Glossary

Understanding the terminology used during a real estate closing helps you feel confident and informed. Below are common terms you may encounter when buying or selling property in Florida.

A

Abstract of Title
A written summary of the ownership history of a property, including all recorded documents such as deeds, mortgages, and liens. It is used to verify that the seller has the legal right to transfer ownership.
Affidavit
A written statement made under oath. In real estate closings, affidavits are commonly used to confirm facts such as the seller's identity, marital status, or that no undisclosed liens exist against the property.

C

Chain of Title
The complete history of ownership transfers for a property, from the original owner to the present. A clear chain of title shows that every transfer was properly recorded.
Clear Title
A title free from liens, disputes, or legal questions about ownership. A clear title is required before a property can be sold or a title insurance policy can be issued.
Closing
The final step in a real estate transaction where documents are signed, funds are exchanged, and ownership transfers from seller to buyer. In Florida, closings are typically conducted by a title company or real estate attorney.
Closing Costs
Fees and expenses paid at closing beyond the purchase price of the property. These may include title insurance premiums, recording fees, documentary stamps, and lender charges.
Closing Disclosure
A standardized federal form that lists the final terms, costs, and details of your mortgage loan. Lenders must provide this document at least three business days before closing.
Cloud on Title
Any claim, lien, or encumbrance that could call the ownership of a property into question. Clouds on title must typically be resolved before a sale can proceed.
Commitment for Title Insurance
A document issued by a title company after a title search, stating the conditions under which a title insurance policy will be issued. It lists any known exceptions or requirements that must be met before closing.
Conveyance
The legal transfer of property ownership from one person to another, typically accomplished through a deed.

D

Deed
A legal document that transfers ownership of real property from one party to another. In Florida, deeds must be signed, witnessed by two people, notarized, and recorded with the county.
Documentary Stamps
A Florida state tax paid when a deed is recorded, calculated at $0.70 per $100 of the sale price. Documentary stamps are typically paid by the seller in most Florida counties.

E

Earnest Money
A deposit made by the buyer when submitting an offer, showing good-faith intent to purchase the property. Earnest money is held in escrow and applied toward the purchase price at closing.
Easement
A legal right allowing someone other than the property owner to use a portion of the property for a specific purpose, such as a utility company accessing power lines.
Encumbrance
Any claim, lien, or restriction on a property that may affect its use or transferability. Common encumbrances include mortgages, easements, and deed restrictions.
Escrow
An arrangement where a neutral third party holds funds or documents on behalf of the buyer and seller until all conditions of the transaction are met. Title companies often serve as the escrow agent in Florida.
Estoppel Letter
A document from a homeowners association (HOA) or condominium association stating the current balance owed by the seller, including any dues, fees, or special assessments. In Florida, this letter is required before closing on properties with an HOA.
Exception
An item listed in a title insurance commitment or policy that is excluded from coverage. Common exceptions include existing easements, HOA restrictions, and property taxes not yet due.

F

FIRPTA
The Foreign Investment in Real Property Tax Act, a federal law requiring buyers to withhold a percentage of the sale price when purchasing property from a foreign seller. The withholding is sent to the IRS to cover the seller's potential tax liability.

H

Homestead Exemption
A Florida property tax benefit that reduces the taxable value of a primary residence by up to $50,000. Homeowners must apply with their county property appraiser and must use the property as their permanent residence.

I

Intangible Tax
A one-time Florida state tax of 0.2% (2 mills) charged on new mortgage obligations when they are recorded. For example, a $300,000 mortgage would incur an intangible tax of $600.

J

Judgment Lien
A court-ordered claim against a property owner's assets, which attaches to any real property they own. A judgment lien must be satisfied or released before the property can be sold with clear title.

L

Lien
A legal claim against a property, typically as security for a debt. Common liens include mortgages, tax liens, and judgment liens. Liens must generally be paid off before ownership can transfer.

M

Marketable Title
A title that is free from significant defects or disputes, making it acceptable to a reasonable buyer and a title insurance company. Florida's Marketable Record Title Act helps simplify older chains of title.
Mechanic's Lien
A claim filed by a contractor, subcontractor, or supplier who has not been paid for work performed or materials provided for a property. In Florida, mechanic's liens must be filed within a specific timeframe after the work is completed.
Mortgage
A loan used to purchase real property, where the property itself serves as collateral. The mortgage is recorded in the public records and creates a lien on the property until the loan is paid in full.

O

Owner's Title Insurance Policy
An insurance policy that protects the buyer's ownership interest against covered title defects, liens, or claims that existed before the purchase but were not discovered during the title search. In Florida, the party who pays for the owner's policy varies by county.

P

Power of Attorney
A legal document authorizing another person to act on your behalf in financial or legal matters. A power of attorney is sometimes used when a buyer or seller cannot be present at closing.
Proration
The division of costs such as property taxes, HOA dues, or insurance between buyer and seller based on the closing date. Each party pays their proportional share for the time they own the property.

Q

Quit Claim Deed
A deed that transfers whatever ownership interest the grantor has in a property, without any guarantees about the quality of that title. Quit claim deeds are commonly used between family members or to correct title issues.

R

Real Property
Land and anything permanently attached to it, including buildings, fences, and fixtures. Real property is distinct from personal property, which can be moved.
Recording
The process of filing legal documents, such as deeds and mortgages, with the county clerk of court to create a public record. In Florida, recording provides legal notice of ownership and liens to the public.

S

Settlement Agent
The person or company responsible for coordinating the closing process, including preparing documents, collecting funds, and distributing payments. In Florida, a title company or attorney typically serves as the settlement agent.
Survey
A professional measurement of a property's boundaries, structures, and features. Surveys identify the exact location of property lines, easements, and any encroachments.

T

Title Defect
Any problem in the chain of title that could affect ownership, such as a missing signature on a prior deed, an unresolved lien, or a recording error. Title defects must be corrected before a clear title can be issued.
Title Insurance
A one-time insurance policy that protects against financial loss from covered defects in a property's title. Unlike other insurance that covers future events, title insurance covers issues that originated before the policy date.
Title Search
An examination of public records to verify the property's ownership history and identify any liens, encumbrances, or defects. The title search is performed before closing to ensure the seller can transfer clear title.

W

Warranty Deed
A deed in which the seller guarantees that they hold clear title to the property and have the right to sell it. This is the most common type of deed used in Florida real estate transactions and provides the buyer with the greatest protection.