Glossary of Bay Area Real Estate Terms

1031 Exchange –This is named for code in the IRS tax regulations allowing the deferment of capitol gains taxes on the sale of an investment property if a property of equal or greater value is purchased within a specific time frame. It is required to advise the other party of your participation in this event.  The other party has nothing to do and incurs no added costs.  

Adjustable-rate mortgages - A loan that allows the interest rate to be changed periodically.

Adjustment period - The time between interest rate changes on an adjustable-rate mortgage (ARM)

Amortization - The gradual repayment of a mortgage by periodic installments.

Annual percentage rate (APR) -  The total finance charge (interest, loan fees, points) expressed as a percentage of the loan amount.

Appraisal - An estimate of the value of a property.

Assessed value - The valuation placed on property by a public tax assessor as the basis of property taxes.

Assumption of mortgage -  Agreement by the buyer to assume responsibility for a mortgage owed by the seller: the seller remains liable to the lender unless the lender agrees to release him.

Balloon mortgage - A mortgage that has a substantial amount of principal due at the maturity of the note.

Binder - An agreement, accompanied by a deposit, whereby the purchaser evidences good faith.

Bridge loan - A short-term loan made until a longer-term arrangement can be made.  It's sometimes used when a person needs money to build or buy a home before the present one has been sold. 

Broker - A person licensed by a state real estate commission to act independently in conducting a real estate brokerage business.  Although the requirements vary from state to state, an individual must usually have one or more years of experience in the industry and must pass an examination to earn a broker's license.

Cap - The maximum amount an interest rate or monthly payment can change, either at adjustment time or over the life of the mortgage.

Closing (Close of Escrow) - The final step in transferring ownership of a property from seller to buyer.  A very firm date.  

Closing costs - Fees and Expenses, not including the price of the home, payable by the seller and the buyer at the time of closing (e.g.; brokerage commissions, title insurance premiums, inspections, appraisal, deed recording, attorney fees, etc.)

Cloud on title - An outstanding lien, encumbrance, or mortgage that can prevent the seller from delivering clear title and the buyer from obtaining title insurance.

Comparable - Properties that are similar in size and character to the one being bought or sold.

Condominium – An ownership in real property wherein there is an undivided interest in common in a portion of real property with a separate interest in space called a unit, the boundaries of which are described on a recorded final map, parcel map or condominium plan.  The areas within the boundaries may be filled with air, earth, or water or any combination and need not be attached to land except by easements for access and support.  

Contingency - A condition that must be satisfied before a contract is binding

Deed - A legal document conveying title to a property.  

Disclosure Package – Is assembled by the seller.  It is copies of all reports, inspections and other disclosures prepared by the seller for the buyer's knowledge and approval.

Earnest Money - A deposit.  A portion of the down payment given to the seller by a potential buyer indicating the buyer's intent to complete the purchase of property.

Equity - The owner's value or interest in a property.

Equity loan - A loan that's based on the equity of real property.  

Escrow - The placement of money or documents with a third party for safekeeping pending the fulfillment or performance of a specified act or condition.  

Exclusive Right-to Sell listing -  A written agreement by which the owner promises to pay the broker a commission if the property is sold during the listing period, regardless of whether the broker is responsible for the sale. 

Fiduciary - In a financial role, person acting in the best interests of others.

Foreclsure - Occurs when the owner defaulted (did not make the required payments as scheduled) and the lender forecloses (takes back legal ownership) of the home.  Most lenders will not file a 'Notice of Default" (NOD) until the buyer is behind in their payments for at least 60 days but in today's environment we see it go for 120 or 180 days.  After a NOD has been filed with the county recorders office the owner has an additional 90 days to bring the loan current.  If not a foreclosure date is set with the courts at a minimum of 21 days after the 90 day NOD period ended.  Also known as an auction or foreclosure sale this takes place at the court house steps.  Generally the minimum offer is the loan amount of the first lien holder.  At these sales the buyer must pay in full.  No loans are available and no times for inspections are permitted. 

Housing and Urban Development (HUD)  A U.S. governmental agency established to implement certain federal housing and community development programs.

Lien - A legal claim against a property that must be paid when property is sold.

Listing Contract -An agreement between a homeowner and a licensed Real Estate broker authorizing the broker to sell the property during a given time period.

Market Value -The highest price a ready, willing, and able buyer will pay and the lowest price the seller will accept.

Points - A dollar amount, expressed as a percentage of the mortgage amount, which is paid to a lender as a consideration for making the loan.  A point is one percent of the amount of the mortgage loan.

Principal - A person who appoints another as a representative.  It also refers to the capital sum lent on interest.

Principal and Interest - A periodic (usually monthly) payment that includes the interest charges for the period plus an amount applied to amortization of the principal balance.

Principal, interest, taxes, and insurance payment (PITI) - a periodic (typically monthly) payment that includes the principal and interest payment plus a contribution to the escrow account set up by the lender to pay insurance premiums and property taxes on the mortgaged property.

Realtor and Realtor-Associate - Registered membership marks that identify real estate professionals who are members of the National Association of Realtorsâ and who subscribe to its strict Code of Ethics.

REO - :  REO stands for the Real Estate Owned Department of Banks. Also know as Bank Owned.  After a bank forecloses on a property they are managed in this department and are offered for sale through local Realtors.  uodUpon  

Rent Back – A period of time the seller would like to remain in the home after the close of escrow.   The payment of this is negotiable but often the seller offers to pay the buyers PITI.   

Short Sale - Is when the home owner owes more than the home is worth and is requesting their lender bank or banks to accept a "Short Payment" as complete payment on their debt.  Short Sales are also called Pre-Foreclosure sale.

Title - A document that's evidence of ownership. 

Title Insurance - Protection for lenders and homeowners against financial loss resulting from legal defects in the title.  

Townhouse- One of a row of houses usually of the same or similar design with common side walls or with a very narrow space between adjacent side walls.

Transfer Disclosure Statement -  This is state required.  It is a short informative questionnaire concerning the home for sale.  It is usually included in the disclosure package.