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Understanding Basic Foreclosure Terms

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By : Karim El Sheikh    99 or more times read
When dealing with foreclosure property or purchasing foreclosure homes, it is important for the average layman to understand the complicated terms used during transactions. This will provide an important cornerstone of how you handle the foreclosure market and the purchases or sales you make. In many cases, it can make the difference between closing a sale or losing your investment.

Abstract – a brief summary, for example of a title and its history and/or grants, usually with clauses or encumbrances that affect a home or property.

Accrued – usually refers to any items on a closing that need to be paid, for example real estate taxes the buyer will usually have to pay after the sale is closed.

ARM – the Adjustable Rate Mortgage, which refers to loans with interest rates that change with certain criteria, usually T-Bills.

Agreement to Convey – also known as the Agreement of Sale, a written contract between buyer and seller for sale of real estate property or land, usually with a set of agreed-upon terms and conditions.

Alienation – the transfer of property of one entity to the other.

Involuntary Alienation – forced alienation through circumstances like eminent domain, right of reclamation or adverse possession.

Voluntary Alienation – when the property is transferred through a gift or a sale.

Acceleration Clause - a clause within a mortgage that necessitates that the borrower pay full principal and interest when the property is sold, also known as the alienation or due in sale clause.

Appraisal – a form of valuation or estimation of a certain property, needs an expert opinion from a third party.

Balloon Payment – a large, final payment of a loan, usually larger than required payments due to the loan not being paid in full.

Betterment – any repair, renovation or improvement to property that causes its market value to rise.

Bid – any offer from intending buyers for properties sold at auction.

Bill of Sale – a written document that transfers titles for personal property.

Blanket Deed of Trust – a deed of trust secured by multiple collateral, such as several pieces of land.

Chattel Mortgage - mortgages that use personal property as collateral.

Cloud on Title – any outstanding claim that contradicts the owner’s title on a deed.

Collateral – items used to secure debts, such as homes for mortgage.

Encumbrance – a restriction on land use, such as a lien.

Estate – usually refers to total assets upon death, including real estate and property.

Fair Market Value – the amount a property will sell for between a willing buyer/seller without compulsions (such as a forced sale through mortgage).

Garnishment – the forcible application of a person’s assets towards a payment of debt by a third party.

Grace Period – the period of days where a debtor can cure a delinquency or in some cases, a period of days before they begin payment on a loan.

Judicial Foreclosure - a foreclosure initiated through and by the court.

Land Contract – a type of contract that transfers property ownership, but not title until the purchase is completed.

Lis Pendens - a term that refers to legal action pending.

Offer to Purchase – a contract citing a person’s willingness to purchase a property, with terms written in the offer. Not to be confused with a bid.

Quit Title – actions to remove cloud of titles.
HUD home foreclosures provide a great opportunity for future homebuyers. Find these government hud homes for sale in your area.

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