Real Estate Attorney in Morris County NJ
Real Estate Closings  


The potential home buyer or seller should find this Glossary helpful for understanding words and terms used in real estate transactions. There are, however, some factors that may affect these definitions:

  • Terms are defined as they are commonly understood in the mortgage and real estate industry. The same terms may have different meanings in another context.
  • The definitions are intentionally general, non- technical and short. They do not encompass all possible meanings or nuances that a term may acquire in legal use.
  • State laws, as well as custom and use in various States or regions of the country, may modify or completely change the meanings of certain terms defined.

Before signing any documents or depositing any money preparatory to entering into a real estate contract, the purchaser should consult with an attorney of his choice to ensure that his rights are properly protected

Frequently used terms:



Abstract (Of Title)

    A summary of the public records relating to the title to a particular piece of land. An attorney or title insurance company reviews an abstract of title to determine whether there are any title defects which must be cleared before a buyer can purchase clear, marketable, and insurable title.

Acceleration Clause

    Condition in a mortgage that may require the balance of the loan to become due immediately, if regular mortgage payments are not made or for breach of other conditions of the mortgage.

Agreement of Sale

    Known by various names, such as contract of purchase, purchase agreement, or sales agreement according to location or jurisdiction. A contract in which a seller agrees to sell and a buyer agrees to buy, under certain specific terms and conditions spelled out in writing and signed by both parties.


    A payment plan which enables the borrower to reduce his debt gradually through monthly payments of principal.



    An expert judgment or estimate of the quality or value of real estate as of a given date.



    A fibrous mineral formerly used for making incombustible or fireproof articles. It can be hazardous if airborne and ingested. This is commonly found in older homes and may need to be removed before the transaction can close.

Assumption of Mortgage

    An obligation undertaken by the purchaser of property to be personally liable for payment of an existing mortgage. In an assumption, the purchaser is substituted for the original mortgagor in the mortgage instrument and the original mortgagor is to be released from further liability in the assumption, the mortgagee's consent is usually required.

    The original mortgagor should always obtain a written release from further liability if he desires to be fully released under the assumption. Failure to obtain such a release renders the original mortgagor liable if the person assuming the mortgage fails to make the monthly payments. An "Assumption of Mortgage" is often confused with "purchasing subject to a mortgage." When one purchases subject to a mortgage, the purchaser agrees to make the monthly mortgage payments on an existing mortgage, but the original mortgagor remains personally liable if the purchaser fails to make the monthly payments. Since the original mortgagor remains liable in the event of default, the mortgagee's consent is not required to a sale subject to a mortgage.

    Both "Assumption of Mortgage" and "Purchasing Subject to a Mortgage" are used to finance the sale of property. They may also be used when a mortgagor is in financial difficulty and desires to sell the property to avoid foreclosure.

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Back-up Offer

A secondary offer that the seller may accept if the initial offer becomes void.

Binder or "Offer to Purchase"

    A preliminary agreement, secured by the payment of earnest money, between a buyer and seller as an offer to purchase real estate. A binder secures the right to purchase real estate upon agreed terms for a limited period of time. If the buyer changes his mind or is unable to purchase, the earnest money is forfeited unless the binder expressly provides that it is to be refunded.


    (See real estate broker)

Building Line or Setback

    Distances from the ends and/or sides of the lot beyond which construction may not extend. The building line may be established by a filed plat of subdivision, by restrictive covenants in deeds or leases, by building codes, or by zoning ordinances.

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Certificate of Occupancy

    A certificate issued by a local authority indicating that a building meets building-code requirements. It is required to close the sale of real estate in NJ.

Certificate of Title

    A certificate issued by a title company or a written opinion rendered by an attorney that the seller has good marketable and insurable title to the property which he is offering for sale. A certificate of title offers no protection against any hidden defects in the title which an examination of the records could not reveal. The issuer of a certificate of title is liable only for damages due to negligence. The protection offered a homeowner under a certificate of title is not as great as that offered in a title insurance policy.

Closing Costs

    The numerous expenses which buyers and sellers normally incur to complete a transaction in the transfer of ownership of real estate. These costs are in addition to price of the property and are items prepaid at the closing day.

Closing Day

    The day on which the formalities of a real estate sale are concluded. The certificate of title, abstract, and deed are generally prepared for the closing by an attorney and this cost charged to the buyer. The buyer signs the mortgage, and closing costs are paid. The final closing merely confirms the original agreement reached in the agreement of sale.

Cloud (On Title)

    An outstanding claim or encumbrance which adversely affects the marketability of title.


    Money paid to a real estate agent or broker by the seller as compensation for finding a buyer and completing the sale. Usually it is a percentage of the sale price- - 6 to 7 percent on houses, 10 percent on land.


    The taking of private property for public use by a government unit, against the will of the owner, but with payment of just compensation under the government's power of eminent domain. Condemnation may also be a determination by a governmental agency that a particular building is unsafe or unfit for use.


    Individual ownership of a dwelling unit and an individual interest in the common areas and facilities which serve the multi- unit project.

Contract of Purchase

    (See agreement of sale)


    In the construction industry, a contractor is one who contracts to erect buildings or portions of them. There are also contractors for each phase of construction: heating, electrical, plumbing, air conditioning, road building, bridge and dam erection, and others.

Conventional Mortgage

    A mortgage loan not insured by HUD or guaranteed by the Veterans' Administration. It is subject to conditions established by the lending institution and State statutes. The mortgage rates may vary with different institutions and between States. (States have various interest limits.)

Cooperative Housing

    An apartment building or a group of dwellings owned by a corporation, the stockholders of which are the residents of the dwellings. It is operated for their benefit by their elected board of directors. In a cooperative, the corporation or association owns title to the real estate. A resident purchases stock in the corporation which entitles him to occupy a unit in the building or property owned by the cooperative. While the resident does not own his unit, he has an absolute right to occupy his unit for as long as he owns the stock.

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    A formal written instrument by which title to real property is transferred from one owner to another. The deed should contain an accurate description of the property being conveyed, should be signed and witnessed according to the laws of the State where the property is located, and should be delivered to the purchaser at closing day. There are two parties to a deed: the grantor and the grantee. (See also deed of trust, general warranty deed, quitclaim deed, and special warranty deed.)

Deed of Trust

    Like a mortgage, a security instrument whereby real property is given as security for a debt. However, in a deed of trust there are three parties to the instrument: the borrower, the trustee, and the lender, (or beneficiary). In such a transaction, the borrower transfers the legal title for the property to the trustee who holds the property in trust as security for the payment of the debt to the lender or beneficiary. If the borrower pays the debt as agreed, the deed of trust becomes void. If, however, he defaults in the payment of the debt, the trustee may sell the property at a public sale, under the terms of the deed of trust. In most jurisdictions where the deed of trust is in force, the borrower is subject to having his property sold without benefit of legal proceedings. A few States have begun in recent years to treat the deed of trust like a mortgage.


    Failure to make mortgage payments as agreed to in a commitment based on the terms and at the designated time set forth in the mortgage or deed of trust. It is the mortgagor's responsibility to remember the due date and send the payment prior to the due date, not after. Generally, thirty days after the due date if payment is not received, the mortgage is in default. In the event of default, the mortgage may give the lender the right to accelerate payments, take possession and receive rents, and start foreclosure. Defaults may also come about by the failure to observe other conditions in the mortgage or deed of trust.


    Decline in value of a house due to wear and tear, adverse changes in the neighborhood, or any other reason.


Documentary Stamps

    A State tax, in the forms of stamps, required on deeds and mortgages when real estate title passes from one owner to another. The amount of stamps required varies with each State.


Down payment

    The amount of money to be paid by the purchaser to the seller upon the signing of the agreement of sale. The agreement of sale will refer to the down payment amount and will acknowledge receipt of the down payment. Down payment is the difference between the sales price and maximum mortgage amount. The down payment may not be refundable if the purchaser fails to buy the property without good cause. If the purchaser wants the down payment to be refundable, he should insert a clause in the agreement of sale specifying the conditions under which the deposit will be refunded, if the agreement does not already contain such clause. If the seller cannot deliver good title, the agreement of sale usually requires the seller to return the down payment and to pay interest and expenses incurred by the purchaser.

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Earnest Money

    The deposit money given to the seller or his agent by the potential buyer upon the signing of the agreement of sale to show that he is serious about buying the house. If the sale goes through, the earnest money is applied against the down payment. If the sale does not go through, the earnest money will be forfeited or lost unless the binder or offer to purchase expressly provides that it is refundable.


Easement Rights

    A right- of- way granted to a person or company authorizing access to or over the owner's land. An electric company obtaining a right- of- way across private property is a common example.



    An obstruction, building, or part of a building that intrudes beyond a legal boundary onto neighboring private or public land, or a building extending beyond the building line.



    A legal right or interest in land that affects a good or clear title, and diminishes the land's value. It can take numerous forms, such as zoning ordinances, easement rights, claims, mortgages, liens, charges, a pending legal action, unpaid taxes, or restrictive convenants. An encumbrance does not legally prevent transfer of the property to another. A title search is all that is usually done to reveal the existence of such encumbrances, and it is up to the buyer to determine whether he wants to purchase with the encumbrance, or what can be done to remove it.



    The value of a homeowner's unencumbered interest in real estate. Equity is computed by subtracting from the property's fair market value the total of the unpaid mortgage balance and any outstanding liens or other debts against the property. A homeowner's equity increases as he pays off his mortgage or as the property appreciates in value. When the mortgage and all other debts against the property are paid in full the homeowner has 100% equity in his property.



    Funds paid by one party to another (the escrow agent) to hold until the occurrence of a specified event, after which the funds are released to a designated individual. In FHA mortgage transactions an escrow account usually refers to the funds a mortgagor pays the lender at the time of the periodic mortgage payments. The money is held in a trust fund, provided by the lender for the buyer. Such funds should be adequate to cover yearly anticipated expenditures for mortgage insurance premiums, taxes, hazard insurance premiums, and special assessments.

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    This stands for For Sale By Owner. This is a homeowner selling without a real estate broker.

FHA Loan

    A loan approved by the Federal Housing Administration and insured by them as well. For more information go to

Fair Market Value

The value that the open market will bear for a parcel of real estate.


    Normally movable items that are attached to the land or its improvements. For example, a toilet. These cannot be removed without prior approval.

Flood Insurance

    Insurance required if the land is designated in a flood zone. You can find out if the property is in a flood zone by searching


    A legal term applied to any of the various methods of enforcing payment of the debt secured by a mortgage, or deed of trust, by taking and selling the mortgaged property, and depriving the mortgagor of possession.

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General Warranty Deed

    A deed which conveys not only all the grantor's interests in and title to the property to the grantee, but also warrants that if the title is defective or has a "cloud" on it (such as mortgage claims, tax liens, title claims, judgments, or mechanic's liens against it) the grantee may hold the grantor liable.

Good Faith Estimate

    An estimate of costs from the Lender associated with the purchase of real estate.


    That party in the deed who is the buyer or recipient.


    That party in the deed who is the seller or giver.

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Hazard Insurance

    Protects against damages caused to property by fire, windstorms, and other common hazards.

Home Inspection

    Inspection of the home being purchased by a licensed contractor to inspect the integrity of the structure of the home and the systems.

Home Owners’ Insurance

    Required by the Lender. An insurance policy that covers the structure and the contents of the home.

Home Warranty Insurance

    Insurance contract that covers the replacement and/or repair of the utilities in the home that are covered.


    U.S. Department of Housing and Urban Development. Office of Housing/Federal Housing Administration within HUD insures home mortgage loans made by lenders and sets minimum standards for such homes. Visit for more information.

HUD-1 Statement

    Standard list of closing costs associated with the purchase of real estate. This is presented at closing.

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    A charge paid for borrowing money. (See mortgage note)


Incapable of being revoked or changed.

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Joint Tenancy

    A holding of property, either real or personal, by two or more persons with each sharing the undivided interest, the entire tenancy passing to the survivor or survivors.

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Knob & Tube Wiring

    An antiquated method of electrical wiring that is no longer used. Sellers are usually required to convert to modern wiring methods before the transaction can close.



Latent Defect

    Physical defects not noticed by a license home inspector.

Lead-based Paint

    Hazardous paint that contained lead. Since 1978 it is no longer manufactured. This must be disclosed to buyers.

Legal Residence

The primary residence of the owner.


    Any entity that advances funds to be repaid. i.e. Mortgage company or beneficiary.


    A claim by one person on the property of another as security for money owed. Such claims may include obligations not met or satisfied, judgments, unpaid taxes, materials, or labor. (See also special lien.)

Lot and Block

Reference to how a parcel of real estate is indentified within a sub-division.

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Market Value

    The highest price in terms of money which a property will bring in a competitive and open market and under all conditions required for a fair sale like the buyer and seller acting prudently with knowledge and neither being affected by undue pressures.

Marketable Title

    A title that is free and clear of objectionable liens, clouds, or other title defects. A title which enables an owner to sell his property freely to others and which others will accept without objection.


Master Deed

A single deed for all units in a condominium style environment.

Megan’s Law

    Federal legislation designed to protect children from pedophiles by requiring that convicted sex offenders must register their residence with the government.


    A lien or claim against real property given by the buyer to the lender as security for money borrowed. Under government- insured or loan- guarantee provisions, the payments may include escrow amounts covering taxes, hazard insurance, water charges, and special assessments. Mortgages generally run from 10 to 30 years, during which the loan is to be paid off.

Mortgage Commitment

    A written notice from the bank or other lending institution saying it will advance mortgage funds in a specified amount to enable a buyer to purchase a house.

Mortgage Insurance Premium

    The payment made by a borrower to the lender for transmittal to HUD to help defray the cost of the FHA mortgage insurance program and to provide a reserve fund to protect lenders against loss in insured mortgage transactions. In FHA insured mortgages this represents an annual rate of one- half of one percent paid by the mortgagor on a monthly basis.

Mortgage Note

    A written agreement to repay a loan. The agreement is secured by a mortgage, serves as proof of an indebtedness, and states the manner in which it shall be paid. The note states the actual amount of the debt that the mortgage secures and renders the mortgagor personally responsible for repayment.

Mortgage (Open- End)

    A mortgage with a provision that permits borrowing additional money in the future without refinancing the loan or paying additional financing charges. Open- end provisions often limit such borrowing to no more than would raise the balance to the original loan figure.


    The lender in a mortgage agreement.



Offer & Acceptance

    When all parties agree to exact terms of contract.


    The right of one or more parties to possess, use, enjoy and to dispose of property and to exclude all others.

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Parcel of Real Estate

A piece of land and its improvements.

Personal Property

    Property that can be moved that is not attached to the land or improvement. Will not convey with the deed unless indicated.


    A map or chart of a lot, subdivision or community drawn by a surveyor showing boundary lines, buildings, improvements on the land, and easements.


    Sometimes called "discount points." A point is one percent of the amount of the mortgage loan. For example, if a loan is for $25,000, one point is $250. Points are charged by a lender to raise the yield on his loan at a time when money is tight, interest rates are high, and there is a legal limit to the interest rate that can be charged on a mortgage. Buyers are prohibited from paying points on HUD or Veterans' Administration guaranteed loans (sellers can pay, however). On a conventional mortgage, points may be paid by either buyer or seller or split between them.


    Payment of mortgage loan, or part of it, before due date. Mortgage agreements often restrict the right of prepayment either by limiting the amount that can be prepaid in any one year or charging a penalty for prepayment. The Federal Housing Administration does not permit such restrictions in FHA insured mortgages.


    The basic element of the loan as distinguished from interest and mortgage insurance premium. In other words, principal is the amount upon which interest is paid.

Principal, Interest, Tax & Insurance (PITI)

    A loan payment typically made monthly on an amortized loan that includes a principal and interest payment plus a contribution into a lender-established escrow account to pay property taxes and insurance premiums on the property.

Property Tax

    A tax levied on privately owned property by the government based on its market value.

Purchase Agreement


Quitclaim Deed

    A deed which transfers whatever interest the maker of the deed may have in the particular parcel of land. A quitclaim deed is often given to clear the title when the grantor's interest in a property is questionable. By accepting such a deed the buyer assumes all the risks. Such a deed makes no warranties as to the title, but simply transfers to the buyer whatever interest the grantor has. (See deed.)

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    A naturally-occurring, heavier than air, radioactive gas common in many parts of the country. Radon gas exposure is associated with lung cancer.

Radon Remediation

    Mitigation measures may involve crawl space and basement venting and various forms of vapor barriers.

Real Estate Agent

Works for a broker as an agent who represents either the buyer or seller.

Real Estate Broker

    A middle man or agent who buys and sells real estate for a company, firm, or individual on a commission basis. The broker does not have title to the property, but generally represents the owner.


Real Estate Owned (REO)

Property owned by a lender acquired through foreclosure.


    A real estate agent is a REALTOR when he or she is a member of the National Association of REALTORS.


    The filing of a real estate transaction with the appropriate government agent. A real estate transaction is considered final when it is recorded.


    The process of the same mortgagor paying off one loan with the proceeds from another loan.


Restrictive Covenants

    Private restrictions limiting the use of real property. Restrictive covenants are created by deed and may "run with the land," binding all subsequent purchasers of the land, or may be "personal" and binding only between the original seller and buyer. The determination whether a covenant runs with the land or is personal is governed by the language of the covenant, the intent of the parties, and the law in the State where the land is situated. Restrictive covenants that run with the land are encumbrances and may affect the value and marketability of title. Restrictive covenants may limit the density of buildings per acre, regulate size, style or price range of buildings to be erected, or prevent particular businesses from operating or minority groups from owning or occupying homes in a given area. (This latter discriminatory covenant is unconstitutional and has been declared unenforceable by the U.S. Supreme Court.)

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Sales Agreement

    See agreement of sale.


Seller’s Disclosure

    A questionnaire completed by the seller disclosing what they know about the home. It is not guaranteed, as it is to the best of their knowledge.

Short Sale

    A sale of real estate in which the sale proceeds fall short of the balance owed on the property's loan. It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the current debtor. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrower.

Special Assessments

    A special tax imposed on property, individual lots or all property in the immediate area, for road construction, sidewalks, sewers, street lights, etc.


Special Lien

    A lien that binds a specified piece of property, unlike a general lien, which is levied against all one's assets. It creates a right to retain something of value belonging to another person as compensation for labor, material, or money expended in that person's behalf. In some localities it is called "particular" lien or "specific" lien. (See lien.)


Special Warranty Deed

    A deed in which the grantor conveys title to the grantee and agrees to protect the grantee against title defects or claims asserted by the grantor and those persons whose right to assert a claim against the title arose during the period the grantor held title to the property. In a special warranty deed the grantor guarantees to the grantee that he has done nothing during the time he held title to the property which has, or which might in the future, impair the grantee's title.


State Stamps

    See documentary stamps



    A map or plat made by a licensed surveyor showing the results of measuring the land with its elevations, improvements, boundaries, and its relationship to surrounding tracts of land. A survey is often required by the lender to assure him that a building is actually sited on the land according to its legal description.

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    As applied to real estate, an enforced charge imposed on persons, property or income, to be used to support the State. The governing body in turn utilizes the funds in the best interest of the general public.


An interest in real property giving the right to its possession and use.

Tenants in Common

    The co-ownership of property by two or more persons whose interests need not be equal and who each hold an undivided interest in the entire property and without the right of survivorship.

Time is of the Essence

    A clause in a contract expressing a condition that the essential nature or performance of the contract by a party will be done within the specified period of time or the contract is voidable.


    As generally used, the rights of ownership and possession of particular property. In real estate usage, title may refer to the instruments or documents by which a right of ownership is established (title documents), or it may refer to the ownership interest one has in the real estate.

Title Insurance

    Protects lenders or homeowners against loss of their interest in property due to legal defects in title. Title insurance may be issued to a "mortgagee's title policy." Insurance benefits will be paid only to the "named insured" in the title policy, so it is important that an owner purchase an "owner's title policy", if he desires the protection of title insurance.

Title Search or Examination

    A check of the title records, generally at the local courthouse, to make sure the buyer is purchasing a house from the legal owner and there are no liens, overdue special assessments, or other claims or outstanding restrictive convenants filed in the record, which would adversely affect the marketability or value of title.


    A party who is given legal responsibility to hold property in the best interest of or "for the benefit of" another. The trustee is one placed in a position of responsibility for another, a responsibility enforceable in a court of law. (See deed of trust.)

Truth in Lending

    The federal law that requires lenders to disclose the terms and conditions of a mortgage, including the APR, based on certain charges incurred by the borrower.

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The process of evaluating a loan application.

Upside Down

    Refers to when a homeowner owes more on their mortgage than their house is worth.

Utility Easement

    Area on your property that a utility company has rights to in order to maintain their property, i.e. telephone pole.

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VA Loan

A loan made to qualified Veterans to buy real estate. The VA will guarantee repayment if the loan defaults. For more information go to



Walk Through Inspection

    This is done prior to the closing so that the buyer can see the condition that the house was left in by the seller. If anything is askew, the attorney’s will resolve it before the closing.

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Interest earned on money loaned.



Zoning Map

    A map showing the various sections of the community and the division of the sections into zones of permitted land uses under the zoning ordinance in specific areas.

Zoning Ordinances

    The acts of an authorized local government establishing building codes, and setting forth regulations for property land usage.

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The Law Office Of Martin D. Eagan
52 Maple Avenue
Morristown, NJ 07960
Tel.: (973) 898-7300 | Fax: (973) 734-1903

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