Real Estate Glossary
The real estate industry, like many professions, has its own unique language, which may be confusing for those not in the industry. The terms below are only defined in their common real estate context and may have a different meaning in another context. You should consult your legal counsel for a precise meaning of any term.
Annual Percentage Rate (APR): A number representing the cost of credit expressed as a yearly percentage rate. The APR is disclosed on the Truth in Lending disclosure statement.
Assessments: Annual fees assessed by either a condominium or a homeowners’ association, and are usually assessed on an annual basis. The assessments cover the annual expenses incurred by the condominium or homeowners’ association.
Assignment: An instrument where the lender transfers the promissory note and the mortgage to another party, which other party is then entitled to receive the monthly mortgage payments.
Closing: The transaction where the buyer and the seller sign all documents necessary to transfer title and/or mortgage the home.
Closing Attorney: The individual handling your closing who most often only represents the lender. The closing attorney prepares the closing documents according to instructions received from both the lender and the title insurance company.
Earnest Money Deposit: A sum of money paid by the buyer at the time the residential sales contract is executed and applied against the purchase price at closing. The earnest money deposit is held in a Realtor®’s escrow account or by the seller if there is no Realtor® involved. The earnest money deposit may be forfeited to the seller if the buyer does not have an excuse for closing.
Encumbrance: A mortgage, a lien or any other claim, charge or liability attaching to real estate.
Escrow Account: A lender maintained account that contains funds paid by the borrower each month and used to pay real estate taxes and insurance.
Finance Charge: A dollar amount representing the sum of the interest, certain charges and insurance premiums the lender anticipates the borrower will pay over the life of the loan.
General Warranty Deed: The document that conveys title to real estate.
Good Faith Estimate: An estimate of the settlement charges the borrow will pay at closing and associated with the loan. The borrower must receive the Good Faith Estimate for the lender within three days of when the loan application is submitted to the lender.
Grantor: The party in the deed who is the seller of real estate.
Grantee: The party in the deed who is buyer of real estate.
Hazard Insurance: This insurance is commonly known as homeowner’s insurance and provides cover against fire and other types of damage to the home. The lender will require the borrower obtain this insurance prior to closing
Joint Tenant with the Right of Survivorship: An undivided interest in real estate, acquired by two or more people ("joint tenants"). All joint tenants must have an equal interest in the real estate. The interest of deceased joint tenant immediately passes the deceased’s interest to the surviving joint tenant(s) rather than passing to the deceased tenant’s heirs.
Lender's Title Insurance: Insurance purchased by the borrower for the lender, that protects the lender against defects in title or encumbrances neither of which were discoverable or uncovered by a title examination.
Lien: A monetary charge against real estate that usually arises because of an unpaid debt or other obligation.
Mortgage: The instrument signed by the borrower (buyer) where the borrower (buyer) grants to the lender (mortgagee) a lien against the home.
Mortgagee: The lender who is granted a mortgage against the home.
Mortgage Insurance: Borrower purchased insurance that protects the lender in the event the borrower defaults in payment. Mortgage insurance, also known as private mortgage insurance, permits a lender to lend a higher percentage of the purchase price.
Mortgagor: The person who signs the mortgage, granting to the mortgagee a mortgage against the home.
Owner's Title Insurance: Insurance purchased by the borrower that protects the borrower against defects in title or encumbrances neither of which were discoverable or uncovered by a title examination.
Pest Inspection Report: A signed document from an exterminating company, dated within 30 days of closing and disclosing any previous or present infestation by wood destroying organisms. (Also called "Termite Letter.")
Power of Attorney: A document where one person grants another person the authority to act for him or her. The power may authorize another to execute a deed, the loan documents or receive the loan or sale proceeds.
Prepaid Interest: The interest the borrow pays at closing representing the interest due for the month the loan closes. Interest on a mortgage loan is paid in arrears (the June mortgage pays the interest that accrued during May) and the interest the borrower pays at closing taking place early in the month is higher than the interest paid later in the month.
Promissory Note: This documents sets forth the terms of the loan and legally obligates the borrower to repay the money lent. The terms include the interest rate, the circumstances that permit the lender to change the interest rate, the date each payment is due, the amount of the monthly principal and interest and how late charges are calculated.
Residential Sales Contract: The document wherein the seller agrees to sell and the buyer agrees to buy the home. The contract is legally enforceable and obligates the parties to perform once the contract is signed by both parties and the Earnest Money Deposit is paid. (Also called "Purchase & Sale Contract.")
Recording: The act of taking the deed and the mortgage and making both a permanent part of the records maintained by the county clerk. The deed and the mortgage are copied by the county clerk, recorded in the indexes maintained by the county clerk and then made available for public review either in electronic or paper form. The closing attorney is responsible for delivering the deed and the mortgage to the county clerk.
Recording Fees: The fees collected by the county clerk to record the deed and the mortgage in the county clerk’s records.
Rider: A document attached to a mortgage that either modifies or adds terms to the mortgage.
Settlement Statement: This document, also known as the closing statement, contains a description of all funds received from or paid to the buyer and/or the seller. The settlement statement is prepared by the closing attorney and reviewed, approved and signed by both the buyer and the seller at the closing.
Survey: A drawing showing the location of the home and any other improvements on the real estate being transferred or mortgaged in relation to the boundary lines and whether the home encroaches any boundary lines, easements or building set back lines. There are several types of surveys (staked survey and mortgage inspection).
Taxes: A closing may involve a transfer tax if the closing involves the sale of a home There are several kinds of taxes involved in a real estate transaction such as Property taxes, intangible tax, and transfer tax. Property taxes are prorated between the buyer and seller at closing.
Tenancy In Common: Ownership of property by two or more tenants ("tenants in common") in which the interest of each tenant does not have to be equal. Upon the death of one of the tenants in common, his or her interest in the property passes to his or her heirs rather than to the other tenants.
Three Day Right of Rescission: A federally granted right, given to a borrower in a refinance transaction, allowing the borrower to cancel the loan.
Title Examination: A review of the public records maintained by the county clerk and performed to determine that the seller owns the real estate and whether there are any encumbrances, liens, mortgages or other claims against the real estate or the seller’s interest in the real estate.
Transfer Tax: A Kentucky tax assessed upon the transfer of real estate and usually paid by the seller. The transfer tax is imposed at the rate of fifty cents ($0.50) for each $500.00 of value or fraction thereof, which value is set forth in the deed.
Truth In Lending Disclosure Statement: A document describing the costs of the loan and provided to the borrower at closing. A preliminary Truth in Lending disclosure statement is also provided to the borrower within three days of loan application if the borrower is using the loan to purchase the home.