Real Estate Glossary

A provision in a loan that allows the lender to demand full repayment of the outstanding balance if the borrower defaults or violates loan terms.

A home loan with an interest rate that changes periodically based on a market index, typically after an initial fixed period.

The gradual reduction of a loan balance through regular principal and interest payments over a set period.

The true yearly cost of a loan including fees and interest, expressed as a percentage. Always higher than the stated interest rate.

A licensed professional's estimate of a property's fair market value based on recent comparable sales, condition, and location. Required by most lenders.

A transaction in which the seller offers no repairs or credits; the buyer accepts the property in its current condition, though inspections are still typically allowed.

The dollar value placed on a property by a county assessor for property tax purposes — often different from market value.

A secondary offer accepted by a seller contingent on the primary offer failing. The backup buyer is next in line if the first deal falls apart.

A large lump-sum payment due at the end of a loan term that has not been fully amortized through regular payments.

Short-term financing used to cover the gap between buying a new property and selling the current one. Higher rates and fees apply.

A licensed agent representing the buyer's interests in a transaction, typically compensated by the seller's proceeds through a cooperative commission.

A real estate market where supply exceeds demand, giving buyers negotiating leverage over price and terms.

Capitalization Rate — a property's annual net operating income divided by its purchase price, used to evaluate investment return potential.

Covenants, Conditions & Restrictions — rules governing what owners can and cannot do with properties in a planned community or HOA.

A property title free of liens, encumbrances, or legal questions about ownership. Required to complete most real estate sales.

The final step in a real estate transaction where ownership transfers, documents are signed, funds are disbursed, and keys are exchanged.

Fees paid at settlement typically totaling 2–5% of the purchase price, including escrow, title, lender fees, prepaid taxes, and insurance.

Any document, claim, or encumbrance that may impair clear title to a property — must be resolved before closing.

Compensation paid to real estate agents, typically a percentage of the sale price negotiated in the listing agreement.

A detailed report comparing recently sold, active, and expired listings to estimate a property's competitive market value.

A mortgage that meets Fannie Mae or Freddie Mac guidelines for purchase — including loan limits, credit, and documentation requirements.

A condition written into a purchase contract that must be satisfied for the sale to proceed — common types include financing, inspection, and appraisal.

A mortgage not backed by a government agency (FHA, VA, USDA), typically requiring stronger credit and larger down payments.

A seller's (or buyer's) response to an offer that changes one or more terms, effectively rejecting the original and proposing new terms.

The number of days a property has been listed for sale. High DOM can signal overpricing; low DOM suggests strong demand.

A lender's measure of a borrower's monthly debt obligations compared to gross monthly income. Most conventional loans require DTI below 43%.

The legal document that transfers ownership of real property from seller to buyer. Must be recorded in the county where the property is located.

An arrangement where a borrower voluntarily transfers property title to the lender to avoid foreclosure.

Failure to meet the terms of a loan agreement — typically missed payments — which can trigger foreclosure proceedings.

Written statements legally required of sellers revealing known material defects, property history, and conditions that could affect value or desirability.

The portion of a property's purchase price paid in cash at closing. Typically 3.5–20% of the purchase price depending on loan type.

The buyer's investigation period to review disclosures, conduct inspections, verify title, and confirm financing before removing contingencies.

When a single agent or brokerage represents both the buyer and seller in the same transaction. Requires written consent from both parties in California.

A good-faith deposit submitted with a purchase offer, held in escrow and credited toward the purchase price at closing.

A legal right for another party (neighbor, utility company) to use a portion of a property for a specific purpose without owning it.

Any claim, lien, or restriction on a property's title that may affect its use or transferability.

The difference between a property's current market value and the outstanding loan balance. Builds through appreciation and mortgage paydown.

A neutral third party — typically a title company or escrow firm — that holds funds, documents, and instructions until all transaction conditions are met.

A lender-managed account funded monthly to collect and pay property taxes and homeowner's insurance on the borrower's behalf.

The price a willing buyer would pay and a willing seller would accept with neither under pressure and both having reasonable knowledge of the facts.

A government-backed mortgage insured by the Federal Housing Administration, allowing down payments as low as 3.5% with more flexible credit requirements.

A home loan with an interest rate that remains constant for the entire loan term, providing predictable monthly payments.

The legal process by which a lender takes possession of a property after a borrower defaults and sells it to recover the outstanding loan balance.

A property listed and sold directly by the homeowner without agent representation — typically to avoid paying a listing commission.

The most common type of deed in California conveying ownership with implied warranties that title has not been transferred to another party.

A quick valuation metric: property price divided by annual gross rental income. Lower GRM generally indicates better value for investors.

A professional visual examination of a property's physical condition including structure, systems, and major components — strongly recommended before purchase.

An organization governing a planned community, condo, or PUD that enforces rules and collects dues to maintain common areas and amenities.

Property insurance covering damage to the home structure and personal belongings, plus liability protection. Required by virtually all mortgage lenders.

A federally required form (now replaced by the Closing Disclosure) that itemizes all charges and credits in a real estate transaction.

See Escrow Impound Account — funds held by a lender to pay property taxes and insurance as they come due.

The percentage charged on the outstanding loan balance, expressed annually. Affects monthly payment and total cost of borrowing.

Real estate purchased to generate rental income or capital appreciation rather than as a primary residence. Often requires 20–25% down.

A form of co-ownership where two or more parties hold equal shares with right of survivorship — when one owner dies, their share passes automatically to survivors.

A mortgage exceeding conforming loan limits set by Fannie Mae/Freddie Mac (currently $806,500 in Los Angeles County). Requires stronger credit and larger reserves.

A legal claim against a property as security for a debt. Must be resolved (paid or released) before clear title can transfer.

The price at which a property is offered for sale. Not necessarily indicative of actual value — compare against CMAs and recent sales.

A contract between a seller and their agent authorizing the brokerage to market and sell the property under specified terms.

A fee charged by the lender for processing a new mortgage application, typically 0.5–1% of the loan amount.

The mortgage amount divided by the appraised property value. Higher LTV means less equity and typically higher rates or required mortgage insurance.

The middle price point of all homes sold in a given area during a period — half sold for more, half for less. A key market health indicator.

A special tax assessed in California on properties within Community Facilities Districts to fund public infrastructure and services.

A shared database of property listings used by member brokers to cooperate on sales. CRMLS is the primary MLS serving Southern California.

A loan secured by real property where the borrower pledges the property as collateral. Failure to repay can result in foreclosure.

Insurance required on FHA loans protecting the lender against borrower default — paid as upfront and annual premiums.

A required California disclosure identifying whether a property lies within flood, fire, earthquake, or other natural hazard zones.

Gross rental income minus operating expenses (excluding mortgage payments) — the foundation for evaluating investment property value.

A public notice filed by a lender when a borrower is 90+ days delinquent, initiating the formal foreclosure process in California.

A formal, written proposal to purchase a property at specified price and terms. Becomes a binding contract when accepted by the seller.

A scheduled period during which a property is open for public viewing without an appointment — a common marketing tool for listed homes.

An arrangement where the seller extends credit to the buyer rather than requiring a traditional mortgage, acting as the lender.

A listing status indicating the seller has accepted an offer and contingencies are being resolved. Property is no longer actively marketed.

Principal, Interest, Taxes, and Insurance — the four components of a typical monthly mortgage payment. Used by lenders to qualify borrowers.

Prepaid interest paid to a lender at closing to lower the interest rate. One point equals 1% of the loan amount.

A lender's conditional commitment to loan a specific amount based on verified income, assets, and credit. Strengthens offers significantly.

An informal lender estimate of borrowing capacity based on self-reported financials. Less rigorous than pre-approval.

A report issued by a title company identifying any liens, easements, or encumbrances on a property before closing.

The original loan amount borrowed, or the remaining balance excluding interest. Each payment reduces principal over time.

Insurance required on conventional loans with less than 20% down, protecting the lender. Can be removed once equity reaches 20%.

The court-supervised sale of a deceased person's real property. Requires court confirmation and has unique procedural requirements.

Annual taxes levied by local government based on assessed value. In California, Prop 13 limits annual increases to 2% until resale.

California's landmark 1978 law that caps property tax rates at 1% of assessed value and limits annual assessment increases to 2%.

California law allowing homeowners 55+ (and others) to transfer their property tax base to a new home anywhere in the state.

A deed that transfers whatever ownership interest the grantor has without any warranties. Common between family members or to clear title issues.

A lender's guarantee that a specific interest rate will be held for a set period (typically 30–60 days) while a loan is processed.

Property owned by a bank or lender after an unsuccessful foreclosure auction. Sold as-is, often at a discount.

A licensed real estate agent who is a member of the National Association of REALTORS® and bound by its Code of Ethics.

The official filing of a deed or other legal document with the county recorder's office, creating a public record of ownership transfer.

Replacing an existing mortgage with a new one — typically to lower the rate, reduce payments, or access equity through a cash-out refi.

Government regulation limiting rent increases on eligible residential properties. Los Angeles has local rent control and California's AB 1482 provides statewide protections.

See Real Estate Owned — bank-owned property resulting from foreclosure, sold directly by the lender.

The final agreed price at which a property transfers ownership. May differ from list price depending on market conditions and negotiations.

Written statements the seller must provide about known material defects, hazards, and conditions affecting the property.

A market condition where demand exceeds supply, giving sellers leverage to command higher prices and better terms.

A sale in which the lender agrees to accept less than the full mortgage balance to avoid foreclosure. Requires lender approval and typically takes longer.

A legal remedy requiring a party to fulfill their contractual obligations — often sought when a seller tries to back out of an accepted offer.

An agreement in which a lender consents to have their lien take lower priority than another lender's claim on the same property.

Co-ownership where each party holds a distinct, divisible share that can be sold or willed independently — no right of survivorship.

Legal ownership of real property. A clear title is required to complete most sales.

Insurance protecting buyers and lenders against financial loss from hidden title defects, liens, or ownership disputes discovered after closing.

An examination of public records to trace the history of a property's ownership and identify any title defects or encumbrances.

A tax imposed on the transfer of real property, collected at closing. California charges $1.10 per $1,000 of value; Los Angeles County adds additional.

The sale of property held in a trust. The trustee has authority to sell without court approval, unlike a probate sale.

A status indicating a seller has accepted an offer but the sale has not yet closed. Contingencies may still be active.

The lender's process of evaluating a borrower's creditworthiness, the property value, and other risk factors before approving a mortgage.

A mortgage guaranteed by the Department of Veterans Affairs available to eligible service members, veterans, and surviving spouses. No down payment required.

Official permission from a local government to deviate from current zoning or building code requirements for a specific property.

A buyer's final inspection of a property shortly before closing to verify condition, repairs, and that all agreed items remain.

Government regulations controlling how land in specific areas may be used — residential, commercial, industrial — and what can be built there.