If you are involved in a real estate transaction here in the Silicon Valley, you may be confused with all the terminology you are going to hear throughout the process.
I have gathered for you some of the most common real estate terms you are likely to hear:
Appraisal: If you are applying for a loan your lender will send out an appraiser to determine the value of the home. This will be packaged into your loan cost.
Chain of Title: If you are purchasing a property transfer-ability of the property will be checked from the time records were available to ensure that there are no liens or encumbrances on the property which would affect you taking title.
Cloud on Title: the result of finding something on the above search. This may or may not be valid, but until it is cleared you will not be able to take title.
Comparative Market Analysis (CMA): You will hear this a lot from your agent if you are thinking of making an offer. They will conduct one of these, which compares your property with other comparable ones which have sold in the area. If nothing has sold, then your agent will have to go further afield. But the aim is to ensure that you are paying the proper price.
Condominium: Simply put, ownership of a unit in a multi-unit building.
Contingency period: These are time frames for both the buyer and seller to fulfill certain conditions of the contract: e.g. the buyer will have x number of days to conduct an inspection and release their loan and appraisal conditions. The seller also has certain contingency deadlines, but they don’t have to remove them. The buyer does. Once these contingencies are released the buyer cannot back out for any of those reasons.
Coop: There are very few of these in the Bay area. Here you own shares in the corporation which owns the building. Each owner can sell their own unit. Loans are not readily available for this kind of property, and it is usually with cash. Also the board have to approve new owners, and leases are often not allowed.
Counter Offer: When an offer is submitted by a buyer to a seller, the seller can either accept the offer or counter the offer. By the same token, the buyer can accept the counter or counter themselves. These counters can go back and forth indefinitely. If at any point either side is not interested in the terms they can just let the offer expire.
Covenants Conditions and Restriction (CC&Rs): These are the rules and limits applied properties that have a homeowners association. A buyer looking to purchase in one of these communities will be required to check out the CC&Rs before removing all their contingencies.
Deed of Trust or Trust Deed: This is used to convey the title to a property to a third person as security, generally the lender for the loan.
Deferred Maintenance: Short and sweet the property has been been maintained in a while and is going to need work.
Earnest Money Deposit (EMD) or Good Faith Deposit (GFD): upon the seller’s acceptance of the buyer’s offer escrow will be opened and the buyer has three days to put this deposit into escrow, usually 3% of the purchase price. This money is refundable if the buyer follows all the contingencies but cannot perform for good reason. If contingencies are removed and the buyer does not perform the seller is entitled to this money.
Easement: Can be found on the report. It means that permission has been granted for right-of-way on your property, e.g. electricity lines, phone cables, etc.
Escrow: Professional neutral party who is assigned to manage the sale transaction through to completion.
Fanny Mae: The Federal Housing Mortgage Association.
Foreclosure: The process of taking possession of a mortgaged property as a result of the mortgagor’s defaulting on the bank..Lender is taking possession of the real estate property (see Trustee’s Sale).
Good Faith Deposit: a check or through wire transfer for the escrow company within three days of contract signature, usually 3% of the purchase price. This is fully refundable should you decide not to continue with the purchase if.you have the requested contingency unexpired.
Grant Deed: this is the conveyance of the property from the seller (the grantor) to the buyer (the grantee) ensuring that there are no liens or encumbrances (clear title) on the property.
Homeowners Association (HOA): This is a group of people in a community, such as a condominium building formed to manage the financial affairs and operations of those communities.
Home Warranty: This is usually a buyer request on the purchase contract. The seller pays for a one year home warranty policy to cover the buyer should appliances breakdown.
HUD1 Statement: Provided by the escrow company at closing showing the costs involved in the transaction, both for the seller and buyer.
Leaseback or Sale Leaseback: The buyer grants the right to the seller to remain in the property. Most commonly up to 55 days after the close of escrow.
Multiple Listing Service (MLS): An online listing service, usually provided by the local real estate board, which allows for the sharing of listings among Realtors.
Notice of Default (NOD): This is recorded at counter recorder’s office and states that the trust deed is in default. The owner has three months after this notice to reinstate the loan.
Purchase Contract: The legal instrument with which a buyer makes an offer to a seller that is stating the terms of a purchase.
Quitclaim Deed: Often done in the case of divorce where one party grants full rights to the property to the other.
REO (real estate owned): This is a Property owned by a lender after an unsuccessful sale at a foreclosure auction. See foreclosure.
Short Sale: A home that is for sale at a price lower than the amount owed on the mortgage. The initial purchase process is the same, whereby the buyer and seller come to an agreement on price and terms. Remember, the lender is losing money, hence the length of the transaction. Also, in this kind of transaction, the seller/lender is unlikely to approve repairs requested buy the buyer.
Termite Report: This is a buyer common requested in the purchase contract. More properly referred to as a Wood Destroying Pest and Organism inspection report, entails a thorough inspection of the exterior and interior of the structure and should infestation be found, to remedy it.
Time is of the Essence: It means that performance by one party at a period specified in the contract is necessary to enable that party to require performance by the other party. In short: Timelines need to be met.
Title Insurance: This is an insurance which covers the owner of a property against loss or defect should some unknown issues arise after they have assumed ownership. The seller usually pays for the owners policy, CLTA, and if the buyer is assuming a loan, an ALTA policy is requested by the lender .
Transfer Disclosure Statement (TDS): Seller is under the obligation to disclose to the buyer all known conditions and issues with the specific piece of property. Only in the case of a foreclosure, or in a probate, a TDS will not be issued.
Trustee: Someone who holds the property in trust for another, most commonly the lender.
Trustee’s Sale: When a foreclosed property does not sold at auction (trustee’s sale) becomes lender owned.
Stephanie Perrault Realtor Associate
Coldwell Banker Residential