Deciphering Common Title Terms: Part 1

The title industry is one of the most complex industries pertaining to real estate. Title experts use an extensive vocabulary riddled with terms unique to our industry, and it can be overwhelming and confusing to lay persons seeking title assistance for the first (or even the second or third) time. At Arrowhead Title, Inc., we recognize the challenge this type of language barrier presents. In an effort to overcome these communication difficulties, we are dedicating this week's blog to defining some of the title terms used in most transactions.

Common Title Terms - Explained

Abstract of Title
An abstract of title is a summary of all the public records pertaining to a specific piece of property. In order to be considered legally valid, it must be prepared by a licensed abstractor.

Adverse Possession
Adverse possession is the process wherein someone may legally claim ownership of a piece of property if they have occupied it for a certain number of years.

Certificate of Title
A printed, official document that certifies ownership of a specific piece of property.

Cloud on Title
A "cloud" on a title refers to something that may hinder the sale of a property, such as an unsatisfied lien.

Color of Title
Color of title refers to a situation wherein someone appears to possess legal ownership of a piece of property, but there is a defect in the deed or certificate of title that renders the ownership invalid.

The act of passing ownership rights of a piece of property from one party to another.

An easement refers to someones legal right to use property that is not their own for a specific purpose. An easement may grant someone the right to put his driveway across a piece of his neighbor's land, for example, or it may allow a utility company to install lines through a homeowner's property.

An encumbrance is a restriction placed on a property by someone who is not the owner. Encumbrances may be placed by easements, mortgages, leases, etc.

The escrow process involves an independent party who facilitates the transaction between buyers, sellers, mortgage lenders, and other parties. All finances involved in a transaction are delivered to the escrow officer, who then distributes them to the appropriate parties.

Lender's Title Policy
A lender's policy is a title policy that protects the lender's interests in a piece of property.

A lien is a restriction placed on a property to secure payment for before or during the sale of the property. Liens may be placed for unpaid property taxes, unsatisfied mortgages, etc.

Mechanic's Lien
A mechanic's lien is a lien placed by contractors to secure payment for their services, such as remodeling.

Owner's Title Policy
An owner's policy is a title policy that protects the owner's interests in a piece of property.

Quitclaim Deed
A quitclaim deed is used to transfer ownership of a piece of property from one party to another without requiring the property to be sold. When properly executed, it simply transfers ownership of the property from the grantor to the grantee.

Check Back Next Week For More Terms!

The title industry is as vast as it is complex. These terms, while important, are certainly not an exhaustive list of all the vernacular unique to the title industry. Watch for the second part of this list next week, when our Lake of the Ozarks title company will offer the definitions to several other title terms.

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