san diego california guide

Glossary of Real Estate Terms - San Diego, California - Page 2

Real Estate Terms You Will Want To Know
The following terms and phrases are used in Real Estate transactions. A basic understanding of these will help make the process of buying or selling your home a bit easier.

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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 - Created by grant or agreement for a specific purpose, an easement is the right, privilege or interest which one party has in the land of another (i.e. right-of-way).

Escrow - A procedure in which an independent 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.

Equity - The interest or value which an owner has in real estate over and above the liens against real property.

FHA Loan - A loan insured by the Insuring Office of the Department of Housing and Urban Development; the Federal Housing Administration.

Federal National Mortgage Association (FNMA) - Popularly known as Fannie Mae. A privately owned corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by FHA or guaranteed by the VA, as well as conventional home mortgages.

Fee Simple - An estate in which the owner has unrestricted power to dispose of the property as he wishes, including leaving by will or inheritance. It is the greatest interest a person can have in real estate.

Finance Charge - The total cost a borrower must pay, directly or indirectly, to obtain credit according to Regulation Z.

Dedication - An appropriation of land by its owner for some public use and accepted for such use by authorized public officials on behalf of the public. A gift of privately owned land to the public or for public use. It may be voluntary or involuntary.

Deed - Written instrument which, when properly executed and delivered, conveys title.

Deed Of Trust - The Deed of Trust is a security device for a lender. Under California law, the Deed of Trust allows a relatively quick and easy way for a lender to obtain real property with which to satisfy a delinquent loan.

Deficiency Judgement - A judgment given for the unpaid balance of a debt remaining after the surety is sold. A court decree holding a debtor personally liable for the shortage or insufficiency realized on the sale of secured property. The debtor owes the difference between the sale price of the property and the amount of the secured debt.

Disclosure Statement - A statement that the Truth-in-Lending Law requires a creditor to give a debtor showing the finance charge, annual percentage rate, and other required information.

Discount Points - Additional charges made by a lender at the time a loan is made. Points are measured as a percent of the loan, with each point equal to one percent. These additional interest charges are paid at the time a loan is closed to increase the rate of return to the lender so as to approximate the market level.

Due-On-Sale Clause - An acceleration clause that requires full payment of a mortgage or deed of trust when the secured property changes ownership.

Graduated Payment Mortgage - A residential mortgage with monthly payments that start at a low level and increase at a predetermined rate.

Gross Rent Multiplier - A number that reflects the ratio between the sales price of a property and its gross monthly rents. It is used in the income approach of appraising property.

GRI—Graduate Realtors Institute - A professional designation granted to a member of the National Association of Realtors who has successfully completed three courses covering Law, Finance and Principles of Real Estate.

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.

Home Warranty Plan - Protection against failure of mechanical systems within the property. Usually includes plumbing, electrical, heating systems and installed appliances.

Index - A measure of interest rate changes used to determine changes in an ARM’s interest rate over the term of the loan.

Joint Tenancy - An equal undivided ownership of property by two or more persons. Upon the death of any owner, the survivors take the decedents interest in the property.

Land Contract - A contract ordinarily used in connection with the sale of property in cases where the seller does not wish to convey title until all or a certain part of the purchase price is paid by the buyer.

Lien - A legal hold or claim on property as security for a debt or charge (i.e. judgements, taxes, mortgages, deeds of trust, etc.).

Loan Commitment - A written promise to make a loan for a specified amount on specified terms.

Loan-To-Value Ratio - The relationship between the amount of the mortgage and the appraised value of the property, expressed as a percentage of the appraised value.

Margin - The number of percentage points the lender adds to the index rate to calculate the ARM interest rate at each adjustment.

Marketable Title - Merchantable title free and clear of objectionable liens or encumbrances.

Mechanics Lien - Under California law, workmen who provide materials and/or labor to a property owner who is improving his property are entitled to use the real property to satisfy the debt. This type of lien also alerts the selected title company to the possibility of on-going construction work which may affect the priority of a new Deed of Trust.

Mortgage - An instrument recognized by law by which property is hypothecated to secure the payment of a debt or obligation, procedure for foreclosure in event of default is established by statute.

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 insurance proceeds.

Multiple Listing - Multiple Listing is the name given a service performed by the local Board of Realtors (Multiple Listing Service). MLS provides necessary information to aid in the sale of listings. It is a marketing tool used by members of the service to expose properties to a wider market base.

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 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 an ARM has a payment cap that results in monthly payments that are not high enough to cover the interest.

Origination Fee - A fee or charge for work involved in evaluating, preparing and submitting a proposed mortgage loan. The fee is limited to one percent for FHA and VA loans.

Personal Property - Any property which is not real property, (i.e. money, savings accounts, appliances, cars, boats, etc.)

PITI - Principal, interest, taxes and insurance

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. Uses may be residential, commercial or industrial.



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San Diego, California - Last Revision - 04 December 2006 - jat