rights to the property have come up. Also called Bring-Down or Continuation.
31
Correction Line
In the government survey system, lines that are established at 24-mile intervals (or at every four township lines) north and south of a baseline, re-establishing the six-mile width between the range lines to account for the curvature of the earth.
32
cost basis
Original price paid for a property.
33
documentary transfer tax
A state enabling act allowing 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.
34
Down Payment
The amount of money a buyer pays to obtain a property, in addition to the money that the buyer borrows.
35
earnest money
(1) Down payment made by a purchaser of real estate as evidence of good faith. (2) A deposit or partial payment.
36
escrow (en custodia de tercero persona)
A small and short-lived trust arrangement.
37
Escrow Account
1. A separate account maintained by a broker for the deposit of clients’ money (i.e., good faith deposits). Also called Trust Account. 2. The account a lender maintains to hold a borrower’s monthly payments for property insurance and property tax until those bills are due. Also called Reserve Account or Impound Account.
38
escrow agent
The neutral third party holding funds or something of value in trust for another or others.
39
Escrow Closing
A settlement procedure conducted by a disinterested third party, often an escrow agent, where the buyer and seller are not present.
40
escrow holder
Acts as a neutral agent of both buyer and seller.
41
escrow instructions
Written directions, signed by a buyer and seller, detailing the procedures necessary to close a transaction and directing the escrow agent how to proceed.
42
Escrow Reserves
An account maintained by a lender for the deposit of borrowers’ extra 1/12 monthly deposits to cover next year’s insurance and tax payments.
43
Evidence of Title
Evidence of title to real estate is provided through a title report or issuance of title insurance. Proof of property ownership.
44
extended policy
An extended title insurance policy.
45
final tract map
A map indicating any changes required by the planning commission and is recorded in the county where the property is located.
46
First Substantive Contact
An event triggering agency disclosure (e.g., prior to entering into a listing agreement, prior to showing a property, at an open house when a buyer displays serious interest, etc.).
47
fiscal year
Starts on July 1 and runs through June 30 of the following year (used for real property tax purposes).
48
Foreign Investment in Real Property Tax Act of 1980 (FIRPTA)
A federal law that imposes income tax on foreign persons selling or otherwise disposing of their interest in real property.
49
front money
The minimum amount of money necessary to initiate a real estate venture, to get the transaction underway.
50
Government Survey System
Legal description for land referencing principal meridians and baselines designated throughout the country. Also called Rectangular Survey System. Government-Sponsored Enterprise (GSE) A privately held corporation with public purposes created by the U.S. Congress to reduce the cost of capital for certain borrowing sectors of the economy. -- A method of specifying the location of parcels of land using prime meridians, base lines, standard parallels, guide meridians, townships, and sections.
51
guarantee of title
An assurance of clear title.
52
hazard insurance
A property insurance policy that protects the owner and lender against physical hazards to property such as fire and windstorm damage.
53
Heterogeneity
A characteristic of real property; each piece of land, each building, and each house is a unique piece of real estate. Also called Uniqueness.
54
Homeowners Association (HOA)
A nonprofit association comprised of homeowners in a subdivision, responsible for enforcing the subdivision's CC&Rs and managing other community affairs.
55
homeowners’ exemption
A $7,000 tax exemption available to all owner-occupied dwellings.
56
impound account
A trust account set up for funds set aside for future costs relating to a property.
57
Insurable Title
Title to property that a title insurance company has agreed to insure against defects that could affect its ownership or value.
58
Involuntary Alienation
When title to property is transferred during the owner's lifetime without his consent.
59
IRS Form 1099-S
A tax form indicating the seller’s proceeds from the sale or transfer of real estate that a settlement officer submits to the Internal Revenue Service.
60
Legal Description
A precise description of a specific piece of property; the most common systems are lot and block, metes and bounds, rectangular (or government) survey. -- (1) A land description recognized by law. (2) A description by which property can be definitely located by reference to government surveys or approved recorded maps.
61
Limited Warranty Deed
A deed in which the grantor warrants title only against defects arising during the time he owned the property and not against defects arising before his ownership. Also called Special Warranty Deed.
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Lot
A parcel of land; a parcel in a subdivision.
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Lot and Block System
The type of legal description used for platted property. The description states only the property’s lot number and block number in a particular subdivision. To find out the exact location of the property’s boundaries, one can consult the plat map for that subdivision at the county recorder’s office. -- (1) A process where developers divide parcels of land into lots. Each lot in a subdivision is identified by number, as is the block in which it is located; each lot and block is in a referenced tract. This process is required by the California Subdivision Map Act. (2) Also known as lot and block system, subdivision system or recorded map system.
64
Marketable Title
A title that is free and clear from undisclosed encumbrances or other defects that would expose a purchaser to litigation or impede a purchaser’s ability to enjoy the property or to later sell the property; required to be delivered by the seller to the purchaser at settlement. Also called Merchantable Title. -- Good or clear saleable title reasonably free from risk of litigation over possible defects.
65
Meridian
A survey line running north and south, used as a reference when mapping land.
66
metes and bounds
Land description that delineates boundaries and measures distances between landmarks to identify property.
67
Metes and Bounds System
A legal description that starts at an easily identifiable point of beginning (POB), then describes the property’s boundaries in terms of courses (compass directions) and distances, ultimately returning to the point of beginning. -- Land description that delineates boundaries and measures distances between landmarks to identify property.
68
Mill
A measurement equal to one–tenth of one cent and is used to state the property tax rate. (.001) Millage A rate of taxation for real property calculated as $1 per $1,000 (or .001) of assessed value.
69
Monument
Any natural or man-made marker used to establish lines and boundaries in a metes and bounds survey. Also called Marker. -- A fixed landmark used in a metes and bounds land description.
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NDFA
The mnemonic for No Darn Fooling Around.
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Nonhomogeneity
A characteristic of real property; each piece of land, each building, and each house is a unique piece of real estate. Also called Uniqueness or Heterogeneity.
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PITTI
The mnemonic for Principles, Interest, Taxes, and Insurance.
73
Plat
A detailed survey map of a subdivision, recorded in the county where the land is located. Subdivided property is often called platted property. Also called Plat Map.
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plat map
Map of a subdivision indicating the location and boundaries of individual lots.
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Platted Property
Land that has been subdivided into blocks and lots.
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Preliminary Title Report
A search of liens, encroachments, easements, and any recorded documents in the county records in order to issue title insurance. An offer to issue a policy of title insurance in the future for a specific fee.
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Prepaid Expenses
Expense items on a settlement statement the seller has already paid in advance, usually at the beginning of a month for the rest of the month, or at the beginning of the year for the rest of the year or longer.
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prepaid items of expense
Prorations of prepaid items of expense which are credited to the seller in the closing escrow statement.
79
Prepayment Penalty
Additional money charged by a lender for the borrower paying a loan off early. Not permitted for FHA-insured loans or VA-guaranteed loans.
80
Principal Meridian
North-south lines designated and named throughout the country for use with the government survey system. They are based off the prime meridian, which is the line of longitude passing through the Royal Greenwich Observatory in England (0 degrees).
81
Property Inspection
An evaluation of the conditions of a property by a trained professional, often required by a lender before approval of a loan is granted. Inspections usually include looking for evidence of termites, structural integrity, septic systems, etc.
82
property taxes
Taxes used to operate the government in general.
83
Proration
The allocation of expenses between buyer and seller in proportion to their actual usage of the item or service. (1) The division and distribution of expenses and/or income between the buyer and seller of property as of the date of closing or settlement. (2) The process of making a fair distribution of expenses, through escrow, at the close of the sale.
84
Public Land Survey System (PLSS)
A land description method that uses imaginary lines to form a grid to locate land.
85
Range
The six-mile distance between range lines in the rectangular survey system. A land description used in the U.S. government survey system consisting of a strip of land located every six miles east and west of each principal meridian.
86
Range Line
A line that runs parallel to a principal meridian, marking the land into six-mile strips known as ranges; they are numbered east or west of a principal meridian in the rectangular survey system.
87
Rectangular Survey System
Method of land description used in about 30 states based on imaginary lines of longitude (meridians) and latitude (base lines). Also called Government Survey System.
88
Root of Title
The deed or other document of transfer that was the first recorded, going back at least as far as required by state law.
89
Section
Part of a township, one-mile by one-mile square. Used for the rectangular survey system; one section equals 640 acres, 36 sections equal one township. 1/36 of a township.
90
Settlement Officer
The person charged with coordinating the activities and documentation necessary for completing a real estate transaction; usually the one who prepares the settlement statement and conducts the closing. Also called Closing Officer, Closing Agent, Escrow Agent, or Title Agent.
91
Settlement Services
Any service provided in connection with a prospective or actual settlement of a real estate transaction, including, but not limited to, those provided by lenders, title companies, real estate brokers, property inspectors, attorneys, appraisers, etc.
92
standard policy
A policy of title insurance covering only matters of record.
93
standard subdivision
A land division with no common or mutual rights of either ownership or use among the owners of the parcels created by the division.
94
State Housing Law
Outlines the minimum construction and occupancy requirements for dwellings.
95
Street Improvement Act of 1911
A law that empowers cities and counties to levy a special assessment to repair streets.
96
Subdivided Land
Land that has been divided into two or more parcels for the purpose of development, such as a residential subdivision.
97
subdivision
The division of land into five or more lots for the purpose of sale, lease, or financing.
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Subdivision Map Act
The law that authorizes a city or county to control the orderly and proper development of the community.
99
subdivision system
Also known as a recorded map system.
100
Survey
The formal process of locating and measuring the boundaries of a property and identifying the improvements, encroachments, and easements that are associated with that parcel.
101
Tax Base
The total tax–assessed value of all real property in a particular jurisdiction.
102
tax deed
A deed given to a successful bidder at a tax auction.
103
tax delinquent property
Property that has unpaid taxes.
104
Tax Depreciation
The expensing of the cost of business or investment property over a set number of years, determined by the IRS to be an asset's useful life (27 1/2 years for residential property; 39 years for non-residential property).
105
Tax Rate
The rate, normally stated in units of $100, multiplied by the assessed value of property to determine the amount of the property tax due.
106
tax sale
Sale of property after a period of non-payment of taxes.
107
Tax Shelter
Property or other investments that give owners certain income tax advantages, such as deductions for property taxes, mortgage interest, and depreciation.
108
Taxation
The right of government to require contribution from citizens to pay for government services.
109
tentative tract map
A map of the proposed subdivision that is submitted to a planning commission for approval or disapproval. It is used to make sure that the improvements, such as lot layouts, sizes, and configurations; grading plans; traffic access and street alighments; storm drainage, sewers, and water facilities; and other project features have been designed to conform to city or county general plans. The approval or disapproval of the planning commission is noted on the map. Therefore, a final map of the tract embodying any changes requested by the planning commission is required to be filed with the planning commission.
110
Title
The actual, lawful ownership interest in a property; title is not a document but a concept. Evidence that the owner of land is in lawful possession.
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Title Company
A company that examines and insures title claims for real estate purposes through a thorough examination of property records.
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Title Insurance
Insurance policy that protects lenders and homeowners against losses resulting from undiscovered title defects and encumbrances.
113
title plant
The storage facility of a title company in which it has accumulated complete title records of properties in its area.
114
Title Report
A report issued by a title company disclosing the condition of the title to a specific piece of property; evidence of marketable title. preliminary to issuance of title insurance policy.
115
Township
Square division of land, six miles by six miles, in the rectangular survey system. One township contains 36 sections.
116
Township Line
East-west lines that run parallel to baselines in the rectangular survey system. Imaginary lines drawn every six miles north and south of the base line to form a horizontal row or tier of townships.
117
Township Tier
The six-mile distance between township lines in the rectangular survey system.
118
Transfer Tax
A tax levied on the transfer of a piece of real property from one person to another; it could be levied by the state, the county, or the municipality. Also called Excise Tax.
119
Transferability
The ability to exchange goods and services. In real estate legal rights are transferred. The title must be marketable with an unclouded title.
120
Veterans Exemption
Entitles a resident of California who has been in the military during wartime to take a $4,000 real estate tax emption. Because the Homeowners’ Exemption of $7,000 is greater, most California veterans choose the Homeowners’ Exemption.
121
Voluntary Alienation
When title to property is transferred voluntarily through a sale, gift, dedication, or grant.
