Terms & definitions

The terms and phrases we use as closing agents are so familiar to us, but we realize that they can confuse others less familiar, especially first-time home buyers. We hope these definitions help.

Agreement of sale: A sales contract signed by buyer and seller stating the terms and conditions under which a property will be sold.

Closing, or settlement: The final transaction between a buyer and seller of real property. At the closing, all agreements between buyer and seller are finalized, documents are signed and exchanged, money passes to the seller and title to the property passes to the buyer.

Home Sale Terms:


Closing agent or settlement agent

Closing agent or settlement agent: A settlement agent (also called a “closing agent”) handles the real estate transaction when you buy, sell, or refinance a property.   He or she oversees title searches, legal documents, fee payments, and other details of transferring property, acting on your behalf to ensure that the conditions of the contract have been met and all lienable payments have been satisfied.

Closing Costs
Closing costs: When you purchase real estate, these are the expenses you pay, over and above the cost of the property, to finalize the transaction. In some cases, the seller may offer to pay certain closing costs to attract buyers or close the sale more quickly. Closing costs vary depending on the area where the property is located.

Technically, closing costs are only those fees and expenses necessary to close a sale or a mortgage, such as document preparation, the fee for the actual closing itself and perhaps overnight delivery charges. However, the phrase has come to mean all expenses associated with a closing with the exception of the actual purchase price of the property and any lender fees. Potential expenses might include

  • Preparation of closing documents
  • Expenses associated with clearing title defects, such as preparation of affidavits or quit-claim deeds
  • Title insurance
  • Lender-required policy endorsements
  • Lender closing protection Letter
  • Any points (up-front interest charges) you have agreed to pay the lender
  • Deed recording fees
  • Mortgage recording fees
  • Transfer taxes
  • Transfer fees imposed by condos, homeowners associations or co-op boards
  • Listing agent’s commission
  • Cost of wood infestation report and clearance letter
  • Cost of survey
  • Cost of appraisal
  • Cost of required inspections
  • Escrow fees
  • Document delivery charges
  • Attorneys’ or settlement agent’s fees
  • Pro-rated real estate taxes, insurance and/or dues

The lender must give you a good faith estimate, included in the loan estimate (LE), of your closing costs before the closing date so you’ll know approximately how much money you need to have available at closing—usually 5% to 10% of your mortgage. Many closing costs are tax deductible, so it’s a good idea to consult with your tax adviser.

Closing Disclosure

Closing disclosure: This five-page document replaces the old HUD-1 form for residential transactions that involve borrowing money from a lender. The closing disclosure details all of the costs associated with your mortgage transaction. By law, this form must be received by you three days business days before your settlement and by design is in the same format as the loan estimate you were given after applying for your mortgage. Review the closing disclosure carefully upon receipt and compare it to your loan estimate to make sure all numbers meet your expectations. Contact your lender during the three-day period before closing if you have questions or find an error on the statement so it can be resolved before settlement.

Deed

Deed: A written instrument of conveyance that has been signed and delivered, by which one individual, the grantor, conveys title to real property to another individual, the grantee; also, a conveyance of land, tenements or inherited property from one individual to another.

Deed Accomodation

Deed accommodation: A service in which a new deed is drawn and recorded but no title search is conducted and no title insurance is issued. Example: A single owner of a home chooses after marriage to add his or her spouse to the deed.

Endorsement

Endorsement: A title endorsement is an addition or limitation of coverage that is attached to a title insurance policy to tailor the policy to fit the needs of the insured—owner or lender—for a specific transaction. Most mortgage companies require endorsements on a lender’s policy, but endorsements on an owner’s policy are less common. American Land Title Association (ALTA) regulates and sets guidelines for the different types of endorsements. Other associations set the one-time fees for endorsements for specific states, such as Title Insurance Rating Bureau of Pennsylvania (TIRBOP) and Title Insurance Rate Service Association (TIRSA) in New York. In PA, the three most common endorsements to a residential policy—often referred to as PA100, PA300 and PA900—currently add $300 to the buyer’s closing costs

Endorsement

Endorsement: A title endorsement is an addition or limitation of coverage that is attached to a title insurance policy to tailor the policy to fit the needs of the insured—owner or lender—for a specific transaction. Most mortgage companies require endorsements on a lender’s policy, but endorsements on an owner’s policy are less common. American Land Title Association (ALTA) regulates and sets guidelines for the different types of endorsements. Other associations set the one-time fees for endorsements for specific states, such as Title Insurance Rating Bureau of Pennsylvania (TIRBOP) and Title Insurance Rate Service Association (TIRSA) in New York. In PA, the three most common endorsements to a residential policy—often referred to as PA100, PA300 and PA900—currently add $300 to the buyer’s closing costs

Escrow

Escrow: Something of value, such as a deed, stock, money or written instrument, that is put into the custody of a third person or party, where it must be retained until a contingency or condition occurs. In real estate sales, the “earnest money”—the deposit sent by the hopeful buyer with his or her offer to purchase—is held in escrow.

Mortgage

MortgageYour signature on this document means you are putting up your real estate as security for the debt you now owe. (In a title search, this would appear as a lien on the property.)

Promissory Note

Promissory note: A written promise to pay back the amount you’re borrowing; it lists the loan’s terms, such as length of time to repay the loan, interest rate and any penalties and interest if payments are missed.

Title

Title: The rights of ownership recognized and protected by the law. A combination of all the elements that constitute the highest legal right to own, possess, use, control, enjoy and dispose of real estate or an inheritable right or interest therein.

Warranty Deed or Title

Warranty deed or title: This piece of paper transfers the title from the seller to the buyer. It also contains the legal description of the property and one or more title covenant

Wire Transfer

Wire Transfer: A transfer of funds done electronically across a network of banks or transfer service agencies around the world to safely and efficiently move money between individuals or entities to complete a business transaction. Senders pay for the transaction at the remitting bank and provide the recipient’s name, bank account number and the amount transferred. International wire payments are monitored by the Office of Foreign Assets Control to ensure the money isn’t being wired to terrorist groups or for money laundering purposes.

Wire Fraud

Wire Fraud: is a federal and state crime in which a person concocts a scheme to defraud or obtain money based on false representation or promises and using electronic communications or communications facility. It can be defined broadly to include any writings, signs, signals, pictures or sounds transmitted by wire, radio or television in intrastate, interstate or foreign commerce under false representation.

However, in the real estate industry it refers more narrowly to schemes concocted to convince victims through legitimate-looking emails to wire funds for a property purchase to an individual or entity falsely presenting itself as the legitimate recipient. It’s difficult to prosecute because the funds leave the country to a foreign account that can’t be identified. It’s devastating to the victims because the funds often cannot be retrieved.

Tohickon will never email instructions for a wire transfer. If you receive transfer instructions purporting to be from Tohickon, STOP and call us immediately.

Types of Ownership:


Sole Owner

Sole owner: An individual, married or unmarried, buying a property alone has the easiest task. Title is taken as a sole owner in the individual’s name.

Tenants by The Entireties

Tenants by the entireties: Ownership that can exist only between married people. This has an implied right of survivorship meaning that when one spouse dies, the complete ownership vests in the surviving spouse.

Tenants-in-common

Tenants-in-common: When two or more individuals buy a property together as tenants-in-common, they are partners who may own unequal shares and who can sell their shares of ownership independently. There is no right of survivorship, so upon the death of a partner his or her interest passes to the heirs.

Joint tenancy with the right of survivorship

Joint tenancy with the right of survivorship: When choosing to take title with joint tenancy, each owner has an undivided interest in the property. When one joint tenant dies, full ownership goes to the survivor(s) in equal portions.

Contact Us

Tohickon Settlement Services
6464 Lower York Road
Suite B
New Hope PA 18938

And now in Center City

One Liberty Place
1650 Market Street, Suite 3600
Philadelphia, PA 19103

And in New Jersey

372 Route 18
East Brunswick, NJ  08816

How can we help?