Real Estate Legal Terms Case Study 2022

Real Estate
Legal
Terms

Contents
A. Mortgage.......................................................................................................................................4
Advantages of mortgage:..................................................................................................................4
Dis advantages of mortgage:.............................................................................................................4
B. Escrow Closing...............................................................................................................................4
Advantages of escrow:......................................................................................................................5
Dis advantages of escrow:.................................................................................................................5
C. Pro-rated paid expenses................................................................................................................5
Advantages of pro rate expenses:.....................................................................................................6
Dis advantages of pro rate expenses:................................................................................................6
D. Title Search....................................................................................................................................6
References.............................................................................................................................................7

EXECUTIVE SUMMARY
The term real estate means the property related to land, building and any physical property.
There are various key terms associated with the closing of real estate transactions like title
deed, mortgage, HUD-1, escrow closing, deed, note, mortgage, marketable title, title search,
binder, deed of trust, warranty or other deeds, closing costs, prorated prepaid expenses,
transfer tax and many other. Some of the key terms related to real estate transaction has been
described and explained below.

The term real estate means something real and physical .It is the property, land and
building .There are mainly four types of real estate which are residential real estates,
commercial real estates, industrial real estates and land (Real Estate, What It Is and How It
Works, 2019).The principal key terms associated with real estate at the time of closing of
property are her in below:
A. Mortgage: It is nothing but a legal agreement that grants ownership of an asset
by its owner or mortgagor to the lender of an asset or mortgagee of an asset as a way
of security for a loan. In the title deed interest rate and amount is recorded for the
same which is to be repaid over a period by the mortgagor of an asset to the lender
and it becomes void when the loan amount is paid in full. Any properly which is
legally owned by the owner can be easily mortgage. When the mortgage is done of
any property which is personal in nature it is called as chattel mortgage. (Web
Finance Inc, 2019)Few advantages and dis advantages of mortgage are explained here
in below:
Advantages of mortgage:
 Ownership of home becomes very easy and affordable as buying a home is the
biggest purchase and mortgaging any asset is the largest debt one has ever
made. As the repayment which is to be done for the home loan is spread over a
period of years which becomes very easy for the person to manage .It is better
to opt for a short mortgage period rather than going for a longer mortgage
period. (Wait, 2019)
 It provides a very cost-effective way of borrowing money as the rate of
interest is very much low on mortgage loan as compared to other forms of loan
borrowing because there is a security of loan. As the lending institutions also
knows if something went wrong in between than there is still something
valuable lying with them. (Wait, 2019)
Dis advantages of mortgage:
 An excess amount is paid back than the amount borrowed actually. Excess
debt is carried and repaid over a period of time. The biggest dis advantage in
case of mortgage repayment is that one cannot default in the repayment of
loan as if the person default in its repayment than one can lose its
property .Generally the monthly repayment which is done seems to be quite
reasonable to the mortgagor but over a period of time the amount is very
much huge . (Wait, 2019)
 The fees part also form a big burden. As a new cost will be charged every
time one come for a new mortgage and a penalty will be levied if the
mortgage deal will be closed early before the time frame . (Wait, 2019)
B. Escrow Closing: It means that the whole real estate transactions has been
completed and finally the sale is over from the seller end. The term escrow is a
common term used in case of real estate transactions. The property seller generally

transfers all the documents to the escrow agent who holds them until the buyer of the
property clears all the settlement and transfer all due to the escrow agent who
ultimately at the end transfer all the money to seller of the property. After completion
of all the above transactions it is finally known as closing of the escrow. The main
function of the escrow agent includes handles all the documents carefully, properly
close the process of sale, transfer of money to the seller. The agent is only responsible
for registering all the deeds with the court. Once the name of the seller is updated in
the property deed it is given to the financing institutions. This whole process is known
as a recording process in real estate. Finally, all the funds lying with the agent is done
transfer to the seller and the escrow agent work finally comes to an end. (What Does
Close of Escrow Mean?, 2019)
Advantages of escrow:
 Creating an escrow account is very easy and convenient mode of transferring
money. One need not to be worried about the due date or remember it and also
worried about the funds were to transfer. All the process is taken care by the
service provider only the monthly payment is to be taken care of it.
(Advantages and disadvantages of escrow, 2019)
 As all the worries is to be left with the mortgage service provider, one also
need not to be worried about the missed instalment payment if any, late paid
fees or any penalty to be levied. As all the factors generally can put the
mortgagor home at risk. (Advantages and disadvantages of escrow, 2019)
 It is also good for the credit of the person. As if one has an escrow account
than that person can easily get low interest rate from bank and financial
lending institutions.
Dis advantages of escrow:
 Person opening an escrow account required to maintain a good budget for the
mortgage purpose. This part is very challenging for those whose salary is not
fixed and varies depending upon the performance. For example, the sales
person of the company whose salary is based on the target achieved during the
month but their quarterly bonus is high. So, for those people opening an
escrow account will be a big headache. (Advantages and disadvantages of
escrow, 2019)
 Control is lost when one deposit there in an escrow account. After depositing
money in escrow account one cannot easily withdraw it during the emergency
situation and also cannot re invest it somewhere else .All the money lie idle in
the escrow account . (Advantages and disadvantages of escrow, 2019)
C. Pro-rated paid expenses: The meaning of pro rate means the
proportion of expenses. It here means the real estate expenses to be divided according
to the ownership on the assets over a period of time in a year. For instance if a person
sold his house on May 20,so according to the calculation the seller owner the home
for a period of 140 days of the year and the purchaser of the house will hold the home
for the remaining part of the year for 225 days .The proportion of ownership for the

seller during the period in which the sales take place is 140 days divided by total of
365 days in a year.approx of 40 percent. The same for buyer ownership 225 days
divided by 365 days in a year approx. of 60 percent. The expenses which are prepaid
by the seller are to be borne according to the proportion by both buyer and seller of
the property. As the property taxes are paid in January month for the whole year. As
the ownership of seller was for 40 percent of the year, the taxes which are borne by
the seller of the property are to proportion as 40:60 and the buyer will reimburse the
60 percent of property tax to the seller of the property. As same with the school tax
paid by any and the same is to prorated according to the percent of ownership .If there
is any other expenses which is borne by the seller will be prorated accordingly.
(Stevens, 2019)
Advantages of pro rate expenses:
 The expenses incurred are apportion proportionately between the buyer and
seller of the property so after selling the property the seller does not feel to
bear the whole year expenses of the house as it is pro-rated.
 It lightens the whole year expenses as it is apportioned between the buyer and
seller.
Dis advantages of pro rate expenses:
 The buyer of the house may feel burdensome as the expenses is to done
proportionately between the buyer and seller.
 The cost of maintenance is high in case of pro rate of expenses.
D. Title Search: In terms of real estate, the meaning of title means the right which
particularly belongs to the owner who has the right over the property. Right is
inclusive of right to live, lease or sell the property. A deed is a legal document which
transfers the title right from one owner to another. (Study.com, 2019)
For example, if person A is obtaining a mortgage loan in order to finance the property
purchase, he wanted to buys from person Both person A and B needs to obtain title
insurance policy. The title insurance policy will preserve the right of both buyer and
seller. This type of process is often referred to as full title search. Generally, title
deeds are records to the public and are easily available to any people at demand.
Skilled title searchers are trained professionals who are highly skilled in organizing
various information required for various types of real estate transactions. (Study.com,
2019) In order to conduct a full title search, the below following records of public
need to be located:
 Mortgages: Purchase of a property through the financing provided by the
mortgage lender, Generally the searcher look for the property on which the
amount has not been paid back in full. (Study.com, 2019)

 Marriage Licenses and Divorce Decrees: The name on the title deed will
change after marriage and divorce. Marriage certificate and divorce certificate
will provide the proof of change in the name.
References
Advantages and disadvantages of escrow. (2019, September 21). Retrieved from
www.newcastle.loans/: https://www.newcastle.loans/mortgage-guide/advantages-and-
disadvantages-of-escrow
Real Estate, What It Is and How It Works. (2019, September 21). Retrieved from
www.thebalance.com: https://www.thebalance.com/real-estate-what-it-is-and-how-it-
works-3305882
Stevens, D. (2019, September 21). What Does Prorate Mean in Real Estate Terms? Retrieved from
budgeting.thenest.com: https://budgeting.thenest.com/prorate-mean-real-estate-terms-
26916.ht
Study.com. (2019, September 21). What is a Property Title Search? - Definition & Importance.
Retrieved from study.com: https://study.com/academy/lesson/what-is-a-property-title-
search-definition-importance.
Wait, R. (2019, September 21). Advantages and Disadvantages of Mortgage. Retrieved from
www.moneysupermarket.com:
https://www.moneysupermarket.com/mortgages/advantages-and-disadvantages/
Web Finance Inc. (2019, September 21). mortgage. Retrieved from www.businessdictionary.com:
http://www.businessdictionary.com/definition/mortgage.htm
What Does Close of Escrow Mean? (2019, September 21). Retrieved from www.mortgage101.com:
https://www.mortgage101.com/article/what-does-close-escrow-mean