Glossary

This Glossary has been prepared to assist you in understanding terms commonly used in real estate transactions. The definitions provided are general in nature. All questions concerning the meaning of specific words in specific situations should be referred to an appropriate professional; such as an attorney, accountant, lender, escrow officer or title insurance officer.

1031 Exchange – An exchange of investment real estate that defers the taxable basis

1034 Exchange – An exchange of a persons residence that defers the taxable basis

Acceleration Clause – A clause in a note, trust deed or mortgage advancing the date of maturity of the debt upon the happening of a certain event, such as a sale or transfer of title to property.

Adjustable Rate Mortgage (ARM) – A mortgage with an interest rate that is periodically adjusted up or down, depending on a specific index.

Agency – A relationship between two or more persons whereby one is authorized to act for another.

Amortization – Payment of principal and interest at stated periods for a stated time until debt is paid off.

Annual Percentage Rate (APR) – The finance charges for a loan, including points and other loan fees, that are in addition to interest on the loan.

Appurtenance – Anything incidental to or belonging to land and considered a part of the real property.

Assessed Value – The value of property for taxation purposes.

Assumption of a Mortgage (or Deed of Trust) – An agreement in which the buyer accepts liability for payment of a seller’s existing promissory note secured by a mortgage or deed of trust.

Balloon Payment – A final installment payment larger than preceding installment payments on a promissory note.

Beneficiary – One for whose benefit a trust is created, such as a lender whose loan is secured by a deed of trust.

Beneficiary’s Demand – The payment required by a beneficiary under a deed of trust before authorizing a reconveyance, the removal of the lien on title to property created by a deed of trust.

Beneficiary Statement – The statement of a beneficiary under a deed of trust stating the principal balance due on a promissory note and other information concerning the loan.

Binder – A memorandum of agreement to issue insurance giving temporary coverage until a formal policy is issued.

Chain of Title – A chronological list of documents comprising the record history of title to a specific parcel of real property.

Commitment – A pledge, promise, or firm agreement, such as a title insurer’s contractual obligation to insure title to real property or a lender to make a loan.

Contract of Sale – An agreement entered into for sale and purchase of real property.

Convey – To transfer title to property from one to another.

Dedication – The donation of land for public use by its owner.

Deed – A written document transferring ownership of land from one to another.

Deed of Trust – A three party security document conveying title to land, secured by the performance of an obligation, such as the repaying of a loan. It is also called a trust deed.

Default – Omission or failure to fulfill a duty or promise, discharge an obligation or perform an agreement.

Discount Points – Money paid to lower the interest rate on a loan. Basically it’s prepaid interest ,to the investor making the loan, to guarantee an acceptable rate of return.

Documentary Transfer Tax – A tax on recorded transfers of title to real property.

Down leg Property – The sold property in a 1031 exchange.

Down Payment – The amount or percentage of the purchase price paid by the buyer in cash, not borrowed from the lender.

Due on Sale Clause – A clause in a promissory note or deed of trust calling for automatic maturity and payoff of the loan in the event of a sale or transfer of title to real property.

Duel Agency – When a broker represents both buyer and seller in a transaction.

Earnest Money – Something given by a potential buyer to show good faith in an offer to purchase.

Easement – A limited right or interest in the land of another entitling the easement holder to some use, privilege or benefit.

Encroachment – The extension of an improvement onto the land of another.

Equity – The value of the property actually owned by the property owner, often calculated by adding together the purchase price, appreciation and value of improvements and then subtracting the amount of all mortgages and liens on the property.

Escrow – A transaction in which an impartial,neutral, third party acts as an agent for all principles in a transaction, assuring the execution of agreed upon terms.

Fee Simple – Absolute ownership of real property.

Fixture – Personal property that is considered a part of the real property because of the way it was affixed to the structure or land.

Foreclosure Sale – The sale of real property given to secure performance of an obligation after the obligation has been breached. Also known as Trustee Sale.

Grant Deed – A written instrument transferring title to real property.

Grantee – The person/entity acquiring title to real property by a deed.

Grantor – The person/entity transferring title to real property by a deed.

Interest – The cost of borrowing money, usually expressed as a percentage over time.

Lien – A charge on real property in order to secure payment or satisfaction of a debt or other obligation.

Legal Description – A description of real property sufficient to locate it on the ground by reference to surveys or approved recorded maps.

Lis Pendens – A recorded notice of the pendency of a lawsuit.

Notice of Default or NOD – A recorded notice of a borrower’s failure to perform the obligations in a deed of trust. Precursor to a foreclosure.

Ordinance – A legislative enactment of a city or county.

Party Wall – A wall located on a boundary line of real property and used by the owners of the property on each side.

PITI – The amount of principal, interest, taxes and insurance which are the bases for monthly mortgage payments.

Point One Point = one percent of the loan principal, charged in part or in multiples to obtain a loan, in addition to interest and other fees. see Discount Points.

PrePayment Clause – A charge imposed by a lender for payment of a debt before its due date.

Principal – A party to a contract; also, the amount of money borrowed upon which interest is charged.

Promissory Note – A written promise, signed by the borrower, to repay a loan.

Probate – The division or assessment or an estate. Based upon a will or the state.

Public Report – A report issued by the California Department of Real Estate containing a wide variety of information of interest to a prospective buyer of subdivided property.

Real Property – Immovable property such as land and improvements on it, such as buildings.

Reconveyance – A document, executed when obligations in a deed of trust have been met, that removes the lien on title to property created by a deed of trust.

Recording – The act of filing documents in the office of the County Recorder.

Request for Reconveyance – A written instruction by a beneficiary under a deed of trust acknowledging that the obligations in the deed of trust have been met, and directing that the lien on title to the property created by the deed of trust be removed.

Rescission – The act of canceling the effect of a document.

Rider – A supplement, addition, or endorsement to a document.

Statute of Frauds – A law requiring certain agreements to be in writing in order to be enforceable, including an agreement for the sale of real property.

Starker Exchange – A 1031 exchange that does not have concurrent closing of the up leg and down leg escrows

Straight Note – A promissory note calling for payment of principal in one sum rather than in installments.

Subdivision – The division of a tract of land into separate parcels.

Tax Service – The fee charged to a borrower by a lender to establish the notification of a real estate tax default

Title – A mode of ownership of a specific parcel of property.

Title Insurance or Title Policy – A contract indemnifying the policy holder against loss resulting from a defect in the title to the insured interest in real property.

Title Search – The steps required to complete the chain of title to a parcel of real property.

Trustee – The fiduciary designated to hold title to real property for the benefit of another.

Trustee Sale – The final foreclosure procedure.

Up leg Property – The newest acquired property in a 1031 exchange

Usury – The exaction of a greater payment or return for a loan of money than is permitted by law.

Licensed Real Estate Broker with the Calif. Dept. of Real Estate