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| You
will find this Glossary useful in understanding words or terms used in Real
Estate transactions. However, there are some factors that may affect the
following definitions: |
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1.
Terms are defined as commonly understood in the mortgage and real estate
industry. The same terms may have different meanings in other context.
2. The definitions are intentionally short and non-technical. They do
not include all possible meanings that a term may acquire in legal
use.
3. State laws may modify or change the meanings of certain terms defined. |
Deed
A formal written instrument by which title to real property is transferred
from one owner to another. 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. (See also deed of trust, general warranty deed, quitclaim
deed, and special warranty deed.) |
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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, 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 or beneficiary. If the borrower
pays the debt as agreed, the deed of trust becomes void. If, however,
he 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. 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.
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Default
Failure to make mortgage payments as agreed to in a commitment based on
the terms and at the designated time set forth in the mortgage or deed
of trust. It is the mortgagor's responsibility to remember the due date
and send the payment prior to the due date, not after. Generally, thirty
days after the due date if payment is not received, the mortgage is in
default. In the event of default, the mortgage may give the lender the
right to accelerate payments, take possession and receive rents, and start
foreclosure. Defaults may also come about by the failure to observe other
conditions in the mortgage or deed of trust.
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Depreciation
Decline in value of a house due to wear and tear, adverse changes in the
neighborhood, or any other reason.
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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.
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Downpayment
The amount of money to be paid by the purchaser to the seller upon
the signing of the agreement of sale. The agreement of sale will refer
to the downpayment amount and will acknowledge receipt of the downpayment.
Downpayment is the difference between the sales price and maximum mortgage
amount. The downpayment may not be refundable if the purchaser fails to
buy the property without good cause. If the purchaser wants the downpayment
to be refundable, he should insert a clause in the agreement of sale specifying
the conditions under which the deposit will be refunded, if the agreement
does not already contain such clause. If the seller cannot deliver good
title, the agreement of sale usually requires the seller to return the
downpayment and to pay interest and expenses incurred by the purchaser.
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