Commonly Used Terms in Title Insurance and at Property Closings

Abstract (or Abstract Of Title)
A summary of the public records relating to the title to a particular property. An attorney or title insurance company reviews an abstract of title to determine whether there are any title defects which must be cleared before a buyer can purchase clear, marketable, and insurable title. The abstract also identifies encumbrances, easements and covenants that affect the property. Also known as a Title Report.

American Land Title Association (ALTA)
A national association of title companies, abstractors, and attorneys established to promote uniformity and quality in title abstract and insurance policies.

Certificate of Title
A certificate issued by a title company or a written opinion rendered by an attorney that the seller has good marketable and insurable title to the property which he is offering for sale. A certificate of title offers no protection against any hidden defects in the title which an examination of the records could not reveal. The issuer of a certificate of title is liable only for damages due to negligence. The protection offered a homeowner under a certificate of title is not nearly as great as that offered in a title insurance policy.

Clear Title
Title not encumbered or burdened with defects

Cloud On Title
An outstanding claim, condition or encumbrance which adversely affects the marketability of title.

Deed
A formal written instrument by which title to real property is transferred. The deed should contain an accurate description of the property being conveyed, should be signed and witnessed according to the laws of the State where the property is located, and should be delivered to the purchaser at closing day. There are two parties to a deed: the grantor and the grantee.

Deed of Trust
Like a mortgage, a security instrument whereby real property is given as security for a debt. However, in a deed of trust there are three parties to the instrument: the borrower (or trustor), the trustee, and the lender (or beneficiary). In such a transaction, the borrower transfers the legal title for the property to the trustee who holds the property in trust as security for the payment of the debt to the lender. When the borrower satisfies the debt, the deed of trust becomes reconveyed to the borrower and is extinguished. However, if the borrower defaults in the payment of the debt, the trustee may sell the property at a public sale, under the terms of the deed of trust and within statutory requirements. In most jurisdictions where the deed of trust is in force, the borrower is subject to having his property sold without benefit of legal proceedings. A few States have begun in recent years to treat the deed of trust like a mortgage.

Documentary Stamps
A State tax, in the forms of stamps, required on deeds and mortgages when real estate title passes from one owner to another. The amount of stamps required varies with each State and in some States stamps are no longer used. In some States these are also known as Transfer Taxes.

Encroachment
An obstruction, building, or part of a building or other improvement that intrudes beyond a legal boundary onto neighboring land. A common example would be fences or walls that are built on the other side of a property line and thereby "encroach" on the neighbors property.

Encumbrance
A legal right or interest in land that affects or limits complete ownership and control over property. It can take numerous forms, such as zoning ordinances, easement rights, claims, mortgages, liens, charges, a pending legal action, unpaid taxes or restrictive convenants. An encumbrance does not necessarily prevent transfer of the property to another, but may diminish its value. A title search will usually reveal the existence of such encumbrances, and it is up to the buyer to determine whether he wants to purchase the property with the encumbrance.

Escrow
The deposit of the purchase agreement, funds, deeds or other instruments with a neutral third party to carry out the provisions of the agreement. An escrow company or attorney usually acts as the escrow agent and completes the transaction as instructed by the parties.

General Warranty Deed
A deed which conveys not only all the grantor's interests in and title to the property to the grantee, but also warrants that if the title is defective or has a "cloud" on it (such as mortgage claims, tax liens, title claims, judgments, or mechanic's liens against it) the grantee may hold the grantor liable.

Lien
A type of encumbrance which makes a specific property the security for the payment of a debt or other obligation. Common forms of liens are mortgages and deeds of trust, but liens can also be placed against property for taxes or judgments.

Marketable Title
A title that is free of objectionable liens, easements, clouds, or other title defects. A title which enables an owner to sell his property freely to others and which others will reasonably accept without objection.

Quitclaim Deed
A deed which relinquishes any interest in a particular property which the grantor may have. A quitclaim deed is often executed to clear the title when the nature of a grantor's interest in a property is questionable. By accepting such a deed the buyer assumes all the risks because the deed makes no warranties as to the title held by the grantor. Quitclaim deeds may transfer full ownership in a property or no interest at all.

Special Warranty Deed
A deed in which the grantor warrants or guarantees the title only against defects arising during grantor's ownership of the property and not against title defects existing before the time of the grantor's ownership.

Title
The lawful ownership of particular property.
In common real estate usage, title may refer to the actual documents or deeds by which a right of ownership is established.

Title Insurance
An insurance policy that protects lenders or property owners up to a specified amount from certain types of loss of interest in property due to legal defects in title.

Title Search (or Title Records Examination)
A check of the title records to establish that the buyer is purchasing a property from the legal owner and to determine all of the liens, assessments, claims, convenants, or other encumbrances or restrictions that would affect the title to the property. The results of the search are expressed in a Title Report or Abstract. The primary purpose of the search is to establish whether the property has marketable title.