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Escrow Terms – Real Estate Must Knows

Happy faceNow you’re happy that your finally in escrow. Smooth sailing ahead but suddenly you find out that there is a lot of paperwork to sign and the escrow officer and title company are using words you’ve never heard of. When you look at the paperwork to sign, there’s a lot of words you’re not sure what they mean. You are not alone.

I want to make it easy on you and give you the main terms that are used in a real estate transaction. I put them in a list below. If you have any other terms that are not on the list, just let me know and I’ll define and explain it to you.

Amendment – A change—either to alter, add to, or correct—part of an agreement without changing the principal idea or essence.

Appraisal – An estimate of value of property resulting from analysis of facts about the property; an opinion of value.

Assumption – Taking over another person’s financial obligation; taking title to a parcel of real property with the Buyer assuming liability for paying an existing note secured by a deed of trust against the real property.

Beneficiary – The recipient of benefits, often from a deed of trust; usually the lender.

Close of Escrow – Generally the date the documents are recorded and title passes from Seller to Buyer. On this date, the Buyer becomes the legal owner, and title insurance becomes effective.

Comparable Sales – Sales that have similar characteristics as the subject real property, used for analysis in the appraisal. Commonly called “comps.”

Deed of Trust – An instrument used in many states in place of a mortgage.

Deed Restrictions – Limitations in the deed to a parcel of real property that dictate certain uses that may or may not be made of the real property.

Earnest Money Deposit – Down payment made by a purchaser of real property as evidence of good faith; a deposit or partial payment.

Easement – A right, privilege or interest limited to a specific purpose that one party has in the land of another.

Hazard Insurance – Real estate insurance protecting against fire, some natural causes, vandalism, etc., depending upon the policy. Buyer often adds liability insurance and extended coverage for personal property.

Impounds – A trust type of account established by lenders for the accumulation of borrower’s funds to meet periodic payments of taxes, mortgage insurance premiums and/or future insurance policy premiums, required to protect their security.

Legal Description – A description of land recognized by law, based on government surveys, spelling out the exact boundaries of the entire parcel of land. It should so thoroughly identify a parcel of land that it cannot be confused with any other.

Lien – A form of encumbrance that usually makes a specific parcel of real property the security for the payment of a debt or discharge of an obligation. For example, judgments, taxes, mortgages, deeds of trust.

Mortgage – The instrument by which real property is pledged as security for repayment of a loan.

PITI – A payment that combines Principal, Interest, Taxes, and Insurance.

Power of Attorney – A written instrument whereby a principal gives authority to an agent. The agent acting under such a grant is sometimes called an “Attorney-in-Fact.”

Purchase Agreement – The purchase contract between the Buyer and Seller. It is usually completed by the real estate agent and signed by the Buyer and Seller.

Quitclaim Deed – A deed operating as a release, intending to pass any title, interest, or claim which the grantor may have in the property, but not containing any warranty of a valid interest or title by the grantor.

Recording – Filing documents affecting real property with the County Recorder as a matter of public record.

Wishing you a smooth real estate sale!!

By Diego Loya

Diego Loya is a Realtor - Broker at Home Living Real Estate Brokerage, a Orange County full services real estate company. Over the past 12 years, Diego has helped homeowners sell and buy their homes. He's loves educating and empowering real estate consumers. You can find him on Google, Facebook and Twitter.

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