GLOSSARY
GLOSSARY
A reference for title, settlement, escrow, and closing terminology each entry includes a plain English explanation and links to related concepts.
A
ATTORNEY REVIEW
Attorney Review is a period within many real estate transactions during which the attorneys representing the buyer and seller review the real estate contract, proposed transaction terms, title matters, and related documents. Attorney Review commonly occurs shortly after the contract is signed and may involve negotiating revisions, clarifications, deadlines, repair provisions, contingencies, or other legal and transactional matters associated with the sale.
In attorney-driven real estate markets, attorneys often play an important role in helping clients evaluate legal risks, review title-related issues, coordinate with lenders and title companies, and assist in resolving matters that may arise prior to closing.
Attorney Review can also include review of the Title Commitment, proposed surveys, closing documents, and other transaction-related materials to help ensure the transaction proceeds according to the agreed terms and applicable legal requirements.
IN SIMPLE TERMS
Attorney Review is the stage of the transaction where the parties’ attorneys review and help coordinate the legal and contractual aspects of the real estate sale.
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C
CHAIN OF TITLE
Chain of Title refers to the historical sequence of ownership transfers and recorded interests associated with a property over time. The Chain of Title is established through publicly recorded documents such as deeds, mortgages, releases, court filings, easements, and other legal instruments affecting ownership or lien rights connected to the property.
As part of the title review process, the title company researches the Chain of Title to help confirm that ownership has been properly transferred from one party to the next throughout the property’s history. This review also helps identify potential title issues such as missing documents, unreleased liens, recording errors, or competing ownership claims that may need to be resolved before closing.
A clear and properly documented Chain of Title is one of the foundational elements supporting the issuance of title insurance policies and the legal transfer of ownership in a real estate transaction.
IN SIMPLE TERMS
The Chain of Title is the documented history of ownership and recorded interests associated with a property over time.
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D
DEED
A deed is a legal document used to transfer ownership of real estate from one party to another. The deed identifies the current owner transferring the property, the new owner receiving the property, and the Legal Description of the real estate being conveyed.
Once properly signed, executed, and delivered, the deed is typically recorded in the public record as part of the closing process. Recording the deed creates the official public record of the ownership transfer and updates the Chain of Title associated with the property.
There are several different types of deeds that may be used depending on the nature of the transaction and the warranties or protections being provided by the seller. One of the responsibilities of the settlement and title process is helping ensure the deed is properly prepared, executed, and recorded as part of the legal transfer of ownership.
IN SIMPLE TERMS
A deed is the legal document that transfers ownership of real estate from one party to another.
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E
EARNEST MONEY
Earnest Money is a deposit made by a buyer shortly after entering into a real estate contract to demonstrate good faith and financial commitment toward completing the transaction. The funds are typically held in escrow by a neutral third party, such as a title company, real estate brokerage, or attorney, until closing or until the contract is otherwise terminated according to its terms.
The amount of Earnest Money can vary depending on the type of transaction, local market conditions, and the terms negotiated between the buyer and seller. At closing, the Earnest Money deposit is generally credited toward the buyer’s required funds due at closing.
The handling and potential return of Earnest Money is governed by the terms of the real estate contract. If a transaction does not close, the disbursement of the Earnest Money may depend on the circumstances surrounding the termination of the contract and the agreement of the parties involved.
IN SIMPLE TERMS
Earnest Money is a good-faith deposit showing a buyer’s commitment to completing a real estate transaction.
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E
EASEMENT
An easement is a legal right allowing another party limited use of a portion of a property for a specific purpose, even though the property is owned by someone else. Easements are commonly recorded in the public record and may remain attached to the property through future ownership transfers.
Common examples of easements can include utility easements for power lines, water lines, sewer access, drainage areas, shared driveways, access easements, or municipal rights associated with public infrastructure and services.
An easement does not typically prevent ownership or sale of a property, but it may affect how certain portions of the property can be used or improved. Easements are commonly identified during the title review process, are often shown on a property survey, and are typically listed as exceptions within the Title Commitment and final title insurance policies.
IN SIMPLE TERMS
An easement gives another party limited rights to use part of a property for a specific purpose.
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E
ENCROACHMENT
An encroachment occurs when a structure, improvement, or physical feature extends beyond a property boundary and onto neighboring property or into an easement area without the legal right to do so. Encroachments are commonly identified through a property survey during the title review or closing process.
Common examples of encroachments can include fences, driveways, garages, sheds, sidewalks, retaining walls, or other improvements crossing property lines or extending into recorded easement areas.
Depending on the nature and severity of the issue, an encroachment may or may not materially affect ownership or the ability to close a transaction. In some situations, additional documentation, agreements, corrective action, or underwriter approval may be required before title insurance can be issued or closing can proceed.
IN SIMPLE TERMS
An encroachment occurs when a structure or improvement crosses over a property line or easement area without proper rights.
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E
ESCROW
Escrow refers to money, documents, or other items held by a neutral third party on behalf of the parties involved in a transaction until certain conditions or obligations have been satisfied.
In a real estate transaction, escrow can apply to several different situations. One common example is earnest money, where funds are held in escrow until closing or until the terms of the contract are otherwise resolved. Escrow can also refer to funds collected and held by a mortgage lender for the future payment of real estate taxes and insurance premiums.
During the closing process, the settlement agent may also temporarily hold funds, documents, and executed closing materials in escrow until all conditions necessary to complete the transaction have been satisfied and the transaction is ready to be finalized and recorded.
IN SIMPLE TERMS
Escrow means money or documents are being temporarily held by a neutral third party until certain parts of the transaction are completed.
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L
LEGAL DESCRIPTION
A Legal Description is the formal written description used to precisely identify a specific parcel of real estate for legal and public record purposes. Unlike a mailing address, which is used for everyday identification and delivery purposes, the Legal Description defines the actual property being transferred, mortgaged, insured, or recorded in a real estate transaction.
Legal Descriptions can take several forms depending on the type and location of the property, including subdivision lot and block descriptions, metes and bounds descriptions, or references to recorded plats and surveys.
The Legal Description appears on many important real estate documents, including deeds, mortgages, title commitments, surveys, and title insurance policies. Accuracy of the Legal Description is important because it establishes the precise property rights and boundaries associated with the transaction.
IN SIMPLE TERMS
A Legal Description is the formal legal identification of a specific piece of real estate.
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L
LENDER'S POLICY
A Lender’s Policy is a type of title insurance policy that helps protect a mortgage lender’s lien interest in real estate. The policy is generally required whenever a buyer obtains financing to purchase or refinance a property.
The Lender’s Policy helps insure that the lender’s mortgage is properly recorded and maintains the priority lien position expected by the lender. In simple terms, the policy helps protect the lender from certain title defects, liens, ownership disputes, or other covered matters that could negatively affect the lender’s secured interest in the property.
Unlike an Owner’s Policy, which helps protect the property owner, a Lender’s Policy protects only the lender’s financial interest in the property and does not provide ownership protection to the buyer. The policy amount generally decreases over time as the mortgage balance is paid down and typically terminates once the loan is fully satisfied.
IN SIMPLE TERMS
A Lender’s Policy helps protect a mortgage lender’s lien interest in a property.
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L
LIEN
A lien is a legal claim against a property that secures the payment of a debt or other financial obligation. Liens can arise from a variety of sources, including mortgages, unpaid real estate taxes, contractor claims, court judgments, homeowner association dues, or other obligations connected to the property or property owner.
In many cases, liens are recorded in the public record and may affect the owner’s ability to sell, refinance, or transfer clear ownership of the property until the lien is properly satisfied or released.
One of the primary functions of the title review process is identifying existing liens that may affect ownership or the lender’s lien position prior to closing. Outstanding liens often must be paid, resolved, or otherwise addressed before a title insurance policy can be issued and the transaction can proceed to closing.
IN SIMPLE TERMS
A lien is a legal claim against property used to secure payment of a debt or obligation.
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M
MORTGAGE
A mortgage is a legal document that creates a lender’s security interest in real estate as collateral for a loan. In a typical financed real estate transaction, the borrower signs a mortgage granting the lender certain legal rights in the property until the loan is repaid according to its terms.
The mortgage is commonly recorded in the public record as part of the closing process and becomes a lien against the property. Recording the mortgage helps establish the lender’s lien position and provides public notice of the lender’s secured interest in the property.
While the borrower generally retains ownership and possession of the property, the mortgage gives the lender legal remedies and protections if the loan obligations are not satisfied. Once the loan has been fully paid and the lender releases the mortgage, the lien is removed from the property’s title record.
IN SIMPLE TERMS
A mortgage gives a lender a legal security interest in real estate as collateral for a loan.
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O
OWNER'S POLICY
An Owner’s Policy is a type of title insurance policy that helps protect a buyer’s ownership interest in real estate. The policy is generally issued at closing and helps protect against certain future claims, defects, liens, or ownership disputes affecting the property that may not have been discovered during the title review process.
In most residential transactions, by custom and contract, the seller provides the Owner’s Policy to the buyer at closing. Unlike many other forms of insurance that require ongoing monthly or annual premiums, an Owner’s Policy is generally purchased through a one-time premium paid at closing and remains in effect for as long as the owner or their heirs retain an interest in the property.
If a covered title issue later arises, the policy may help cover legal defense costs and, in certain situations, financial losses associated with defending ownership rights to the property.
IN SIMPLE TERMS
An Owner’s Policy helps protect a property owner against certain title-related ownership issues.
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P
PIN NUMBER (PROPERTY INDEX NUMBER)
A PIN Number, or Property Index Number, is a unique identifying number assigned to a parcel of real estate by the local county assessment or tax authority. The PIN Number is used by governmental agencies to track property ownership records, assessments, tax bills, exemptions, and other property-related information.
A PIN Number is different from a property address. While a street address may change over time or be formatted differently for mailing purposes, the PIN Number is intended to serve as the property’s consistent identification number within the local property tax and public records system.
PIN Numbers commonly appear on real estate tax bills, assessment notices, title commitments, surveys, deeds, and other real estate-related documents. Because the PIN Number is tied to the legal parcel of property, accuracy is important when reviewing ownership records, tax information, and transaction documents associated with the property.
IN SIMPLE TERMS
A PIN Number is the unique identification number assigned to a parcel of real estate for tax and public record purposes.
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P
PRORATION
A proration is the allocation of certain ongoing expenses between the buyer and seller based on the date of closing. Because many property-related expenses are paid periodically rather than daily, prorations help ensure each party pays their fair share for the period of time they owned or occupied the property.
Common prorations in a real estate transaction can include real estate taxes, homeowner association dues, utilities, rents, or other recurring property expenses. For example, if a seller owned the property for part of the current tax period and the buyer will own it for the remainder, the taxes may be prorated between the parties at closing.
Prorations appear on the Settlement Statement as credits or debits to the buyer and seller and are one of the many financial calculations coordinated by the settlement agent prior to closing.
IN SIMPLE TERMS
Prorations divide certain ongoing property expenses between the buyer and seller based on the closing date.
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R
REAL ESTATE TAXES
Real Estate Taxes are taxes assessed by local governmental authorities against real property to help fund public services such as schools, roads, police and fire protection, parks, libraries, and other local governmental operations. The amount of Real Estate Taxes owed is generally based on the assessed value of the property and the tax rates established by the various taxing districts serving the property.
Real Estate Taxes are commonly billed on a periodic basis and may be paid directly by the property owner or through an escrow account maintained by a mortgage lender as part of the owner’s monthly mortgage payment.
In a real estate transaction, unpaid or future Real Estate Taxes are commonly prorated between the buyer and seller on the Settlement Statement based on the closing date and the terms of the contract. Outstanding unpaid Real Estate Taxes may also create liens against the property that can affect ownership rights and title insurability if not properly satisfied.
IN SIMPLE TERMS
Real Estate Taxes are property taxes assessed by local governments against real estate.
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R
RECORDING COSTS
Recording Costs are fees charged by a local government office, typically the county recorder or clerk, to officially record documents in the public record as part of a real estate transaction. Common recorded documents can include deeds, mortgages, releases, easements, and other legal instruments affecting ownership or lien rights associated with the property.
Recording documents creates the official public record of the transaction and establishes the record of legal ownership and lien rights associated with the property following closing.
Recording Costs are generally determined by the local governmental authority where the property is located and are typically collected and disbursed by the settlement agent as part of the closing process.
IN SIMPLE TERMS
Recording Costs are government fees paid to officially record real estate documents in the public record.
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S
SURVEY
A survey is a drawing or map prepared by a licensed surveyor that identifies the physical boundaries and certain visible features associated with a property. A survey is commonly used in real estate transactions to help confirm the location of property lines and identify physical improvements or conditions affecting the property.
Depending on the type and scope of the survey, it may show items such as buildings, driveways, fences, easements, encroachments, utility lines, setbacks, and other visible improvements or boundary-related matters associated with the property.
Surveys can play an important role in the title review and closing process by helping identify potential issues involving property boundaries, access rights, easements, or encroachments that may affect ownership, use, or future improvements to the property.
IN SIMPLE TERMS
A survey is a map showing property boundaries and certain physical features affecting the property.
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S
SETTLEMENT STATEMENT
A Settlement Statement is the final financial document used in a real estate closing that summarizes all money coming into and going out of the transaction. The statement itemizes the various charges, credits, prorations, taxes, lender fees, title charges, commissions, recording costs, and other transaction-related expenses associated with the closing.
The Settlement Statement helps ensure that all parties involved in the transaction, including the buyer, seller, lender, attorneys, real estate agents, and settlement agent, are working from the same finalized financial figures prior to closing. At closing, both the buyer and seller sign the final Settlement Statement acknowledging that it represents the true and accurate financial accounting of the transaction.
One of the primary responsibilities of the settlement agent is helping ensure the Settlement Statement is accurate, properly balanced, and reflects the agreed upon financial terms of the transaction before funds are collected and disbursed at closing.
IN SIMPLE TERMS
A Settlement Statement is the final accounting document showing all money coming into and going out of a real estate transaction.
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T
TITLE COMMITMENT
A Title Commitment is a preliminary title insurance document issued by the title company after researching the history of a property. The commitment outlines the conditions under which the title insurance underwriter is willing to issue the Owner’s Policy and Lender’s Policy for the transaction.
The Title Commitment identifies the current ownership of the property, the Legal Description of the real estate, and various matters affecting title that may need to be addressed before closing. These items can include existing mortgages, liens, easements, unpaid taxes, restrictions, or other matters appearing in the public record.
In many transactions, the Title Commitment also serves as a roadmap for resolving title issues prior to closing. Once the listed requirements and conditions are satisfied, the final title insurance policies can generally be issued at closing.
IN SIMPLE TERMS
A Title Commitment is the preliminary document outlining the conditions under which title insurance will be issued.
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T
TITLE DEFECT
A Title Defect is a problem, inconsistency, or unresolved matter affecting the ownership or legal status of a property that may interfere with the transfer of clear title from the seller to the buyer. Title Defects can arise from issues discovered during the review of the property’s Chain of Title and public records.
Common examples of Title Defects can include unreleased mortgages, unpaid liens, missing documents, recording errors, unknown heirs, conflicting ownership claims, boundary disputes, or other matters that may affect ownership rights or a lender’s lien position.
Many Title Defects are administrative or procedural in nature and can often be resolved prior to closing through additional documentation, corrective filings, lien payoffs, or other curative actions coordinated by the title company, attorneys, lenders, or other parties involved in the transaction.
Identifying and resolving Title Defects before closing is one of the primary purposes of the title review and settlement process.
IN SIMPLE TERMS
A Title Defect is an ownership or public-record issue that may interfere with transferring clear title to a property.
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T
TITLE INSURANCE
Title insurance is a specialized type of insurance that helps protect real estate owners and mortgage lenders from certain financial losses caused by problems with the property’s title. In simple terms, “title” refers to the legal ownership rights associated with real estate. Before a property can be transferred, the title company reviews public records to identify ownership history, liens, unpaid taxes, easements, recording issues, or other matters that may affect the buyer’s ownership rights or the lender’s secured interest.
Unlike homeowners insurance, which generally protects against future events such as fire, storm damage, or liability claims, title insurance primarily protects against covered issues that may already exist but were not discovered before closing. These issues can include missing documents, unreleased mortgages, unknown heirs, recording errors, fraud, forgery, liens, or other title defects affecting ownership or lien rights.
There are typically two title insurance policies in a financed residential real estate transaction: an Owner’s Policy and a Lender’s Policy. The Owner’s Policy helps protect the buyer’s ownership interest in the property. The Lender’s Policy helps protect the mortgage lender’s lien interest in the property. In most financed transactions, the lender requires a Lender’s Policy, and in many residential transactions, by custom and contract, the seller provides an Owner’s Policy to the buyer.
Title insurance is an important part of the closing process because it helps create confidence that ownership can be legally transferred, the lender’s mortgage can be properly secured, and covered title issues can be addressed if they arise after closing. The title review process, title commitment, settlement coordination, and final policy issuance all work together to support a secure and properly documented transfer of real estate ownership.
IN SIMPLE TERMS
Title insurance helps protect property owners and mortgage lenders from certain hidden ownership or title-related issues that may not have been discovered before closing.
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T
TRANSFER TAXES
Transfer Taxes are governmental charges imposed in connection with the transfer of real estate ownership from one party to another. These taxes are commonly assessed by state, county, or local governmental entities and are typically calculated based on the purchase price or value of the property being transferred.
Transfer Taxes are generally paid at closing and appear on the Settlement Statement as part of the overall transaction costs. Depending on local custom, contract terms, or jurisdictional requirements, the taxes may be paid by the seller, buyer, or shared between the parties.
Payment of the applicable Transfer Taxes is generally required before the deed transferring ownership can be officially recorded in the public record.
IN SIMPLE TERMS
Transfer Taxes are government-imposed taxes paid in connection with transferring ownership of real estate.
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U
UNDERWRITER
A title insurance underwriter is the insurance company that ultimately assumes the financial risk associated with issuing a title insurance policy. The underwriter authorizes licensed title agents to issue Owner’s Policies and Lender’s Policies on its behalf, subject to the underwriter’s guidelines and underwriting standards.
As part of the title review process, the underwriter evaluates whether the ownership of a property can be insured and what requirements, exceptions, or corrective actions may be necessary before issuing a policy. If a covered title claim later arises, the underwriter is generally responsible for providing the insurance coverage and protections outlined in the policy.
In simple terms, the title company coordinates the transaction and title review process, while the underwriter provides the actual insurance backing behind the title insurance policies.
IN SIMPLE TERMS
The underwriter is the insurance company financially backing the title insurance policy.
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