Real Estate Closing Glossary: Key Terms Explained

How to use this glossary

These definitions follow common usage in the title and escrow industry, consistent with the consumer glossary published by Home Closing 101, an educational initiative of the American Land Title Association (ALTA). Where we have a full guide on a term, it's linked below.

Title and ownership terms

• Title — the legal right to own, use, and transfer a property.
• Chain of title — the historical record of ownership transfers for a property, going back through prior owners.
• Title search — the process of examining public records to confirm ownership and identify liens or other claims. See what is a title search?
• Cloud on title / title defect — a claim, lien, or document irregularity that puts clear ownership in doubt. See our guide on title defects and clouds on title.
• Marketable title — title that is reasonably free of defects, such that a buyer can be expected to accept it without unusual risk.
• Quitclaim deed — a deed that transfers whatever interest the signer has in a property, without warranting that the interest is valid or complete.
• Warranty deed — a deed in which the seller guarantees they hold clear title and will defend against certain future claims.

Title insurance terms

• Title commitment / preliminary title report — a document listing the conditions under which a title insurer is willing to issue a policy, including any exceptions. See how to read a preliminary title report.
• Exceptions — specific items (liens, easements, unresolved defects) that a title policy does not cover.
• Owner's policy — title insurance that protects the buyer's ownership interest. See owner's vs. lender's title insurance.
• Loan policy (lender's policy) — title insurance that protects the mortgage lender's interest, not the buyer's equity.
• Endorsement — an addition or modification to a title policy that expands or changes its coverage.
• Claim — a policyholder's formal notice to their title insurer of a covered problem. See how to file a title insurance claim.

Closing and escrow terms

• Escrow — the deposit of money or documents with a neutral third party, released once transaction conditions are met.
• Closing (settlement) — the meeting or process where ownership formally transfers and closing documents are signed.
• Closing Disclosure — the federally required document itemizing final loan terms and costs, provided at least three business days before closing.
• Earnest money — a deposit made by the buyer to demonstrate good faith when submitting an offer.
• Prorations — the division of ongoing costs (like property taxes) between buyer and seller based on the closing date.
• Closing costs — the fees and prepaid items due at closing, beyond the purchase price. See closing costs explained.

Property and records terms

• Easement — a legal right for someone other than the owner to use part of a property for a specific purpose.
• Lien — a legal claim against a property, usually securing a debt, that must generally be resolved before a sale closes.
• Legal description — the formal, surveyed description of a property's boundaries, distinct from its street address.
• Encroachment — a structure or improvement that extends onto a neighboring property or public right of way.