Common Real Estate Terms
COMMON REAL ESTATE TERMS THAT MAY BE USED DURING YOUR CONDO SEARCH:
Comparables: AKA comps
Properties which are similar to a particular property and are used to compare and establish a value for that property.
For Sale By Owner:
An individual homeowner who is attempting to sell his/her property without a real estate broker.
Asking (list) price:
The price placed on a property for sale.
An opportunity for prospective buyers to view a house in a low pressure environment.
A legal process instituted by a lender after the owner’s default. Foreclosed upon homes are also known as “bank owned” or REO (Real Estate Owned) Properties
The price that a willing buyer and a willing seller, both given full information, and neither under pressure to act, would agree upon.
Multiple Listing Service
An online, members only website by which a number of real estate firms share information about homes that are for sale.
A sale of a house in which the proceeds fall short of what the owner still owes on the mortgage. Many lenders will agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the owner cannot make the mortgage payments. By accepting a short sale, the lender can avoid a lengthy and costly foreclosure, and the owner is able to pay off the loan for less than what they owe. Short sales do have a negative impact on the owner/sellers credit.
COMMON REAL ESTATE TERMS DURING THE OFFER AND NEGOTIATIONS STAGE:
The rejection of an offer to buy or sell that simultaneously makes a different offer, changing the terms in some way. A counter offer can address price or terms- anything from the closing date to possession of the refrigerator. Counter offers to multiple buyers competing for the same home are not necessarily the same.
When a homes in multiples, it means that the seller has received offer from more than one prospective buyer. This indicates that the home is highly sought after and is likely to sell for more than the asking price.
A seller’s consent to enter into a contract and be bound by the terms of the offer.
COMMON REAL ESTATE TERMS REGARDING LOANS:
Adjustable Rate Mortgage:
A mortgage loan whose interest rate fluctuates according to the movements of an assigned index or a designated market indicator- such as the weekly average of one year Treasury Bills – over the life of the loan. To avoid constant and drastic fluctuations, ARMS typically limit how often and by how much the interest rate can vary.
The process of verifying data and approving a loan.
A person or company having contacts with financial institutions or individuals wishing to invest in mortgages. Mortgage brokers “shop” different banks to find you the best rates and terms on your best, whereas banks like Bank of America and Wells Fargo do not. Banks market their own products exclusively.
Principal, Interest, Taxes and Insurance, which comprise a buyer’s monthly payment.
COMMON REAL ESTATE TERMS REGARDING REAL ESTATE AGENCY:
The legal relationship between a buyer or seller and his/or her agent.
The company that the agents work for is the brokerage.
A special designation for a real estate associate who holds active membership in a local real estate board affiliated with the National Association of Realtors®. Not to be confused with a real estate agent, who as no obligation to abide by the Board’s strict Code of Ethics.
COMMON REAL ESTATE TERMS THAT MAY BE USED DURING ESCROW:
A modification to an existing contract, mutually agreed to by all parties, and executed to by the escrow company. Examples include a change in the closing date or repair credits negotiated after the inspection.
Costs the buyer must pay at the time of the closing in addition to the down payment. These may include lender fees or points, title fees, and escrow company fees. A good rule of calculating the closing costs is 2% of the purchase price.
A detailed written summary of a real estate transaction, showing all credits and charges made and all cash received and paid out.
The compensation paid to a licensed real estate broker or by the broker to the salesperson for services rendered. Usually a percentage of the selling price of the property.
A provision in a contract stating that some or all of the terms of the contract will be altered or voided by the occurrence of a specific event. A typical offer will include an inspection contingency, as well as a loan/appraisal contingency.
A buyer’s onsite inspection of the property being purchased., just prior to closing, in order to ensure the home is in substantially the same condition.
During the inspection period, sellers are obligated to provide to buyers with disclosures addressing physical defects, environmental hazards and neighborhood nuisances, to the best of their knowledge
A determination of the value of something, such as a house, jewelry or stock. A professional appraiser, a qualified disinterested expert makes an estimate by examining the property and comparing it with recent sales of similar homes. Your lender will typically arrange the appraisal to ensure the home is valued at the purchase price agreed upon.
A local government official who determines the value of the property for taxation purposes.
Los Angeles county requires that all homes sold be retrofitted with low flow toilets, gas shut off valves, water heater bracing, as well as smoke detectors in all hallways and sleeping areas prior to closing. It is customary in standard transactions for the seller to complete the work required and submit evidence of “certification” to the escrow company.
A service contract typically paid by seller and provided to buyers in a standard sale that covers the major systems and appliances for one year from the date a house is sold.
A scenario in which a buyer closes escrow in a home but allows the seller to remain in possession for a fixed period of time, typically 30-45 days after closing. During this period, the seller is “leasing” the home from the buyer at an agreed upon price, and the buyer acts as landlord.
Taxes that are paid annually in two installations on real property. Property taxes are ad valorem based on the assessed value of the real property. Annual taxes are currently 1.25% on Los Angeles County.
Time is of the essence:
A clause which makes failure to perform by a specified date a material breach or violation of the contract. Purchase agreements in LA contain strict timelines which good agents will monitor closely to ensure that all agreed upon deadlines are met.
The right of ownership of a property.
A company that provides title insurance policies. Title companies conduct ensuring that no one else has a right or a claim to the home being purchased.
Natural Hazard Disclosure:
A required report paid for by the seller and provided to the buyer with other disclosures. The NHD includes information regarding any fault lines, flood zones, fire severity zones, and industrial use zones within the home’s immediate vicinity.
Protection for lenders or homeowners against financial loss resulting from legal defects in the title.
Checks all the records relating to the property to determine whether the seller can sell the property and can do so free of liens.
Additions or modifications to a home made without the benefit of a permit, such as a converted garage. Though common, these structures or improvements may not be in compliance with current building codes.
To divide or distribute proportionally. At closing, various expenses such as taxes, insurance, and interest are prorated by the escrow company between seller and buyer.
A written instrument by which title to land is conveyed.
The act of entering in the public records the written record of title to real property.
COMMON REAL ESTATE TERMS REGARDING CONDOS:
Convenants, Conditions, and Restrictions:
Rules governing the use of condos, usually enforced by a homeowner’s association. CC&R’s typically address monthly dues, whether pets are allowed, etc.
A dispute resolution method designed to help warring parties resolve their dispute without going to court. In mediation, a neutral third party meets with the opposing sides to help them find a mutually satisfactory solution.
REAL ESTATE TERMS REGARDING RENTING:
Laws that limit the amount of rent that landlords may charge, and that state when and by how much the rent can be raised. Most rent control laws also require a landlord to provide a good reason, such as repeatedly late rent, for evicting a tenant. Many communities in Los Angeles county are subject to rent control provisions. If you are purchasing an income property, it is imperative to investigate local laws that may impact your investment.