Arizona State Escrow Association Vocabulary

Question 1

ABANDONMENT

Answer 1

The voluntary relinquishment of rights of ownership or another interest.

Question 2

ACCELERATION CLAUSE

Answer 2

A clause in a mortgage or deed of trust which allows the lender to demand payment of the outstanding loan balance for various reasons. The most common reasons are if the borrower defaults on the loan or transfers title to another individual without informing the lender.

Question 3

ACKNOWLEDGEMENT

Answer 3

A Notarial act in which a notary certifies that a singer, whose identity is proven by satisfactory evidence, appeared before the notary and acknowledged that the signer signed the document.

Question 4

ADMINISTRATOR

Answer 4

A person appointed by a probate court as the representative of a decedent’s estate where the decedent left no will.

Question 5

AFFIDAVIT

Answer 5

A written declaration, made under oath, before a notary public or another authorized officer.
When you use an affidavit, you’re claiming that the information within the document is true and correct to the best of your knowledge.

Question 6

AFFIANT

Answer 6

One who makes an Affidavit.

Question 7

AFFIDAVIT OF AFFIXTURE

Answer 7

A form used to surrender title to a mobile home or manufactured home with the Motor Vehicle Department in order to attach the personal property to the real property for ownership and taxation purposes.

Question 8

AFFIDAVIT OF PROPERTY VALUE

Answer 8

A form required by statute to be completed by all buyers and sellers of real property, or their agents, unless otherwise exempt. The County Assessors and the Department of Revenue use data obtained from the affidavits to develop tables and schedules for the uniform valuation of properties based on fair market value.

Question 9

ALIENATION

Answer 9

The voluntary parting of an interest in the ownership of real property.

Question 10

ALIENATION CLAUSE

Answer 10

A clause in a note or deed of trust permitting the Payee/Beneficiary to declare the entire unpaid balance due and payable upon the subsequent transfer of the property. Due on Sale.

Question 11

AMORTIZATION

Answer 11

Provisions for the payment of a debt or obligation by payment of principal and interest at stated periods, for a stated time until the debt is extinguished.

Question 12

REAL ESTATE APPRAISAL, PROPERTY VALUATION, OR LAND VALUATION

Answer 12

An opinion as to the fair market value.

The appraiser visits the property and spends an hour or two inspecting the home’s interior and exterior, measuring the square footage, and evaluating the home’s features and fixtures. The appraiser also compares the home to other similar, recently sold homes in the neighborhood (aka “comps”)

Question 13

CAN A LOAN BE DENIED AFTER APPRAISAL?

Answer 13

A lender cannot lend more than the appraised value of the home. If the appraisal value comes back lower than the sale price, you’ll either need to pay the difference out of pocket or renegotiate to a lower price. If you can’t do either, your loan will be denied.

Question 14

CAN THE SELLER CHANGE THE SALES PRICE AFTER APPRAISAL?

Answer 14

Can the seller back out if your appraisal is high? Realistically, the answer is “no.” For one, they accepted your offer and would be breaching the sales contract if they wanted to put the house back on the market to capture a higher price.
However, the seller can accept a higher offer as a backup offer, and if anything happens to disrupt your sale, the other buyer would win the house.
The seller could also ask for a provision in the sales contract that, in the event a higher backup offer is presented, you as the original buyer will have the opportunity to match or exceed that backup offer. If that exception has been written into the contract and you can’t (or don’t want to) meet the backup offer price, then the seller could back out of the contract.

Question 15

WHAT IS THE MAIN PURPOSE OF THE APPRAISAL FOR THE LENDER AND BUYER?

Answer 15

To prevent the lender from lending more money than the home is worth.
By extension, it also protects the buyer for the sane reason.
It makes you better informed so you’re not overpaying for a home.

Question 16

APPURTENANT

Answer 16

Belonging to.
Appurtenant refers to rights or restrictions that run with the land.
Common examples of appurtenances are driveways, drainage ditches, fences, and rights of way.

Question 17

ARBITRATION

Answer 17

A method of alternative dispute resolution that allows two parties to settle a dispute without going to court. A third neutral party issues a decision that is binding for both parties.

Question 18

ASSESSMENTS

Answer 18

Special taxes imposed to pay for public improvements beneficial to a limited area.

Question 19

ASSUMPTION

Answer 19

The taking over by one party of an obligation that was originally incurred by another.

An assumption clause is a provision in a mortgage contract that allows the seller of a home to pass responsibility for the existing mortgage to the buyer of the property. In other words, the new homeowner assumes the existing mortgage and—along with it—ownership of the property that secures the loan.

Question 20

ATTORNEY-IN-FACT

Answer 20

An agent authorized to act for another under a “Power of Attorney”

Question 21

BENEFICIARY

Answer 21

As used in the deed of trust, the lender is designated as the beneficiary - obtains the benefit of the security.

Question 22

BILL OF SALE

Answer 22

A written instrument evidencing the transfer of title to personal property.

Question 23

BREACH

Answer 23

The failure to fulfill a promise or legal obligation.

Question 24

CHAIN OF TITLE

Answer 24

The historical record of ownership transfers of a specific piece of property.

A chain of title shows all the owners of a piece of property. It is sequential in nature, going from the very first owner all the way up to the current owner.

Question 25

COLLATERAL ASSIGNMENT

Answer 25

The assignment of a security instrument, such as a deed of trust, to secure performance of an obligation by the assignor.

Collateral assignment is the transfer of ownership rights of an asset from a borrower to a lender, in exchange for the granting of some type of loan. Often, the borrower retains possession of the asset, with the understanding that the use or disposition of that asset must be managed with the consent and approval of the lender. Once the loan is repaid in full, the lender relinquishes the collateral assignment, and the borrower has full ownership and control of the asset once again.

Question 26

COMMUNITY PROPERTY

Answer 26

Property acquired by a husband or wife or both during marriage other than by gift, or as an heir, legatee, or devisee.
(Jointly owned)

• Requires a valid marriage between two persons.
• Each spouse holds an undivided one-half interest in the estate.
• One spouse cannot partition the property by selling his/her interest.
• Requires signatures of both spouses to convey or encumber.
• Each spouse can devise (will) one-half of the property.
• Upon death, must be cleared through probate, affidavit, or adjudication.
• Both halves of the community property are entitled to a “Stepped up” tax basis as of the date of death.

Question 27

STEP-UP IN BASIS

Answer 27

A step-up in basis resets the cost basis of an inherited asset from its purchase (or prior inheritance) price to the asset’s higher market value on the date of the owner’s death.

For example, let’s suppose Jane purchases a share of stock at $2 and dies when its market price is $15. Had Jane sold the stock before dying at $15, she (or her estate after her death) would be liable for capital gains tax on a gain of $13.
Instead, her heir’s cost basis becomes $15 so that if the stock is later sold at that price no capital gains tax would be due. Capital gains tax that would have been due on the rise in the share price from $2 to $15 absent Jane’s death is never collected.

Question 28

COMPETENT

Answer 28

Legally qualified.

Question 29

CONDEMNATION

Answer 29

The term “condemnation” is used to define the situation wherein a local, state, or federal government seizes a citizen’s property, then compensates the owner for what was seized.

An example of condemnation is a piece of property being condemned by the government due to a carbon monoxide leak.

Question 30

CONSERVATOR

Answer 30

A person appointed by the probate court to take care of the person or property of an adult person needing care.

Question 31

CONFIRMATION OF SALE

Answer 31

Court approval of the sale of property by an Executor, Administrator, Guardian or Conservator.

Question 32

CONSIDERATION

Answer 32

Something promised, given or done that has the effect of making an agreement a legally enforceable contract.

Question 33

CONSTRUCTIVE NOTICE

Answer 33

Notice given by the public records of a claim of ownership or interest in property.

Question 34

CONTIGUOUS

Answer 34

Being in actual or close contact; near or touching.

Question 35

CONTINGENT

Answer 35

Dependent upon an uncertain future event.

Question 36

CONTINGENCY

Answer 36

The dependence upon a stated event which must occur before a contract is binding.

Question 37

CONVENTIONAL LOAN

Answer 37

A loan secured by a mortgage or deed of trust which is not insured or guaranteed by a governmental agency.

Question 38

CONVEYANCE

Answer 38

The act of transferring title to land or an interest therein from one party to another.

Question 39

COVENANTS

Answer 39

In legal and financial terminology, a covenant is a promise in an indenture, or any other formal debt agreement, that certain activities will or will not be carried out or that certain thresholds will be met.

A property covenant is an agreement between two or more parties regarding certain use of a piece of real property. A property covenant tells you what you can and cannot do with your property.

Question 40

DECEDENT

Answer 40

A deceased person.

Question 41

DEGREE OF DISTRIBUTION

Answer 41

An order of the probate court distributing property to persons entitled thereto.

Question 42

DEDICATION

Answer 42

A gift or grant of land by the owners for a public use.

Question 43

DEFAULT

Answer 43

Failure to perform a duty or discharge an obligation.

Question 44

DEFENDANT

Answer 44

An individual, company, or institution sued or accused in a court of law.

Question 45

DEFICIENCY JUDGMENT

Answer 45

A personal judgement in a foreclosure action for the amount remaining due after a sale of the property when the proceeds of the foreclosure sale are insufficient to satisfy the debt.

Question 46

DESCENT

Answer 46

Transference of property by inheritance.

Question 47

DEVISE

Answer 47

To transfer property by will.

Question 48

DEVISEE

Answer 48

One who receives property by will.

Question 49

DIVEST

Answer 49

To take title, estate, or a right away from.

Question 50

DOMICILE

Answer 50

One’s legal residence.

Question 51

EASEMENT

Answer 51

A permanent or temporary right or interest in the land of another, for a specific purpose, existing apart from the ownership of the land, such as a right to cross over another person’s property.

An easement is a limited right to use another person’s land for a stated purpose

Question 52

EMINENT DOMAIN

Answer 52

The right of a government or its agent to expropriate private property for public use, with payment of compensation.

In the United States, one of the most common examples of eminent domain is when the government is trying to build a road and the road’s path is obstructed by private property.
Eminent domain can also be used for economic development in a community. For example, eminent domain has been used to acquire land for building a shopping center, housing development, stadium, or arena. A person must receive a fair price for their property when the government uses eminent domain.

Question 53

ENCROACHMENT

Answer 53

The extension of an improvement onto the property of another.

An encroachment occurs when a property owner constructs a structure that intrudes on or over another’s property.

Question 54

ENCUMBRANCE

Answer 54

An encumbrance is a claim against an asset by an entity that is not the owner. (A lien or charge on land)
Encumbrances impact the transferability and/or use of subjected properties.

ex: mortgages, easements, property tax liens.

Any lien is an encumbrance, but not all encumbrances are liens.

Question 55

ENDORSEMENT

Answer 55

A title endorsement is an addition to or limitation of title insurance coverage that is attached to a title insurance policy. Endorsements provide coverage that tailors the policy to fit the needs of the insured for a specific transaction.

Question 56

EQUITY

Answer 56

Equity is the difference between what you owe on your mortgage and what your home is currently worth. If you owe $150,000 on your mortgage loan and your home is worth $200,000, you have $50,000 of equity in your home.

Question 57

ESCHEAT

Answer 57

Escheat refers to the right of a government to take ownership of estate assets or unclaimed property. It most commonly occurs when an individual dies with no will and no heirs. Escheat rights can also be granted when assets are unclaimed for a prolonged period of time.

Question 58

ESCROW

Answer 58

Escrow is the process by which a neutral third party mediates a real estate deal, holding money and property “in escrow” until the two sides agree that all the conditions are met for a sale to close

Question 59

ESTATE

Answer 59

An estate is everything comprising the net worth of an individual, including all land and real estate, possessions, financial securities, cash, and other assets that the individual owns or has a controlling interest in.

Question 60

EXECUTOR

Answer 60

A person or institution appointed by a testator to carry out the terms of their will.

The executor of an estate is someone who wraps up a deceased individual’s financial affairs. If the deceased has a will, the will usually names a close relative, friend, accountant, attorney or financial institution to act as executor of the will.

Question 61

EXTENSION AGREEMENT

Answer 61

An agreement granting further time for performance.

Question 62

FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC)

Answer 62

The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by Congress to maintain stability and public confidence in the nation’s financial system. To accomplish this mission, the FDIC insures deposits; examines and supervises financial institutions for safety, soundness, and consumer protection; makes large and complex financial institutions resolvable; and manages receiverships.

Deposit Insurance
The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category. Since the start of FDIC insurance on January 1, 1934, no depositor has lost a penny of insured funds as a result of a failure. The FDIC’s Electronic Deposit Insurance Estimator can help you determine if you have adequate deposit insurance for your accounts. The FDIC insures deposits only. It does not insure securities, mutual funds, or similar types of investments that banks and thrift institutions may offer.

Question 63

FEDERAL NATIONAL MORTGAGE ASSOCIATION

Answer 63

A privately owned, for-profit corporation that is regulated and overseen by the federal government. Its chief purpose is to buy federally guaranteed home mortgages on the secondary market, thus feeling lending institutions to make more funds available for new mortgages for low-to-middle-income home buyers.

Fannie Mae (the Federal National Mortgage Association or FNMA) is a government-sponsored enterprise (GSE) established in 1938 to expand the liquidity of home mortgages by creating a secondary mortgage market.

Fannie Mae is a government-sponsored enterprise that makes mortgages available to low- and moderate-income borrowers. It does not provide loans, but backs or guarantees them in the secondary mortgage market.

Homebuyers must also meet minimum credit requirements to be eligible for Fannie Mae-backed mortgages. For a single-family home that is a primary residence, a FICO score of at least 620 for fixed-rate loans and 640 for adjustable-rate mortgages (ARMs) is required.

Question 64

FEE SIMPLE

Answer 64

An estate in real property which establishes the title as absolute, without limitation or end.
(unlimited ownership rights - this means they have no strings attached on the sale, allows you to do whatever you want, highest form of ownership)

Fee Simple: You own the house and land
Leasehold: You just own the house. The lease holder owns the land.

Fee Simple Defeasible: estates have specific provisions written into the deed that control the use of the property.

Question 65

FIDUCIARY

Answer 65

One who hold something of value in trust for another. A fiduciary duty is a commitment to act in the best interests of another person or entity.

The probate court appoints fiduciaries to serve as guardians for incapacitated persons, conservators for persons whose assets require protection, and personal representatives for the administration of decedents’ estates. Persons serving as fiduciaries for a fee must be licensed by the State of Arizona.

A Fiduciary refers to any individual acting on behalf of another, and in Estate Planning this often means in a legal capacity. An Executor, on the other hand, is a much more narrow responsibility. Executors can only act on the terms laid out in a Will.

Question 66

FIXTURE

Answer 66

A thing which was originally personal property but which has become attached to and is considered a part of the real property.

A real estate fixture is any object permanently attached to a property by way of bolts, screws, nails, glue, cement or other means. Items like chandeliers, ceiling fans and window treatments are generally seen as fixtures and will stay with the house in a real estate transaction.

Question 67

FORECLOSURE

Answer 67

A foreclosure is the legal process where your mortgage company obtains ownership of your home (i.e., repossess the property). A foreclosure occurs when the homeowner has failed to make payments and has defaulted or violated the terms of their mortgage loan.

Question 68

FORFEITURE

Answer 68

A loss of some right, title, estate or interest in consequence of a default under an obligation.

The act of forfeiting : the loss of property or money because of a breach of a legal obligation assets subject to forfeiture.

Question 69

GARNISHMENT

Answer 69

Statutory proceeding whereby property, money, or credits of a debtor, but in possession of another, are seized and applied to payment of the debt.

Question 70

HEIR

Answer 70

A person legally entitled to the property or rank of another on that person’s death.

Question 71

HOMESTEAD

Answer 71

Property designated by a householder as his/her home and protected by law from attachment or forced sale to meet general debts.

A homestead exemption protects a person’s equity in their home. It does not protect a homeowner against a claim of a mortgage holder or someone else to whom the homeowner has granted a consensual lien. It also does not protect a homeowner against a tax lien claim from the IRS. It does protect equity in the home from judgment creditors. The new law in Arizona will significantly change the current law.

At present (until January 1, 2022), the Arizona homestead exemption is $150,000. If a homeowner has a residence (which includes a house, a condominium, a cooperative apartment or a mobile home) that is worth $500,000 and has mortgage debt of $350,000 the $150,000 of equity is protected from claims of non-consensual creditors. The current law only allows a judgment creditor to be paid if that creditor goes through a process to force the sale of the house and gets enough money from the sale to pay the mortgages, the costs of sale and the homestead exemption. The current law does not allow a judgment lien to attach to the home in the event of a voluntary sale by the homeowner. In other words, even though the exemption is “capped” at $150,000 the judgment lien does not get paid (under current law) if the homeowner voluntarily sells the house. The current exemption protects all of the equity unless the judgment creditor initiates the action to force the sale of the house.

The new law will increase the exemption to $250,000 of equity but will change the current law to allow a judgment creditor to be paid in the event of a voluntary sale or a refinance of the property if the homeowner “takes out” money from the refinance. If a home is sold for $750,000 and has mortgage debt of $550,000 the entire $200,000 will go to the homeowner as their homestead exemption. Those proceeds can be protected in a separate bank account for eighteen (18) months and can be used to buy another home. If the home is sold for $750,000 and has mortgage debt of $400,000, there is “excess equity” of $100,000. If there are judgment liens for $100,000, those liens will be paid from the sales proceeds, which is different than the current law. What if the judgment liens total $200,000? It is not clear from the new law whether the homeowner gets the first $250,000 and the rest paid to judgment holders in chronological order or if the judgments are paid first.

If the homeowner refinances the home and has “cash back” in excess of paying the loans on the home, the judgment liens will be paid first before the homeowner can get cash from the refinance.

Question 72

IMPOUND ACCOUNT (ESCROW ACCOUNT)

Answer 72

Set up by your mortgage lender to pay certain property-related expenses. The money that goes into the account comes from a portion of your monthly mortgage payment. (to guarantee payment of such items as taxes and hazard insurance premiums when due)

Question 73

INDEMNITY AGREEMENT

Answer 73

An indemnity agreement is a contract that protect one party of a transaction from the risks or liabilities created by the other party of the transaction. Hold harmless agreement, no-fault agreement, release of liability, or waiver of liability are other terms for an indemnity agreement.‌

To indemnify someone is to absolve that person from responsibility for damage or loss arising from a transaction. Indemnification is the act of not being held liable for or being protected from harm, loss, or damages, by shifting the liability to another party.

Question 74

INSTALLMENT NOTE

Answer 74

Where monthly payments are a set amount for principal and interest throughout the term of the Note

Typically has a payment schedule where the borrower repays the lender in equal payments monthly, quarterly, semi-annually, or annually until the loan is fully repaid with interest. It works the same way a person mortgage works.

Question 75

INTESTATE

Answer 75

Having made no will.

A decedent who has left no will is said to have died “intestate”

Question 76

INVOLUNTARY LIEN

Answer 76

A lien imposed against property without consent of an owner; e.g., taxes, special assessments, federal income tax liens, etc.

Question 77

IRREVOCABLE

Answer 77

Not to be revoked or withdrawn.

Question 78

JOINT VENTURE

Answer 78

A combination of two or more parties that seek the development of a single enterprise or project for profit, sharing the risks associated with its development. The parties to the joint venture must be at least a combination of two natural persons or entities.

Question 79

JUNIOR LIEN

Answer 79

A second mortgage or junior-lien is a loan you take out using your house as collateral while you still have another loan secured by your house. Home equity loans and home equity lines of credit (HELOCs) are common examples of second mortgages.

Question 80

JURAT

Answer 80

Jurat “to swear”

A notarial act in which the notary certifies that a signer, whose identity is proven by satisfactory evidence, has made in the notary’s presence a voluntary signature and has taken an oath or affirmation vouching for the truthfulness of the signed document.

Question 81

LEGAL DESCRIPTION

Answer 81

A legal description is the geographical description of real estate that identifies its precise location, boundaries and any easements for the purpose of a legal transaction, such as a transfer of ownership. A legal description is kept with the deed and filed with the county clerk or county tax assessor.

Question 82

LESSOR

Answer 82

The landlord under a lease.

Question 83

LEVY

Answer 83

A levy is a legal seizure of your property to satisfy a tax debt by judicial process.

Levies are different from liens. A lien is a legal claim against property to secure payment of the tax debt, while a levy actually takes the property to satisfy the tax debt.

Question 84

LIENS

Answer 84

A charge upon property for the payment of a debt or performance of an obligation. A form of encumbrance.
Taxes, special assessments and judgments, as well as mortgages and deeds of trust.

Question 85

LIFE ESTATE

Answer 85

A life estate is something to consider during estate planning. When the creator of the life estate (the grantor) signs a life estate, they are in effect passing part of the ownership of a home to another person. This could be thought of as a way to pre-gift your home to your heirs while still retaining joint ownership.

You’ll often find life estates used for homes, but they can be used for any type of real property – land, and anything attached to the land.

Life estates create a sort of legal joint ownership of a piece of property. For example, let’s say a mother wants to pass her home to her son when she passes away. She decides to use a life estate to make the transaction smoother.
She’d establish a life estate for her home, which would make her the life tenant and her son the remainderman, also called the beneficiary. She can continue to live in her home for the remainder of her life if she chooses to and is responsible for making property tax and insurance payments.
While it doesn’t sound like much has changed, it has. As a life tenant, the mother no longer has full control over her house. She’ll need to get approval from her son to make large changes like selling it or taking out a mortgage. The same goes for refinancing. This is why it’s easier to refinance before you start the estate planning process. She also can’t revoke the life estate without his consent, so it’s important for her to make sure it’s the right solution for her family.
Upon her death, the house title would be immediately passed to the holder of the remainder interest (her son), also known as the remainderman. Rather than going through probate, the only thing that would need to be done to pass ownership is to file her death certificate.

Don’t forget, if the total value of the estate is above a certain amount, there will be estate tax to pay to the IRS. The tax owed will come out of the estate’s assets.