Legal Terms

DECREE OF FORECLOSURE — Decree by a court ordering the sale of mortgaged property and the payment of the debt owing to the lender out of the proceeds.

DEED, TRUST — Just as with a mortgage this is a legal document by which a borrower pledges certain real property or collateral as guarantee for the repayment of a loan. However, it differs from the mortgage in a number of important respects. For example, instead of there being two parties to the transaction there are three. There is the borrower who signs the trust deed and who is called the trustor. There is the third, neutral party, to whom trustor deeds the property as security for the payment of the debt, who is called the trustee. And, finally, there is the lender who is called the beneficiary, the one who benefits from the pledge agreement in that in the event of a default the trustee can sell the property and transfer the money obtained at the sale to lender as payment of the debt.

DEED RESTRICTIONS — Limitations in the deed to a property that dictate certain uses that may or may not be made of the property.

DUE ON SALE CLAUSE — An acceleration clause granting the lender the right to demand full payment of the mortgage upon a sale of the property.

EARNEST MONEY — Down payment made by a purchaser of real estate as evidence of good faith. A deposit or partial payment.

EASEMENT — A right, privilege or interest limited to a specific purpose which one party has in the land of another.

EMINENT DOMAIN — The right of the government to acquire property for necessary public or quasi-public use by condition; the owner must be fairly compensated and the right of the private citizen to get paid is spelled out in the 5th Amendment to the United States Constitution.

ENCUMBRANCE — Anything which affects or limits the fee simple title to or value of property, e.g., mortgages or easements.

ESCALATION — The right reserved by the lender to increase the amount of the payments and/or interest upon the happening of a certain event.

ESCROW — The deposit of instruments and/or funds with instructions with a third neutral party to carry out the provisions of an agreement or contract.

ESCROW AGENT — The neutral third party holding funds or something of value in trust for another or others.

ESTATE — As applied to real estate, the term signifies the quantity of interest, share, right, equity, of which riches or fortune may consist in real property. The degree, quantity, nature and extent of interest which a person has in real property.

EVICTION — Dispossession by process of law. The act of depriving a person of the possession of lands in pursuance of the judgment of a court.

EXCEPTIONS — Matters affecting title to a particular parcel of real property which are included from coverage of a title insurance policy.

FAIR MARKET VALUE — This is the amount of money that would be paid for a property offered on the open market for a reasonable period of time with both buyer and seller knowing all the uses to which the property could be put and with neither party being under pressure to buy or sell.

FEE SIMPLE ESTATE — The greatest interest that one can have in real property. An estate that is unqualified, of indefinite duration, freely transferable and inheritable.

FIDUCIARY — A person in a position of trust and confidence, as between principal and broker; broker as fiduciary owes certain loyalty which cannot be breached under the rules of agency.

FIRST TRUST DEED — A legal document pledging collateral for a loan (See “trust deed”) that has first priority over all other claims against the property except taxes and bonded indebtedness. That trust deed superior to any other.

FORECLOSURE — Procedure whereby property pledged as security for a debt is sold to pay the debt in event of default in payments or terms.

FUNCTIONAL OBSOLESCENCE — A loss of value due to adverse factors from within the structure which affect the utility of the structure, value and marketability.

GIFT DEED — A deed for which there is no consideration.

GOODWILL — An intangible but salable asset of a business derived from the expectation of continued public patronage.

GRANT DEED — A limited warranty deed using the word “grant” or like words that assures a grantee that the grantor has not already conveyed the land to another and that the estate is free from encumbrances placed by the grantor.

GRANTEE — A person towhom a grant ismade.

GRANTOR — A person who transfers his or her interest in property to another by grant.