Real Estate Terminology

This Article is intended as a reference tool - a quick reference dictionary without legalese. It is not intended to be read as an article. It contains simple explanations of many words and phrases often found in documents and other articles about real estate. We hope you will find it a useful reference when reading deeds, agreements of sale and other documents. For definitions and explanations of legal terms, simply scroll down the alphabetical list. Also see the Estate Planning and Estate Administration Terminology article at this Website.  See other Real Estate Articles at this Website.

[See Warning below.]

Closing - the formal meeting, usually conducted by a title insurance company or agent, where the purchase price is paid and the signed deed is delivered to the buyer to be recorded. Legal title is transferred at closing, and the transaction is "closed". Also sometimes referred to as the "settlement".

Condominium - a form of ownership of real estate in which there are "units" owned separately by individuals and "common elements" owned jointly by some or all of the unit owners.

Cooperative - sometimes known as a "co-op." A form of ownership of real estate in which an entity owns the entire real estate (often a building) and a number of individuals who use the real estate have an ownership interest in that entity. For example, a cooperative apartment building might be owned by the co-op - a corporation and the shares in the corporation would be owned by the people who lived in the apartments. The individuals have an ownership interest in the co-op and the co-op owns the building or real estate.

Covenant - a promise, agreement or assurance of some sort. Also see "Restrictive Covenant" below.

Deed - the document that transfers the legal title of a real estate parcel from the seller (the grantor) to the buyer (the grantee). Normally, the deed is recorded in the Office of the Recorder of Deeds in the courthouse of the county where the property is located.

Easement - an interest in real estate (that is owned by another person) that allows the person having that easement to use the real estate or some part of the real estate for some limited purpose. For example, a person may have the right to use a path that crosses another person's property.

Encumbrance - a right or interest in a parcel of real estate that may lower the value of that parcel to the owner but that does not prevent the owner from transferring his or her title to the parcel to another person.

Fee Simple - the most common form of ownership of real estate where the owner has absolute and full ownership of the real estate.

Grantee - the person to whom title to a parcel of real estate is transferred. The grantee is generally the buyer of the real estate.

Grantor - the person from whom title to a parcel of real estate is transferred. The grantor is generally the seller of the real estate.

HUD-1 - another term for "settlement sheet."

Interest - another term for "right" in the sense of an ownership right.

Joint Tenancy - a form of ownership of property by two or more persons who are Joint Tenants with Right of Survivorship regarding that parcel of property.

Joint Tenant with Right of Survivorship - one of a number (two or more) of owners of a parcel of real estate where, if one of the joint tenants dies, ownership automatically passes to the surviving joint tenant or tenants. Title passes to the surviving owners by operation of law without regard to the provisions of the deceased owner's will.

JTWROS - an abbreviation for "Joint Tenants with Right of Survivorship."

Lien - an encumbrance upon property that arises out of a debt or other obligation. For example, a mortgage or a judgment or an unpaid municipal claim may create a lien against property.

Mortgage - a lien against real estate that secures a loan. Sometimes the loan itself is referred to as a "mortgage" and sometimes the document creating the lien is also referred to as a "mortgage." When the loan is repaid, the mortgage is "satisfied" and is no longer a lien against the real estate.

Mortgage Commitment - the agreement by a lender (bank) to lend money to a buyer to enable the buyer to purchase real estate, subject to the conditions contained in the commitment. This is often in the form of a letter addressed to the buyer (borrower) and usually is valid only for a limited time.

Mortgage Satisfaction Piece - the document recorded that shows that the mortgage loan has been paid in full and that acts to remove the mortgage as a lien against the real estate.

Mortgagee - generally the lender on a mortgage loan. Technically, the person in whose favor a mortgage is given.

Mortgagor - generally the borrower on a mortgage loan. Technically, the person who grants the mortgage.

Purchase Money Mortgage - this term has at least two meanings. In a generic sense, it is any mortgage given to secure a loan used to purchase real estate. In a more technical sense in Pennsylvania, it is a mortgage that meets certain requirements and thus is given priority over certain other liens against the property.

Quitclaim Deed - a deed that transfers only whatever title and rights the grantor had to give, without any promise that the grantor had anything. Contrast this with "Warranty Deed" below.

Real Estate - generally refers to land and buildings

Real Property - generally means "Real Estate."

Realty Transfer Tax - a tax imposed in Pennsylvania on certain transfers of real estate. Most transfers are subject to this tax unless a specific exemption applies. For example, transfers between certain family members or transfers in the distribution of an estate may be exempt from this tax. The tax is generally two percent of the sale price or the value of the real estate being transferred - one percent imposed by the Commonwealth of Pennsylvania, and one percent imposed by the municipality. Some municipalities impose a higher rate, for example Philadelphia imposes a three percent tax in addition to Pennsylvania's one percent.

Recorder of Deeds - the county official charged with the recording of documents in the public record that relate in some way to real estate. This term sometimes refers to the office or department in the courthouse where the documents are recorded and maintained. In Philadelphia, it is called the Department of Records rather than the Recorder of Deeds.

Restrictive Covenant - a restriction, generally found in a deed that prevents real estate from being used in a particular way. For example, a deed may contain a restriction on the future use of the property for a business use. This may prevent any future owner of the property from ever using it for a business use.

Settlement - another term for "closing."

Settlement Sheet - the document prepared at closing that sets forth the purchase price, all the deductions, additions and adjustments to the price and all the items charged to the buyer and the seller at the closing.

Tenancy by entireties - the typical form of ownership of property where the owners are wife and husband. Only married individuals can hold this form of ownership and only with a person's own spouse. Upon the death of either spouse, the title automatically vests in the surviving spouse. In Pennsylvania, this form of ownership also provides a degree of protection from claims of creditors. As long as the owners are both alive and married to each other, the creditor of only one spouse cannot attach that spouse's interest in property owned as tenants by entireties.

Tenancy-in-common - a form of shared ownership of property by two or more persons where upon the death of an owner, the surviving owner or owners have no rights in the deceased owner's interests in the property. The deceased owner's interest passes as part of his or her estate.

Title Commitment - the agreement by a title insurance company to insure the title to a particular parcel of real estate, issued after the title insurance company has conducted a title search. It is issued subject to the exceptions set forth in the title commitment. This is sometimes called a "Title Report."

Title Insurance - insurance issued to owners of real estate that insures that they have "good" title to the real estate, subject to the specific exceptions set forth in the title insurance policy. Title insurance may also be issued to a lender, insuring the lender that the lien of its recorded mortgage is secure. In a typical real estate transaction, both an owner's policy and a lender's policy are issued.

Title Report - generally another name for a "Title Commitment."

Title Search - a search of the public records relating to a particular parcel of real estate to determine the identity of the owners of the parcel and the existence of any title defects, liens, encumbrances and similar items. A title search is normally conducted as part of the process of the sale of a parcel of real estate so that the buyer knows that he or she will receive "good" title to the real estate and so that the lender knows that its mortgage lien will be secure.

Warranty Deed - a deed in which the grantor provides some warranty or assurance of the validity of his or her title to the property being transferred.

 

Copyright 2011 - 2014   Marc H. Jaffe

Warning - this page is not intended as legal advice. It is only for informational purposes. It is not a substitute for legal advice from an attorney based upon your own particular circumstances. The definitions are based on Pennsylvania law and not upon the laws of any other jurisdiction. The laws of other states may involve different definitions of the same or similar terms. Many of the items discussed above have additional requirements, which were not discussed here for purposes of simplicity. You should consult with your attorney before taking any action or relying on any information contained here.