Title Tip: Deciphering Title Business Terms

By Lydia Blair
Special Contributor

Buying or selling a home can be complicated. And the lingo and jargon of escrow officers, lenders, and real estate agents can be baffling to those
not in the industry. 

To help decipher, here are definitions of some frequently used title business terms. This isn’t Webster’s Dictionary — it’s Lydia’s dictionary of commonly used words in the title industry. Many of these descriptions come from the Texas Land Title Association (TLTA). 

Abstract of Title: A collection of all the recorded documents relating to a parcel of land. 

Abstract of Judgment: A lien created by a court judgment in the property records. It attaches to non-exempt real estate.

Binder: An enforceable agreement that upon satisfaction of the requirements which are stated in the binder the insurer will issue the title insurance policy subject only to the exceptions stated in the binder.

Closing: Process by which all the parties to a real estate transaction conclude the details of a sale or mortgage. The process includes the signing and transfer of documents and distribution of funds. 

Closing Costs: Expenses involved in closing a real estate transaction over and above the price of the land.

Closing Disclosure or Statement: A statement of final loan terms and closings costs and is required for use in certain types of loan transactions.

Cloud on Title: An outstanding claim or encumbrance which adversely affects the marketability of title.

Commitment: A form issued by a title insurance company committing to issue the form of policy designated in the commitment upon compliance with and satisfaction of certain requirements.

Deed: A written instrument duly executed and delivered by which the title to land is transferred from one person to another.

Deed of Trust: A conveyance of a land title by a maker of a note to a third party, a trustee, as collateral security for the payment of the note with the condition that the trustee shall reconvey the title to the debtor upon payment of the note, and with power in the trustee to sell the land and pay the note in the event of a default on the part of the debtor.

Earnest Money: Advance payment of part of the purchase price made by a purchaser as evidence of good faith.

Encumbrance: Any right or interest in land held by persons other than owner, which right or interest lessens the value of the title. Examples are judgment liens, easements, mortgages, restrictions.

Endorsement: A form issued by the insurer at the request of the insured, which changes terms or items in a title policy or commitment.

Escrow: A procedure whereby a disinterested third party handles legal documents and funds on behalf of a seller and buyer and all others involved in the transaction, and delivers them upon performance by the parties.

Escrow Officer: An attorney or certain licensed employees whose responsibilities include countersigning title insurance forms, supervising
the preparation and delivery of title insurance forms, signing escrow checks, or closing the transaction.

Fee Simple Estate: The greatest interest in a parcel of land that is possible to own. 

General Warranty Deed: A deed containing a covenant whereby the seller agrees to protect the buyer against being dispossessed because of any adverse claim against the land.

Good Faith Estimate: An estimate of closing costs the lender is required to give to the buyer within at least three days of applying for a mortgage loan.

HUD-1/Settlement Statement: A closing statement required by the U.S. Department of Housing and Urban Development (HUD) where federally related mortgages are being made on residential properties. 

Owner’s Policy: A title insurance policy insuring the owner against loss due to any covered defect of title not excepted to or excluded from the

Power of Attorney: An instrument in writing by which one person, the principal, authorizes another to act in the specific actions described in
the instrument.

Premium: The amount payable for an insurance policy. Texas premium rates are promulgated by the state and include a charge for title examination, closing the transaction and issuing the policy.

Prorate: To allocate between seller and buyer their proportionate share of an obligation paid or due. For example, a proration of real property taxes.

Recording: The noting in the designated public office of the details of a properly executed legal document such as a deed or mortgage, thereby making it a part of the public record.

Settlement: See “closing.”

Special Warranty Deed: A deed whereby the seller agrees to protect the buyer against being dispossessed because of any adverse claims to the land by the seller, or anyone claiming through the seller.

TDI: Texas Department of Insurance – regulates the business of insurance in Texas for consumer protection, licenses title agents and companies. 

Title: The evidence of right which a person has to the ownership and possession of land.

Title Defect: Any legal right held by others to claim property or to make demands upon the owner.

Title Insurance: Insurance against loss or damage resulting from defects or failure of title to a particular parcel of real property. 

Title Insurance Company: A company organized to engage in the business of title insurance that holds a certificate of authority to insure a title to real property in this state.

Title Plant: The total facilities (records, equipment, fixtures, and personnel) required to function as a title insurance operation. Technically,
the organization of official records affecting real property into a system which allows quick and efficient recovery of title information.

Title Search: An examination of public records, laws, and court decisions to disclose the current facts regarding ownership of real estate.

Underwriter: An insurance company which issues insurance policies either to the public or to another insurer.

Vest: To become owned by.

Warranty Deed: A deed in which the grantor warrants or guarantees that indefeasible title is being conveyed.

Lydia Blair (formerly Lydia Player) was a successful Realtor for 10 years before jumping to the title side of the business in 2015. Prior to selling real estate, she bought, remodeled and sold homes (before house flipping was an expression). She’s been through the real estate closing process countless times as either a buyer, a seller, a Realtor, and an Escrow Officer. As an Escrow Officer for Carlisle Title, she likes solving problems and cutting through red tape. The most fun part of her job is handing people keys or a check.