California Real Estate Terminology

Estoppel

A legal theory under which a person is barred from asserting or denying a fact because of the person's previous acts or words.

First Mortgage

A mortgage having priority over all other voluntary liens against certain property. The mortgage that is superior to all others, usually determined by the order in which it was recorded.

Assumption

Agreement by a buyer to assume the liability under an existing note secured by a mortgage or deed of trust.

Government Patent

Deed of title transferred by the Government to a grantee.

Base and Meridian

Imaginary lines used by surveyors to find and describe the location of private or public lands. In government surveys, a base line runs due east and west, meridians run due north and south, and are used to establish township boundaries.

Chain of Title

The chronological order of conveying of a parcel of land, starting from original owner.

Alienation

The transferring of property to another; the transfer of property and possession of land, or other things from one person to another.

Basis

(1) Cost basis is the dollar amount assigned to property at the time of acquisition under provisions of the Internal Revenue Code for the purpose of determining gain, loss and depreciation in calculating the income tax to be paid upon the sale or exchange of property. (2) Adjust basis is the cost basis after the application of certain additions for improvements, etc., and deductions for depreciation, etc.

Condition

(1) In contract law, a future and uncertain event which must happen to create an obligation or which extinguishes an existent obligation. (2) In conveyances of real property conditions in the conveyance may cause an interest to be vested or defeated.

Beneficiary

(1) The lender on the security of a note and deed of trust. (2) One entitled to the benefit of a trust. (3) One who receives profit from an estate, the title of which is vested in the trustee.

ALATA Title Policy

(American Land Title Association) A type of title insurance policy issued by title insurance companies which expands the risks normally insured against under the standard policy to include unrecorded mechanic's liens; unrecorded physical easements; facts a physical survey would show; water and mineral rights; and rights of parties in possession, such as tenants and buyers under unrecorded instruments.

Federal Housing Administration

(FHA) An agency of the federal government that insures private mortgage loans for financing of new and existing homes and home repairs.

Encumbrance

A claim, lien, charge, or liability attached to and binding real property.

Comparative Analysis

A comparison of similar properties to a subject property for the purpose of evaluating market value and proper pricing.

Deed

A conveying written instrument used to pass title to property upon sale from one person (grantor) to another person (grantee). To be valid a deed must be properly executed and delivered.

Creative Financing

A general term which encompasses any method of financing property going beyond traditional real estate lending.

Eminent Domain

A governmental right to acquire property for public use by condemnation, and the payment of just compensation.

First Trust Deed

A legal document pledging collateral for a loan (see Trust Deed) that has first priority over all other claims against the property except taxes and bonded indebtedness. The trust deed that is superior to all others, usually determined by the order in which it was recorded.

Grant Deed

A limited warranty deed using the word "grant" like words that assures a grantee that the grantor has not already conveyed the land to another and that the estate is free from encumbrances placed by the grantor. The most common deed form used in California.

Exclusive Right to Sell

A listing contract whereby the owner promises to pay a commission to the broker if property is sold during a stated period, regardless of whether or not the broker is the cause of sale.

Exclusive Agency Listing

A listing under which the broker's commission is protected against a sale by other agents but not by a sale by the principal.

Balloon Payment

A lump sum payment, usually at the end of the term of a note with terms insufficient to fully amortize the loan, or due prior to the end of the amortization period.

Adverse Possession

A method of acquiring title by possession under certain conditions. Generally, possession must be open, continuous, and hostile. Exact time of possession and specific requirements vary from state to state.

Gross Rent Multiplier

A method of obtaining an approximate value of income property by using gross yearly rents. Multiplier amount is calculated by dividing sale price of an investment property by annual rents relating to property.

Ad Valorem

A method of taxation using the value of the real estate to determine the amount of the tax.

Conventional Loan

A mortgage or deed of trust not obtained under a government program, i.e., which is not FHA insured or VA guaranteed. Type of loan customarily made by a bank or savings and loan association.

Escrow

A neutral third party which receives all funds and instruments necessary to a sale, and which processes them according to instructions.

Balloon Note

A note calling for periodic payments which are insufficient to fully amortize the loan, so that a principal sum known as a balloon is due at maturity.

Domicile

A person's legal residence.

Foreclosure

A procedure in or out of court, to extinguish all rights, title, and interest of the owners of property in order to sell the property to satisfy a lien against it.

Fraud

A procedure in or out of court, to extinguish all rights, title, and interest of the owners of property in order to sell the property to satisfy a lien against it.

Cal-Vet Program

A program administered by the State Department of Veterans Affairs for the direct financing of farm and home purchases by eligible California veterans of the armed forces. Uses a Land Contract with the State as Vendor and Vet as the Vendee.

Escheat

A reversion of property to the state in the absence of an individual owner, usually when a property owner dies without a will.

Easement

A right created by grant, reservation, agreement, prescription, or necessary implication, which one has in the land of another.

Distress Sale

A sale of property when the seller is under extreme pressure to sell, and which generally results in the property selling for less than market value.

Condominium

A structure of two or more units, the interior space of which are individually owned, with the balance of the property (both land and building) owned in common by the owners of each unit.

Assignment

A transfer to another of any property, real or personal, or of any rights or estates in said property.

Bundle of Rights

All rights and interests of ownership in real property considered together, but separable.

Gross Acre

An acre (43,560 square feet), as distinguished from a net (usable) acre.

Contract

An agreement to do or not to do a certain thing. It must have four essential elements - parties capable of contracting, consent of the parties, a lawful object or purpose and consideration. A contract for sale of real property must also be in writing and signed by the party or parties to be charged with performance.

Contribution, Principle of

An appraisal term wherein a component part of a property is valued in proportion to its contribution to the value of the whole. Holds that maximum values are achieved when the improvements on a site produce the highest (net) return, commensurate with the investment.

Estate for Life

An estate in real property for the life of a living person. The estate then reverts back to the grantor or to a third party.

Fee

An estate of inheritance in real property.

Freehold Estate

An estate of interminable duration, e.g., fee simple or life estate.

Fee Simple Estate

An estate under which the owner is entitled to unrestricted powers to dispose of the property, and can be left by will or inherited. The greatest interest one can have in real property

Estate of Inheritance

An estate which may descend to heirs.

Estate in Remainder

An estate which vests in one other than a grantor, after the termination of an intermediate estate.

Contract for Deed

An installment contract for the sale of real estate, where the seller has legal title until paid in full. The buyer only has equitable title during the contract term. Also known as a land sale contract or installment sale contract.

Bill of Sale

An instrument by which one transfers personal property.

Goodwill

An intangible but saleable asset of a business derived from the expectation of continued public patronage.

Estate from Period to Period

An interest in land where there is no definite termination date but the rental period is fixed at a certain sum per week, month, or year. Also called a periodic tenancy.

Bridge Loan

An interim loan, generally made between a short term loan and long term loan, when the borrower needs to have more time before taking the long term, or permanent, financing.

Estate for Years

Any estate for a definite period of time, such as a lease.

Appurtenance

Any part of real property which passes upon the transfer, either attached or not, such as a barn or an easement.

Agency

Any relationship in which one party (Agent) acts for or represents another (Principal), under the authority of the latter.

Capital Gains

Gains realized from the sale of capital assets, and generally the difference between cost and selling price, less deductible expenses. Used mainly for income tax purposes.

Encroachment

Generally, construction onto the property of another, as of a wall, fence, building, etc.

Emblements

Growing crops. Are considered personal property.

Caveat Emptor

Let the buyer beware. The buyer must examine the goods or property and buy at his or her own risk, absent misrepresentation.

Economic Obsolescence

Loss of desirability and useful life of a property through economic forces, such as zoning changes, traffic pattern changes, etc., rather than deterioration.

Depreciation

Loss of value of property brought about by age, physical deterioration or functional or economic obsolescence. The term is also used in accounting to identify the amount of the decrease in value of an asset that is allowed in computing the value of the property for tax purposes.

Equity

Market value of real property, less the amount of existing loan balances.

Collateral

Marketable real or personal property which a borrower pledges as security for a loan. In mortgage transactions, specific land is the collateral to secure the performance of a principal agreement (the promissory note).

Fiduciary

One acting in a relationship of trust and confidence. In real estate practice as between a principal (seller or buyer) and a broker. The fiduciary owes the duties of loyalty, accounting, disclosure, care and confidentiality. These duties cannot be breached.

Grantee

One to whom property or property rights is given, generally the buyer.

Agent

One who acts for and with authority from another called the principal.

Assignor

One who assigns or transfers property.

Grantor

One who transfers property or property rights. One who gives a deed.

Equitable Ownership

Ownership by one who does not have legal title, such as a vendee under a land sales contract.

Cotenancy

Ownership interest in a particular parcel of land by more than one person, i.e., tenancy in common, joint tenancy.

Fixtures

Personal property which is attached to real property, and is legally treated as real property while it is so attached.

Chattel

Personal property. Goods or every species of property movable or immovable which are not real property.

Community Property

Property acquired by husband and/or wife during a marriage when not acquired as the separate property of either spouse. Each spouse has equal rights of management, alienation and testamentary disposition of community property.

Free and Clear

Real property against which there are no liens, especially voluntary liens.

Deferred Maintenance

Repairs necessary to put a property in good condition.

Comparables

Similar properties used as comparisons to determine the value of a specific property. Also known as comparable sales.

Deed of Trust

Similar to a mortgage, a security instrument whereby real property is given as security for a debt. See Trust Deed.

Discount Points

The amount of money the borrower or seller must pay the lender to get a mortgage at a stated interest rate. A point is equal to one percent of the loan amount.

Build to Suit

The building of a structure to meet the specifications of a purchaser.

Capitalization

The determination of present value of income property by taking the annual net income, and dividing by a rate of return percentage which is commonly acceptable to buyers of similar properties (i.e. $10,000 / 11% = $90,909).

Fiduciary Duty

The duty owed by an agent to act in the highest good faith toward the principal and not to obtain any advantage over the principal by the slightest misrepresentation, concealment, duress or pressure. The common law fiduciary duties are loyalty, accounting, disclosure, care and confidentiality.

Dedication

The giving of land by its owner to a public use and the acceptance for such use by authorized officials on behalf of the public.

Estate

The interest or nature of the interest which one has in property.

Fictional Obsolescence

The need for replacement because a structure or equipment has become inefficient because of improvements since discovered or invented.

Capitalization Rate

The percentage used to determine the value of income property through capitalization. The selected capitalization rate is the yield rate that is necessary to attract the money of the average investor to a particular kind of investment. The yield rate is used in the process of determining value based upon net income.

Blockbusting

The practice on the part of unscrupulous speculators or real estate agents of inducing panic selling of homes at prices below market value, especially by exploiting the prejudices of property owners in neighborhoods in which the racial make-up is changing or appears to be on the verge of changing. This practice is prohibited by fair housing laws.

Attachment

The process by which real or personal property of a party to a lawsuit is seized and retained in the custody of the court for the purpose of acquiring jurisdiction over the property, to compel an appearance before the court, or to furnish security for a debt or costs arising out of the litigation.

Economic Life

The profitable life of an improvement, which is generally shorter than the physical life.

Dual Agency

The representation by an agent of opposing principals (buyer and seller) at the same time. This practice is legal only if properly disclosed.

Closing Statement

The required computation of financial adjustment between buyer and seller as of the day of closing. The final statement in most real estate transactions is known as a HUD-1 statement.

Air Rights

The rights in real property to the reasonable use of the air space above the surface of the land.

Condemnation

The taking of private property for public use without the consent of the owner, but only upon payment of just compensation.

Fair Market Value

This is the amount of money that would be paid for a property offered on the open market for a reasonable period of time with both buyer and seller knowing all the uses to which the property could be put and with neither party being under pressure to sell or buy.

Assigns, Assignees

Those to whom property or interests therein shall have been transferred.

Fair Housing Law

Title VIII of the Civil Rights Act, which forbids discrimination in the sale or rental of residential property because of race, color, sex, religion, or national origin.

Attest

To affirm to be true or genuine; an official act establishing authenticity.

Conveyance

Transfer of title to land. Includes most instruments by which an interest in real estate is created, mortgaged, or assigned.

Duress

Unlawful constrain exercised upon a person whereby he or she is forced to do some act against his or her will.

Boot

Unlike property used to equalize equities in an exchange that will trigger tax on the amount of the boot.

Band of Investment

Used to determine a cap rate using a weighted average of select rates.