Understanding Your Closing Statement

Understanding Your Closing Statement was provided by Allan Erdy Escrow 15374 Ventura Boulevard, Sherman Oaks, CA 91403-3001 Telephone: (818) 501-5555 Fax: (818) 501-7438

ACCELERATION CLAUSE: This clause in a note and trust deed permits the payee or beneficiary to declare the entire unpaid balance immediately due and payable when a given condition occurs. Such a condition can be the sale of the property. This clause is sometimes called an "alienation clause."

ACCOMMODATION RECORDING: The recordation of an instrument without assumption of responsibility for correctness or validity.

ALL-INCLUSIVE TRUST DEED (AITD/WRAP AROUND): An all-inclusive procedure is used when a Seller (or lender) will carry back a junior note without disturbing the trust deed loan(s) of record. The document "wraps around" the existing loan(s). The sum of the all-inclusive trust deed includes the total amount of the balances on the underlying loan(s). The most common purpose for using an AITD procedure is to avoid giving notice to the underlying lender(s) and not disturbing their interest rates.

AMENDMENTS: After the initial escrow instructions have been executed and the parties wish to change the instructions, an amendment is prepared and signed. Amendments are used in conjunction with the original escrow instructions.

AMORTIZATION: Provision for the payment of a debt as to both principal and interest in equal installments over a period of time.

APPRAISAL: An opinion as to the fair market value of land and the improvements on it.

ASSESSED VALUE: The value placed on land and improvements as a basis for taxation.

ASSESSMENTS: Special and local levies upon property in the immediate vicinity of an improvement. Assessments can be imposed by such entities as flood control districts, street lighting districts and air pollution control districts which serve an area.

ASSIGNEE: One to whom a transfer of interest is made. For example, the assignee of a Deed of Trust or contract.

ASSIGNMENT: The transfer, in writing, of a person's interest to another person or entity in an asset, such as an assignment of stock, a deed of trust and note or a lease.

ASSIGNOR: One who makes an assignment. For example, the assignor of a Deed of Trust or contract.

ASSUMPTION: An agreement by one party to pay an obligation previously owed by another. For example, the assumption of an existing trust deed loan by a new owner may occur when property is sold.

ASSUMPTION FEE: The charge made by a lender when a buyer assumes the seller's existing loan.

ATTORNEY-IN-FACT: One who holds a power of attorney from another allowing him to act on behalf of the grantor of the power.

BENEFICIARY: In a trust deed, the lender is designated as the beneficiary. The beneficiary obtains the benefit of the security.

BENEFICIARY'S STATEMENT: A report from a lender, in writing, setting forth the terms and conditions of a loan already of record, such as amounts still owed, interest rate, monthly payments, etc.

BILL OF SALE: A document that attests to the transfer of ownership of personal property.

BORROWER: One who obtains a loan and owes money to a lender.

BUYER: One who purchases or acquires property.

BY-LAW: A rule adopted for the internal government of a corporation.

CITY REPORTS: (Residential Property Report) The requirement of a special report to be issued in connection with the sale of property, usually processed through the Building and Safety Department.

CLOSING STATEMENT: Settlement of the escrow. (1) The seller's statement gives an accounting of the sales price paid less the charges normally assessed to the Seller and payoffs made on behalf of the seller. (2) The buyer's statement shows the deposits made, the loan(s) obtained or assumed, and any credits by instructions less the sales price, loan costs, insurance, pro-rata items and charges usually paid for by the buyer.

COLLECTION SERVICE: A service performed by a neutral third party in receiving and disbursing loan payments as instructed by the parties concerned.

COMMUNITY PROPERTY: Property acquired after marriage by either a husband and or wife, other than by gift, or as an heir, legatee or devisee.

CONDEMNATION: The exercise of the power of eminent domain by which property is taken for a public use upon payment of just compensation. Condemnation can also refer to the condemning of unsafe structures.

CONDOMINIUM: A multifamily or other structure in which units are individually owned and in which owners of individual units also own an undivided interest in common areas.

CONTINGENT: Dependent upon conditions or events specified but not yet accomplished. Property may be sold contingent upon the seller or buyer meeting pre-determined conditions.

CONTRACT OF SALE: An agreement entered into for the sale and purchase of property where title remains in the seller's name until all conditions of the contract have been fulfilled.

CONVEYANCE: A written document that transfers title to an asset from one person to another. A deed and an assignment are both conveyances, as is a bill of sale.

COUNTY ASSESSOR: One who sets value of property for taxation purposes.

COVENANTS, CONDITIONS AND RESTRICTIONS (CC&R'S): Those matters that inhibit the use and/or sale of a property which are usually placed against properties by an inclusion on a prior deed. Not all properties have CC&R'S, however, all condominium projects will have such restrictions.

CREDIT REPORT: Report which shows your credit history. The lender uses the information in a credit report to help decide whether or not to approve your loan and how much money to lend you.

DEED: A written document which conveys ownership of real property from one person to another.

DEED OF TRUST: A document executed by the owner of real property by which the real property is given as security for the payment of a note or other performance of an obligation.

DEFAULT: Failure to perform a duty or to pay an obligation.

DEFICIENCY JUDGMENT: A personal judgment in a judicial foreclosure action for the remaining amount due after a sale of the security.

DEMAND: A statement from a lender showing the amount due on a loan. If a seller's loan is to be paid in full through escrow, the escrow officer must obtain a written demand for payment and the documents necessary to release the loan.

DISCOUNT: Also often called ‘discount points,' a loan discount is a one-time charge imposed by the lender or broker to lower the rate at which the lender or broker would otherwise offer the loan to you. Each ‘point' is equal to one percent of the loan amount.

DOCUMENTARY TRANSFER TAX: A tax on recorded transfers of title to real property.

EARNEST MONEY: An amount of money given as part of the purchase price of property to bind the agreement between the buyer and seller (initial deposit).

EASEMENT: A right or interest in the property of another, such as a right to cross over another person's property to reach yours.

EMINENT DOMAIN: The right or power of a governmental body to take property for a public purpose upon payment of just compensation.

ENCUMBRANCE: A lien affecting the land and improvements, such as a deed of trust.

EQUITY: Market value of property, less any encumbrance or other liens on it.

ESCROW: A transaction in which an impartial third party acts as agent for both seller and buyer, or for both borrower and lender, in carrying out instructions, delivering papers and documents and disbursing funds.

EXCEPTION: An interest in real property which is excluded from the conveyance and remains with the grantor or which had been excluded in a prior conveyance, such as oil and mineral rights.

FIRE INSURANCE: Insurance against loss or damage by fire to specific property.

FORECLOSURE: A proceeding to enforce a lien by the sale of the real property in order to satisfy the debt.

GRANTEE: The buyer on a deed.

GRANTOR: The seller on a deed.

HOME PROTECTION POLICY: Basically provides limited protection against failure of heating, plumbing, electrical and other systems. Available in a variety of coverage's and costs.

HOMESTEAD: The dwelling in which an owner or head of a family resides which can be protected to a limited extent from forced sale by a recorded "Declaration of Homestead".

IMPOUND ACCOUNT: An account held in trust by the lender in which the borrower is required to place monthly deposits for property taxes, insurance and/or other purposes.

INDEMNITY AGREEMENT: A warranty backed up with a written guarantee of payment on a matter in question.

INVENTORY LIST: A detailed signed statement listing all personal property included in the purchase price.

JOINT TENANCY: A form of co-ownership by two or more persons in equal shares characterized by the incident of survivorship.

LEASE: A writing constituting a conveyance of real property for a period of time along with a contract for its possession during that term.

LEGAL DESCRIPTION: Description of real property as used in legal documents in contrast to a street address by which the property is commonly known. Legal descriptions usually refer to recorded maps, surveys or other public documents.

LESSEE: The tenant under a lease.

LESSOR: The landlord under a lease.

LIEN: A security interest in real or personal property which places the holder in a position prior to the rights of the general creditors of the owner. Examples include trust deeds, mortgages, special assessments, recorded judgments, mechanic's liens, taxes, etc.

LIS PENDENS: A recorded notice of a law suit filed against a property.

LOAN TITLE POLICY: A policy of title insurance insuring the interest of a lender (ALTA).

LOSS PAYABLE CLAUSE: An endorsement to a fire insurance policy specifying the parties entitled to participate in proceeds in the event of a loss.

MAKER: A person who makes, executes or signs a legal instrument such as a promissory note.

NOMINEE: Person(s) that is named, designated or appointed.

NOTARIZE: To prove execution of a document by means of a Certificate of Acknowledgement by a notary public.

NOTE: Written evidence of a debt by a borrower that includes a promise of payment in accordance with specified terms. A valuable document which must not be lost even when paid in full. In real property transactions, a note is usually secured by a deed of trust.

NOTICE OF COMPLETION: A notice which should be recorded to indicate the completion of improvements to real property. A valid notice of completion limits the time for filing mechanic's liens.

NOTICE OF DEFAULT: Recorded notice that a default has occurred under a deed of trust and/or note.

OFFSET STATEMENT: A statement obtained from the owner of real property to verify the loan balance, interest rate, interest paid-to-date, and maturity date with respect to a loan being taken over by a purchaser. Not to be confused with a beneficiary's statement. This can also be provided by a tenant regarding his rights of possession.

ORDINANCE: A legislative enactment of a city or county.

PAYEE: One who receives payments.

PAYOR: One who makes payments.

PERSONAL PROPERTY: All property which is not land or improvements permanently affixed to land. Example: stocks, bonds, furniture, automobiles, clothing, promissory notes, etc.

POINTS: Covers the lender's administrative costs in processing the loan. Often expressed as a percentage of the loan, the fee will vary among lenders. Generally, the buyer pays the fee, unless otherwise negotiated.

POWER OF ATTORNEY: A written authorization to an agent to perform specified acts on behalf of his principal. This may be granted as either a general or limited power.

PRELIMINARY TITLE REPORT: A report from a title company of the present condition of title made prior to the issuance of a title policy.

PREPAYMENT PENALTY: An agreement to pay a specified penalty for the full or partial payment of a note before its maturity date.

PRORATION: The allocation of property taxes, interest, insurance premiums, rental income, etc... between buyer and seller proportionate to time of use.

PURCHASE MONEY TRUST DEED/NOTE: When a seller carries back a note secured by a deed of trust on his property, it is called a purchase money obligation. Purchase money trust deeds are exempt from the usury limitations, the viewpoint being that the seller has agreed to the extended payment of the purchase, and the interest itself is a part of that purchase price.

QUITCLAIM DEED: A deed which conveys whatever right, title or interest the grantor may have in property at the time of conveyance. There is no guarantee implied in a quitclaim deed.

REAL PROPERTY: Land and improvements permanently affixed to land.

RECONVEYANCE: A document evidencing that a deed of trust affecting real property has been paid in full and that the lender and the trustee no longer have any interest in the property.

RECORDATION: Filing for record in the office of the county recorder.

RENTAL STATEMENT: A detailed signed statement covering the rental income of a property. The rent statement is usually given for pro-rata purposes with respect to monthly rentals, security deposits, last months rents, etc.

REQUEST FOR NOTICE: A recorded request by anyone desiring written notice of the recording of a notice of default under a deed of trust.

RESERVATION: A right reserved by the grantor when conveying property, or a right which had previously been reserved.

RIGHT OF WAY: The right of another to cross over, under or through a parcel of land.

RESTRICTIONS: This is often referred to as covenants, conditions and restrictions (CC&R's) in regard to a piece of property, setting limitations on its use.

SINGLE: A person that has never been married.

SELLER: One who sells property to another.

SPECIAL RECORDINGS: "Special" recordings are those filings that are not recorded at the County Recorder's title company window at the beginning of the day with the normal volume of transactions. If the documents are recorded later in the day, it is called a "Special" recording. "Special" recordings are rarely allowed; the recording is at the discretion of the County Recorder's office.

STATEMENT OF INFORMATION: A brief statement of facts relied upon by title insurers to assist in the proper identification of persons.

SUBJECT TO: (1) When a buyer assumes the obligations of a loan on a property informally, he is accepting the property "Subject To" the loan of record. The escrow officer will not request the lender process a formal assumption with credit checks and assumption documentation. (2) The recognition of an existing lien or encumbrance without assuming personal liability thereof.

SUBORDINATION AGREEMENT: An agreement by which a prior lien is made inferior to an otherwise junior lien.

SUPERSEDE: Documents that have been amended, or changed, supersede the old agreement. Any escrow instructions that are fully re-drawn will recite at the top that the instructions supersede all prior instructions.

TAX COLLECTOR: One who collects the taxes on property.

TAX SERVICE CONTRACT: When a lender wishes to be kept informed as to whether or not property taxes are being paid, a Realty Tax Service Contract can be purchased which entails an audit of the tax rolls and issuance of notices when taxes are delinquent.

TENANCY IN COMMON: A form of co-ownership of property by two or more persons in undivided interests.

TITLE: Evidence of a person's right to or the extent of his interest in real property.

TITLE INSURANCE: Insurance against loss or damage resulting from defects in title to a particular parcel of real property.

TRUST DEED: A deed of trust. (See deed of trust.)

TRUSTEE (IN A DEED OF TRUST): The entity to which real property is conveyed in trust, not to be confused with the beneficiary.

TRUSTOR (IN A DEED OF TRUST): The borrower under a deed of trust.

UNMARRIED: Person that was married and divorced.

USURY: A greater payment or return for the loan of money that is permitted by law.

VARIABLE INTEREST RATE: Interest rate which fluctuates up or down according to the current cost of money.

VENDEE: One who is purchasing property under a Contract of Sale.

VENDOR: One who is selling property under a Contract of Sale.

VESTING: The manner in which the owner of real property holds title.

ZONING: Local government regulations relating to the use of real property.