Note: For statistical term definitions, for such terms as "median price" and "average dollar per square foot" see the link on our Market Dynamics page.
Abstract (of title) – A written summary of the title history of
a particular piece of real estate.
Acceleration Clause – A clause in a Deed of Trust or note
that accelerates or hastens the time when the debt
becomes due. For example, most deeds of trust of loans
contain a provision that the not shall become due immediately
upon the sale or transfer of title of the loan, or upon
failure to pay an installment of principal or interest. This is
also called a due on sale clause.
Adjustment Period – The length of time between interest
rate changes on an ARM. For example, a loan with an
adjustment period of one year is called a one-year ARM,
which means that the interest rate can change once a year.
Adjustable Rate Mortgage – A mortgage instrument with
an interest rate that is periodically adjusted to follow a preselected
published index. The interest rate is adjusted at
certain intervals during the loan period.
Agency – Any relationship in which one party (agent) acts for
or represents another (principal) under the authority of the
principal. Agency involving real property should be in writing,
such as listing, trust, and powers of attorney.
Amortization – Payment of debt in regular, periodic installments
of principal and interest, as opposed to interest only
Application Fee – That part of the closing costs pre-paid to
the lender at time of application to cover initial expenses.
Appraisal – An opinion of value based on factual analysis.
In the context of most real estate transactions, performed by an appraiser, licensed by the Department of Real Estate, on behalf of the buyer’s lender.
APR (Annual Percentage Rate) – The yearly interest
percentage of a loan, as expressed by the actual rate of
interest paid. The APR is disclosed as a requirement of
federal truth in lending statutes.
Assessed Value – Value placed upon property for property,
tax purposes by the tax collector.
Assessment – A levy against property in addition to general
taxes. Usually for improvements such as streets, and sewers.
Assumption of Mortgage – Agreement by a Buyer to
assume the liability under an existing note secured by a
mortgage or deed of trust. The lender usually must approve
the new debtor in order to release the existing debtor
(usually the Seller) from liability.
Balloon Mortgage – A mortgage with periodic payments
that do not fully amortize the loan. The outstanding balance
of the mortgage is due in a lump sum at the end of the
Balloon Note – A note calling for periodic payments which
are insufficient to fully amortize the face amount of the note
prior to maturity, so that a principal sum known as a
“balloon” is due at maturity.
Balloon Payment – A lump sum principal payment due at
the end of some mortgages or other long-term loans.
Beneficiary – (1) One for whose benefit a trust is created. (2)
In states in which deeds of trust are commonly used instead
of mortgages, the lender (mortgagee) is called the beneficiary.
Binder – Sometimes known as an offer to purchase or an
earnest money request. A binder is the acknowledgment of
a deposit along with a brief written agreement to enter into a
contract for the sale of real estate.
Borrower – One who borrows funds, with the express or
implied intention of repaying the loan in full, or giving the
Breach of Contract – Failure to perform a contract, in whole
or in part, without legal excuse.
Bridge Loan – A short-term loan secured by the equity in an
as-yet unsold house, with the funds to be used for a down
payment and/or closing costs on a new house. There is no
payment of principal until the house is sold or the end of the
loan term, whichever comes first. Interest payments may or
may not be deferred until the house is sold.
Broker, Real Estate – One licensed by the state to carry on
the business of dealing in real estate. A broker may receive a
commission for his/her part in bringing together a Buyer and
Seller, landlord and tenant, or parties to an exchange.
Buy Down – A fixed rate loan where the interest rate and
payment are reduced for a specific period of time by paying
the interest up front to subsidized the lower payment.
Cal-Vet Loans – Real estate loans available to armed forces
veterans from California, at low interest rates.
Cap – The limit on how much interest rates or monthly
payments can change, either at each adjustment or over the
life of the mortgage.
Cap (interest rate) – The maximum interest rate increase
allowable on an adjustable rate mortgage. Does not result in
negative amortization. See Negative Amortization.
Cap (payment rate) – The maximum payment amount
increase allowable an adjustable rate mortgage
Certificate of Reasonable Value (CRV) – A document that
establishes the maximum value and loan amount for a VA
Certificate of Title: A statement that shows ownership of
property, stating that the Seller has clear legal title.
Chain of Title: The chronological order of conveyances of a
parcel of land, from the original owner to the present owner.
Clear Title: Real property against which there are no liens,
especially involuntary liens (mortgages).
Closing: In real estate sales, the final procedure in which
documents are executed and/or recorded, and the sale (or
loan) is completed.
Closing Costs: Expenses incidental to a sale of real estate,
such as loan fees, title fees, and appraisal fees.
Closing Statement: The statement which lists the financial
settlement between Buyer and Seller, and the costs each
Cloud on Title: An invalid encumbrance on real property,
which, if valid, would affect the rights of the owner. For
example: A sells lot 1, tract 1, to B. The deed is mistakenly
drawn to read lot 2, tract 1. A cloud is created on lot 2 by the
recording of the erroneous deed. The cloud may be
removed by quitclaim deed, or, if necessary, by court action.
Commission: An agent’s or broker’s fee for bringing the
principals together and helping to negotiate a real estate
transaction, often a percentage of the sales price or flat fee.
Commitment: An agreement, frequently in writing, between
a lender and a borrower to loan money at a future date,
subject to certain conditions.
Community Home Buyer’s Program: A fixed rate loan with
a low 3 to 5% down payment, no case reserve requirement,
and easier qualifying ratios. Subject to borrower meeting
income limits and attendance of a 4 hour training course on
Comparables: Refers to similar properties used for
comparison purposes in the appraisal process. These
properties will be reasonably the same size and location,
with similar amenities and characteristics, so that the
approximate fair market value of the subject property can be
Condominium: A form of real estate ownership where the
owner receives title to a particular unit and has a proportionate
interest in certain common areas. The unit itself is generally
a separately owned space whose interior surfaces (walls,
floors and ceilings) serve as its boundaries.
Condo Conversion: In San Francisco, the legal process by which units within a multiple-unit building owned in common, become separate, fee-simple, condominium units. This process is controlled and regulated by the city.
Consideration: Anything which is, legally, of value and
induces one to enter into a contract.
Contingency: A condition that must be satisfied before a
contract is binding. For instance, a sales agreement may be
contingent upon the Buyer obtaining financing.
Conventional Mortgage: A mortgage or deed of trust not
obtained under a government insured program such as FHA
Conversion Clause: A provision in some ARMs that
enables you to change an ARM to a fixed-rate loan, usually
after the first adjustment period. The new fixed rate is generally
set at the prevailing interest rate for fixed-rate
mortgages. This conversion feature may cost extra.
Convey: To transfer real estate from one person to another
Conveyance: Transfer of title to land. Includes most instruments
by which an interest in real estate is created,
mortgaged or assigned.
Co-operative: A form of multiple ownership in which a
corporation or business trust entity holds title to a property
and grants occupancy rights to shareholders by means of
proprietary leases or similar arrangements.
Covenants, Conditions and Restrictions (CC&R’s): A
term used in some areas to describe the restrictive
limitations which may be placed on the property.
CRB: Certified Residential Broker. To be certified, a broker
must be a member of the National Association of Realtors’
Managers’ Council, have two years of experience as a
licensed broker manager and have completed five required
CRS: Certified Residential Specialist. To be certified, an
agent must be a member of the National Association of
Realtors, Residential Sales Council, have completed at least
50 residential transactions and have completed five required
Residential Division courses.
Credit Report: The report to a prospective lender on the
credit standing of a prospective borrower.
Deed: Actually, any one of many conveying or financing
instruments, but generally a conveyancing instrument, given
to pass thee title to property upon sale.
Deed of Trust: An instrument used in many states in place
of a mortgage. Property is transferred to a trustee by the
borrower (trustor), in favor of the lender (beneficiary), and
reconveyed upon payment in full.
Default: Failure to fulfill terms as agreed in the mortgage note.
Deposit: Money given by the Buyer with an offer to
purchase. Shows good faith. Also called earnest money.
Discount Points: A negotiable fee paid to the lender to
secure financing for the Buyer. Discount points are up front
interest charges to reduce the interest rate on the loan over
the life, or a portion, of the loan’s term. One discount point
equals one percent of the loan amount.
Disposable Income: Income, usually monthly income, left
over after fixed obligations and living expenses for that
period of income are paid.
Documentary Transfer Tax: A City/County tax on the sale
of real property, based on the sale price.
Down Payment: Cash portion paid by a Buyer from his/her
own funds, as opposed to that portion of the purchase price
which is being borrowed.
Due-On-Sale Clause: An acceleration clause that requires
full payment of a mortgage or deed of trust when the
secured property changes ownership.
Earnest Money: The portion of the down payment delivered
to the Seller or Escrow agent by the purchaser with a written
offer as evidence of good faith.
Easement: A right to limited use of land owned by another.
An electric company, for example, could have an easement
to put up electric power lines over someone’s property.
Encumbrance: A claim, lien, charge, or liability attached to
and binding real property. Any right to, or interest in, land
which may exist in one other than the owner, but which will
not prevent the transfer of fee title.
Equity: The market value of real property, less the amount of
Escrow: A procedure in which a third party acts as a stakeholder
for both the Buyer and the Seller, carrying out both
parties’ instructions and assuming responsibility for handling
all of the paperwork and distribution of funds.
Execute: To complete, to finish, in real estate deeds, to sign,
seal, and deliver.
Fair Credit Reporting Act: A federal law giving one the right
to see his/her credit report so that errors may be corrected.
A lender refusing credit based on a credit report must inform
the Buyer which company issued the credit report. The
Buyer may see the report without charge if refused credit.
Federal Home Loan Banks: System of 11 regional banks
established by the Home Loan Bank act of 1932 to keep a
permanent supply of money available for home financing.
Fee Simple: Estate under which the owner is entitled to
unrestricted powers to dispose of the property, and which can
be left by will or inherited. Commonly, a synonym for ownership.
F.H.A. (Federal Housing Administration): A federal agency
which insures first mortgages, enabling lenders to loan a
very high percentage of the sale price.
FHA Loan: A loan insured by the Insuring Office of the
Department of Housing and Urban Development, the
Federal Housing Administration.
FHLMC (Freddie Mac): Federal Home Loan Mortgage
Corporation. A federal agency purchasing first mortgages,
both conventional and federal insured; from members of the
Federal Reserve and the Federal Home Loan Bank System.
Finance Charge: The total of cost a borrower must pay,
directly or indirectly, to obtain credit according to Regulation Z.
First Mortgage: A mortgage having priority over all other
voluntary liens against certain property.
Fixed Rate Mortgage: A mortgage having a rate of interest
which remains the same for the life of the mortgage.
Fixture: Property, such as a hot water heater or plumbing
fixture, that has become permanently attached to a piece of
real estate and goes with the property when it is sold.
Flood Certification: An independent agency report
required by the lender to determine whether a property is
located in a flood hazard zone. Such condition would then
require a federally mandated flood insurance policy.
Flood Insurance: Insurance indemnifying banks against
loss by flood damage. Required by lenders (usually banks) in
areas designated (federally) as potential flood areas. The
insurance is private but federally subsidized.
FNMA (Fannie Mae): Federal National Mortgage Association.
A private corporation dealing in the purchase of first
mortgages, at discounts.
Foreclosure: A legal procedure in which property
mortgaged as security for a loan is sold to pay the defaulting
GNMA (Ginnie Mae): Government National Mortgage
Association. A federal association, working with F.H. A.,
which offers special assistance in obtaining mortgages, and
purchases mortgages in a secondary capacity.
Good Faith: Done with good intentions, without knowledge
of fraudulent circumstances, or reason to inquire further.
Graduated Payment Mortgage: A residential mortgage
with monthly payments that start at a low level and increase
at a predetermined rate.
Gross Income: Normal income, including overtime, prior to
any payroll deductions that is regular and dependable. This
income may come form more than one source.
Hazard Insurance: Real estate insurance protecting against
loss caused by fire, some natural causes, and vandalism,
depending upon the terms of the policy.
Home Inspection Report: A qualified inspector’s report on
a property’s overall condition. The report usually includes an
evaluation of both the structure and mechanical systems.
Homeowner’s Association: (1) An association of people
who own homes in a given area, formed for the purpose of
improving or maintaining the quality of the area. (2) An
association formed by the builder of condominiums or
planned developments, and required by statue in some
states. The builder’s participation as well as the duties of the
association are controlled by statute.
Homeowner’s Insurance: Includes the coverage of Hazard
Insurance plus added coverage such as personal liability,
theft away from the home (items stolen from the insured’s
car), and other such coverage.
Home Warranty Plan: A warranty that protects against
failure of mechanical systems within the property. Usually
this includes plumbing, electrical, heating systems and
Housing Starts: Number of houses on which construction
has begun. The figures are used to determine the availability
of housing, need for real estate loans, need for labor and
HUD-1 Form: See Real Estate Settlement Statement
Impound Account: Account held by a lender for payment
of taxes, insurance, or other periodic debts against real
property. The borrower pays a portion of, for example, the
yearly taxes, with each monthly payment. The lender pays
the tax bill from the accumulated funds.
Income Property: Real estate that is owned for investment
purposes and not used as the owner’s residence.
Index: An index used to adjust the interest rate of an adjustable
rate mortgage loan. For example: the change in U.S.
Treasury securities (T-bills) with a 1 year maturity. The weekly
average yield on said securities, adjusted to a constant
maturity of one year, which is the result of weekly sales, may
be obtained weekly. This change in rates is the “index” for
the change in the specific adjustable rate mortgage.
Instrument: Any writing having legal form and significance,
such as a deed, mortgage, will, and lease.
In-Law Unit: Typically a small, separate unit within a house that was not built with permit and thus, in San Francisco, is not legal.
Interest: A charge paid for the use of money.
Interest Rate: The percentage of an amount of money
which is paid for its use for a specified time, usually
expressed as an annual percentage.
Interest Rate Cap: The maximum interest rate increase of
an adjustable rate loan. For example: a 6% loan with a 5%
interest rate cap would have a maximum interest for the life
of the loan which would not exceed 11%.
Interim Financing: See Bridge Loan
Joint Tenancy: An undivided interest in property, taken by two
or more joint tenants. The interests must be equal, occurring
under the same conveyance, and beginning at the same time.
Upon the death of a joint tenant, the interest passes to the
surviving joint tenants, rather than to the heirs of the deceased.
Land Contract: When the Buyer agrees to make payments
directly to the Seller at pre-negotiated terms. The Seller
agrees to deed the property to the Buyer upon completion
of the agreement. The Buyer becomes the owner of equity
in this type of sale. (Also see Owner Financing)
Late Charge: A charge to the borrower for the failure to pay
an installment payment on time.
Lease: An agreement by which an owner of real property
gives the right of possession to another for a specified
period of time and for a specified consideration (rent). Title
does not pass.
Legal Description: A method of geographically identifying a
parcel of land, which is acceptable in a court of law. A
description parcel of land sufficient to identify the property
such as a lot and tract number.
Lien: An encumbrance against property for money, either
voluntary or involuntary. All liens are encumbrances but all
encumbrances are not liens.
Lis Pendens: A legal notice recorded to show pending
litigation relating to real property, and giving notice that anyone
acquiring an interest in said property subsequent to the date
of the notice may be bound by the outcome of the litigation.
Loan Commitment: A written promise to make a loan for a
specified amount on specified terms.
Loan Origination Fee: One time setup fee charged by lender.
Loan Package: The file of all items necessary for the lender
to decide whether to give a loan. Items would include the
information on the prospective borrower (for example, loan
application, credit report, financial statement, employment
letters) and information on the property (for example,
Loan-To-Value (LTV) Ratio: The relationship between the
amount of the mortgage and the appraised value of the
property, expressed as a percentage of the appraised value.
Maintenance Reserve: Money reserved to cover anticipated
Maker: One who executes (signs) as the maker (borrower)
of a note.
Margin: The number of percentage points the lender adds
to the index rate to calculate the ARM interest rate at each
Marketability: Saleability. The probability of selling property
at a specific time, price and terms.
Marketable Title: Title which can be readily marketed (sold)
to a reasonably prudent purchaser aware of the facts and
their legal meaning concerning liens and encumbrances.
Market Price: The price a property brings in a given market.
Commonly used interchangeably with market value,
although not truly the same.
Market Value: The price at which a property will sell, assuming
a knowledgeable Buyer and Seller, both operating
without undue pressure, after the property has been fully exposed to the market.
Material Fact: In the context of real estate, any fact that might alter a buyer’s desire to purchase a property, or affect the amount of money a buyer would pay.
Maturity: (1) Termination period of a note. For example: A 30
year mortgage has a maturity of 30 years. (2) In sales law,
the date a note becomes due.
Mechanics Lien: A lien created by statute for the purpose
of securing priority of payment for the price or value of work
performed and materials furnished in construction or repair
of improvements to land, and which attaches to the land as
well as the improvements.
Moisture Barrier: Insulating materials used to prevent the
build up of moisture (condensation) in walls and other parts
of a building.
Mortgagee: The party lending the money and receiving the
mortgage. Some states treat the mortgagee as the “legal”
owner, entitled to rents from the property. Other states treat
the mortgagee as a secured creditor, the mortgagor being the
owner. The latter is the more modern and accepted view.
Mortgage Credit Certificate (MCC) Program: A first time
home buyer program subject to purchase price and income
limits and limited to Alameda, Contra Costa, San Mateo and
Santa Clara counties. The MCC program is actually a special
tax credit and assists Buyers in qualifying on almost any loan
Mortgage Insurance: Insurance written by an independent
mortgage insurance company protecting the mortgage
lender against loss incurred by a mortgage default, thus
enabling the lender to lend a higher percentage of the sale
price. The Federal government writes this form of insurance
through the FHA and VA.
Mortgage Life Insurance: A type of term life insurance
often bought by mortgagors. The coverage decreases as
the mortgage balance declines. If the borrower dies while
the policy is in force, the debt is automatically covered by
Mortgage Note: A written promise to pay a debt at a stated
interest rate during a specified term. The agreement is
secured by a mortgage.
Mortgagor: The party who borrows the money and gives
Multiple Listing: An exclusive listing, submitted to all members
of an association, so that each may have an opportunity
to sell the property.
Negative Amortization: Negative amortization occurs
when monthly payments fail to cover the interest cost. The
interest that isn’t covered is added to the unpaid principal
balance, which means that even after several payments you
could owe more than you did at the beginning of the loan.
Negative amortization can occur when as ARM has a
payment cap that results in monthly payments that aren’t
high enough to cover the interest.
Note: A unilateral agreement containing an express and
absolute promise of the signer to pay to a named person, or
order, or bearer, a definite sum of money at a specified date
or on demand. Usually provides for interest and, concerning
real property, is secured by a mortgage or trust deed.
Notice of Action: Recorded notice that real property may be
subject to a lien, or even that title is defective, due to pending
litigation. Notice of a pending suit, also called “Lis Pendens”.
Notice of Cessation: A notice stating that work has
stopped on a construction project. Done to accelerate the
period of filing a mechanic’s lien.
Notice of Completion: A notice, recorded to show that a
construction job is finished. The length of time in which
mechanic’s liens may be filed depends upon when and if a
notice of completion is recorded.
Notice of Default: Notice filed to show the borrower under a
mortgage or deed of trust is in default (behind on payments).
Offer: A presentation or proposal for acceptance, in order to
form a contract. To be legally binding, an offer must be
definite as to price and terms.
Offer and Acceptance: Necessary elements of a contract
to sell real estate.
Offer to Purchase: A written proposal to buy a piece of real
estate that becomes binding when accepted by the Seller.
Also called a sales contract.
Origination Fee: A fee made by a lender for making a real
estate loan. Usually a percentage of the amount loaned,
such as one percent.
Owner Occupied: Property physically occupied by the owner.
Owner Financing: A purchase in which the Seller provides
all or part of the financing.
Ownership: Rights to the use, enjoyment and alienation of
property, to the exclusion of others. Concerning real
property, absolute rights are rare, being restricted by zoning
laws, restrictions, and liens.
Payment Cap: A maximum amount for a payment under an
Adjustable Mortgage Loan, regardless of the increase in the
interest rate. If the payment is less than the interest alone,
negative amortization is created.
Payoff: The payment in full of an existing loan or other lien.
Personal Property: Any property which is not designated
by law as real property.
Piggybank Loan: A loan made jointly by two or more
lenders on the same property under one mortgage or trust
deed. One 90% loan, for example, may have one lender
loaning 80% and another (subordinate) lender loaning the
top 10% (high risk portion).
PITI (Principal, Interest, Taxes and Insurance): Used to
indicate what is included in monthly payment on real property.
Principal, interest, taxes (property) and insurance (hazard) are
the four major portions of a usual monthly payment.
Planned Unit Development (PUD): A zoning designation
for property developed at the same or slightly greater overall
density than conventional development, sometimes with
improvements clustered between open, common areas.
Users may be residential, commercial or industrial.
Plat: A map of a piece of land showing boundary lines,
streets, actual measurements and easements.
Point: An amount equal to 1% of the loan principal. Lenders
charge loan points to increase their yield on a mortgage.
Points are considered prepaid interest.
Power of Attorney: An authority by which one person
(principal) enables another (attorney-in-fact) to act for him.
(1) General power – authorizes sales, and mortgaging, of all
property of the principal. Invalid in some jurisdictions. (2)
Special power specifies property, Buyers, price and terms.
How specific it must be varies in each state.
Pre-approval: A commitment by a lender to extend credit
provided that specific conditions are met.
Preliminary Title Report: A report showing the condition of
title before a sale or loan transaction. After completion of the
transaction, a title insurance policy is issued.
Pre-Qualification: A preliminary assessment of a Buyer’s
ability to secure a loan, based on a specific set of lending
guidelines and Buyer representations made. This is not a
guarantee or commitment by a lender to extend credit.
Prepaid Items: Those expenses of property which are paid
in advance and will usually be prorated upon sale, such as
taxes, insurance, and rent.
Prepayment Penalty: A penalty under a note, mortgage, or
deed of trust, imposed when the loan is paid before it is due.
Prime Rate: The interest rate charged by banks to their
preferred corporate customers, it tends to be an estimator
for general trends in short term interest rates.
Principal: (1) The person who gives authority to an agent or
attorney. (2) Amount of debt, not including interest. The face
value or a note, and mortgage.
Private Mortgage Insurance: Insurance against a loss by a
lender in the event of default by a borrower (mortgagor). The
insurance is similar to insurance by a government agency
such as FHA, except that it is issued by a private insurance
company. The premium is paid by the borrower and is
included in the mortgage payment.
Promisee: One to whom a promise has been made, such
as the lender under a promissory note.
Promisor: One who makes a promise. The borrower under
a promissory note.
Promissory Note: Promise in writing, and executed by maker,
to pay specified amount during a limited time, or on demand,
or at sight, to a named person, or on order, or to bearer.
Proration: To divide (prorate) property taxes, insurance
premiums, and rental income, between Buyer and Seller
proportionately to time of use, or the date of closing.
Public Records: Usually at a county level, the records of all
documents which are necessary to give notice. The records
are available to the public. All transactions for real estate
should be recorded.
Purchase Agreement: Agreement between a Buyer and
Seller of real property, setting forth the price and terms of sale.
Qualifying Ratios: Guidelines applied by lenders to determine
how large a loan to grant a home Buyer.
Quitclaim Deed: A deed operating as a release: intended to
pass any title, interest, or claim which the grantor may have
in the property, but not containing any warranty of a valid
interest or title in the grantor.
Real Estate: (1) Land and anything permanently affixed to
the land, such as buildings, fences, and those things
attached to the buildings, such as light fixtures, plumbing
and heating fixtures, or other such items which would be
personal property if not attached. The term is generally
synonymous with real property, although in some states a
fine distinction may be made. (2) May refer to rights in real
property as well as the property itself.
Real Estate Settlement Statement: Final settlement
statement often referred to as the HUD-1 form, used to itemize
Buyer, Seller, broker, and lender charges and credits at closing.
Realtor: Real estate broker or associate active in local real
estate board affiliated with the National Association of Realtors.
Reconveyance: An instrument used to transfer title from a
trustee to the equitable owner or real estate, when title is
held as tolerable security for a debt. Most commonly used
upon payment in full of a trust deed. Also called a deed of
reconveyance or release.
Recording: Filing documents affecting real property as a
matter of public record, giving notice to future purchasers,
creditors, or their interested parties. Recording is controlled
by statute and usually requires the witnessing and notarizing
of an instrument to the recorded.
Recording Fee: Amount paid to recorder’s office in order to
make a document a matter of public record.
RESPA: Real Estate Settlement Procedures Act. Federal
statute effective June 20, 1975, requiring disclosure of certain
costs in the sale of residential (one to four family) improved
property to be financed by a federally insured lender.
Refinancing: Repaying a debt with the proceeds of a new
loan, using the same property as collateral or security.
Regulation Z: The set of rules governing consumer lending
issued by the Federal Reserve Board of Governors in accordance
with the Consumer Protection Act.
Retaining Wall: A wall used to contain or hold back dirt,
water, or other materials of a similar nature.
Right of Survivorship: The right of a survivor of a deceased
person to the property of said deceased. A distinguishing
characteristic of a joint tenancy relationship.
Sales Contract: Another name for a sales agreement, and
Second Mortgage: A mortgage which ranks after a first
mortgage in priority. Properties may have two, three, or more
mortgages, deeds of trust, or land contracts, as liens at the
same time. Legal priority would determine whether they are
called a first, second, third, lien.
Secondary Mortgage Market: The buying and selling of
existing mortgages through agencies (i.e. Fannie Mae,
Septic System: A sewage system, whereby waste is
drained through pips and a title field (a system of clay tiles
and gravel) into a septic tank. Found in areas where city or
county sewers have not yet been installed.
Septic Tank: An underground tank into which a sanitary
sewer drains from a building. The sewage is held until bacterial
action changes the solids into liquids or gasses, which
are then released into the ground.
Signed, Sealed and Delivered: A phrase indicating that
everything necessary to convey has been done by the
grantor. Modernly, signed, and delivered are still necessary,
but the only seals commonly used are by governments,
corporations, and notaries.
Simple Interest: Interest computed on principal alone, as
opposed to compound interest.
Special Assessment: Lien assessed against real property
by a public authority to pay costs of public improvements
(for example, sidewalks, sewers, street lights) which directly
benefits the assessed property.
Specific Performance: An action to compel the performance
of a contract, when money damages for breach
would not be satisfactory.
Statement of Identity: Also called Statement of Information, a
confidential form filled out by Buyer and Seller to help a title
company determine if any liens are recorded against either.
Very helpful when people with common names are involved.
Statute: A law which comes from a legislative body. A
written law, rather than law established by court cases.
Subordinate: To make subject or junior to.
Succession: Passing of real property by will or inheritance,
rather than by grant of a deed or any other form or purchase.
Survey: The measurement of the boundaries of a parcel of
land, its area and sometimes its topography.
Take Out Loan: The “permanent” (long term) financing of
real estate after completion of construction.
Tax Base: The assessed valuation of real property, which is
multiplied by the tax rate to determine the amount of tax due.
Tax Lien: (1) A lien for nonpayment of property taxes.
Attaches only to the property upon which the taxes are
unpaid. (2) A federal income tax lien. May attach to all
property of the one owning taxes.
Tenancy in Common: An undivided ownership in real
estate by two or more persons. The interests need not be
equal, and, in the event of the death of one of the owners,
no right of survivorship in the other owners exists. This term (and the abbreviation TIC) is now used commonly in San Francisco for a single unit within a multi-unit building owned in Tenancy in Common for which the owner of the share interest has an exclusive right to occupy.
Tenant: (1) A holder of property under a lease or other
rental agreement. (2) Originally, one who had the right to
possession, irrespective of the title interest.
Terms: The consideration, other than price, in a sale, lease,
and mortgage. For example: the way the money will be
paid, time to take possession, and conditions.
TIC: Tenancy in Common, in San Francisco typically referring to a single unit within a multi-unit building owned in Tenancy in Common for which the owner of the share interest has an exclusive right to occupy.
“Time Is Of The Essence”: Clause used in contracts to
bind one party to performance at or by a specified time in
order to bind the other party to performance.
Title: The evidence one has of right to possession of land.
Title Insurance Policy: A policy that protects the
purchaser, mortgage or other party against losses
concerning title to the property and matters such as
easements, encroachments and liens.
Title Search: A check of public record to disclose the past
and current facts regarding ownership of a particular piece
Topography: The contour of land surface, such as flat,
rolling, and mountainous.
Transfer: The act by which the title to property is conveyed
from one person to another.
Transfer Tax: City/County tax on the transfer of real
property. Based on purchase price or money changing
hands. Also called documentary transfer tax.
Trust: A fiduciary relationship under which one holds
property (real or personal) for the benefit of another. The
party creating the trust is called the settler, the party
holding the property is the trustee, and the party for whose
benefit the property is held is called the beneficiary.
Trustee: (1) One who is appointed, or required by law, to
execute a trust. (2) One who holds title to real property
under the terms of a deed of trust.
Trustor: The borrower under a deed of trust. One who
deeds his property to a trustee as security for the repayment
of a loan.
Truth-In-Lending: A federal law that requires lenders to
fully disclose, in writing, the terms and conditions of a
mortgage, including the APR and other charges.
Underwriting: The process of evaluating a loan application
to determine the risk involved for the lender.
Veterans Administration (VA): An agency of the Federal
government which, among other things, insures and
guarantees loans or veterans.
VA Loan: A loan that is partially guaranteed by the Veterans
Administration and made by a private lender.
VA Mortgage Funding Fee: A premium of up to 1-7/8
percent (depending on the size of the down payment) paid
on a VA-backed loan. On a $75,000 fixed-rate mortgage
with no down payment, this would amount to $1,406 either
paid at closing or added to the amount financed.
Variable Rate Mortgage (VRM): See adjustable rate
Verification of Deposit (VOD): A document signed by the
borrower’s financial institution verifying the status and
balance of his/her financial accounts.
Verification of Employment (VOE): Document signed by
the borrower’s employer verifying position and salary.
Warrant: To legally assure that title conveyed is good and
possession will be undisturbed.
Warehouse Fee: Many mortgage firms must borrow funds
on a short term basis in order to originate loans which are
to be sold later in the secondary mortgage market (or to
investors). When the prime rate of interest is higher on
short term loans than on mortgage loans, the mortgage
firm has an economic loss which is offset by charging a
Wrap-Around Mortgage: A second or junior mortgage with
a face value of both the amount it secures and the balance
due under the first mortgage. The mortgage under the
wrap-around collects a payment based on its face value
then pays the first mortgagee. It is most effective when the
first has a lower interest rate than the second, since the
mortgagee under the wraparound contains the difference
between the interest rates, or the mortgagor under the
wrap-around may obtain a lower rate than if refinancing.
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