Home / Glossary of Terms

Abstract of Title
A chronological history of the title to a particular piece of real property. Contains a summary of the various documents that have been recorded with the Register of Deeds and other public offices, and a statement of liens, judgments, taxes and encumbrances. This is not what is provided to the purchaser of real property in North Carolina. Closing attorneys prepare an Opinion of Title based on their review of matters in the abstract of title and elsewhere.

Ad valorem
Assessment of taxes against a property. Literally means “according to value.” In North Carolina the general statute which governs the ad valorem taxation of property is called the Machinery Act.

ARM (Adjustable Rate Mortgage)
Payment plan that allows the lender to periodically adjust the interest rate. Sometimes called a Variable Rate Mortgage (VRM).

Backup Offer
An offer to purchase a piece of real estate on which a valid sales contract already exists, made contingent upon failure of first purchaser to close the deal.

Chattels
Movable items of Personal Property, such as household furnishings and motor vehicles.

Closing Costs
A Closing or Settlement is the consummation of a transaction involving the sale of real property. A number of documents are prepared, including the HUD-1 Uniform Settlement Statement, which contains a detailed accounting of all receipts and disbursements in connection with the transaction. Almost any arrangements can be mutually agreed to by the parties in terms of who pays what. Closing costs most often paid by the seller include, but are not limited to, brokers’ commissions, deed preparation fees, excise tax (revenue stamps), unpaid special assessments, and pro rata share of property taxes. Buyer’s closing costs generally include, but are not limited to, loan origination fees, discount points (if any), property survey and appraisal fees, cost of preparation of mortgage instruments, deed and mortgage recordation fees, title insurance premium, title examination fees, purchaser’s attorney’s fees, wood-destroying insect inspection and report, advance escrow deposit for property taxes and insurance, and interim interest.

Consideration
Something of value (usually money) that is inducement for a contract.

Contingent Offer
An offer that makes the contract dependent upon the occurrence of some act. A Contingent Offer is any offer containing a Contingency Provision.

Deed of Trust
A mortgage document widely used in North Carolina in which the borrower conveys the land to a third party trustee to hold for the mortgage lender to secure the debt.

Encroachment
A building, part of a building or other improvement such as a fence that intrudes or trespasses upon the property of another.

Encumbrance
Any right to, or interest in land, which diminishes the value of the estate although it does not prevent conveyance. Mortgages and unpaid taxes are encumbrances known as Liens.

Escrow
An arrangement by which one deposits a thing of value with a third party who will make delivery to another person when specified conditions are fulfilled.

FHA
Federal Housing Administration, an agency of the federal government that insures mortgages. The FHA operates under the Department of Housing and Urban Development (HUD).

Fannie Mae
Federal National Mortgage Association (FNMA) a quasi-governmental corporation that plays an important role in the secondary mortgage market by purchasing mortgage notes from primary lenders.

Freddy Mac
Federal Home Loan Mortgage Corporation (FHLMC) purchases conventional loans (primarily from savings and loan associations) on the secondary loan market.

General Warranty Deed
A deed whereby the grantor agrees to protect the grantee against the valid claims of all persons with respect to the land conveyed. A Title Insurance policy is often used to indemnify the holder from any losses due to defects in the title.

In Arrears
Method of charging interest at the end of the period. Example: A mortgage payment due September 1 pays the interest for the month of August.

Mailbox Rule
A rule that states that once an offeree’s written acceptance is mailed (placed in control of the postal service) the offer is considered to be accepted as of the date and time of the mailing, even though the acceptance is not actually received by the offeror until several days later. The offeror cannot withdraw the offer after an acceptance has been mailed, and the offeree cannot withdraw his or her acceptance after it has been mailed.

Material Fact
A fact of substance relating to a property that might affect a buyer’s or seller’s decision to act, such as a physical defect or a proposed zoning change.

Market Price
The price actually paid for a property. Not to be confused with Market Value which is the most probable amount for which a property might sell under normal conditions. A real estate agent may perform a Comparative Market Analysis (CMA) which is a study of recent sales of comparable properties, to estimate the market value of a property. In North Carolina only a licensed real estate appraiser may conduct an Appraisal; a real estate agent prepares a more informal CMA.

MLS
Multiple Listing Service. A cooperative listing arrangement operated by brokers who are members of a local board of the National Association of REALTORS®.

Plat
A map of a division of land into blocks and lots. A Plat Book is a public record in the office of the Registrar of Deeds of various recorded plans of neighborhoods into blocks and lots.

PMI
Private Mortgage Insurance. Insures a mortgage lender and (subsequent purchaser of the mortgage note, if any) against default by the borrower on a mortgage loan. Usually required on loans greater than 80% of appraised value.

PUD (Planned Unit Development)
Permitted under special zoning ordinances, a PUD is a development with varying land uses and densities. It may include land set aside for schools, shopping centers, parks and greenways, as well as single-family and multi-family housing units.

Restrictive Covenant
Often called a Protective Covenant, it is a privately imposed limitation on the use of real property that is set forth in a deed or in a separately recorded declaration. Such covenants constitute an Appurtenance to the property, that is they “run with the land” and are binding on subsequent owners.

Riparian Land
Land bordering on a river or other body of water. A Riparian Owner has certain Riparian Rights. These rights vary greatly depending on whether the water is navigable or non-navigable, and on various state and federal regulations.

Senior Mortgage
Often referred to as a First Mortgage, it is a note that is higher in priority than any other mortgage on the property. It is senior to any Second Mortgage or Junior Mortgage (for example a home equity line of credit).