CALL OPTION – A clause in a mortgage which allows the lender to demand payment of the outstanding balance at a specific time; triggered under certain (rare) circumstances. Most mortgages are bought and sold on the securities market so that loan owner may vary from originator who, in turn, varies from loan servicer thus breaking the chain of supervision.
CAL–VET LOANS – Real estate loans available to Armed Forces Veterans from California, at low interest rates without mortgage interest payment requirements and low down payment requirements below the customary 20% threshold.
CENSUS TRACT LOANS – Special government-sponsored loans from selected lenders that allow buyers (regardless of income) purchase homes with less-than 20 percent down payment (e.g., 5%, 10%) for designated census tracts of communities that have a lower-than-desired median income without the need to pay private mortgage insurance (PMI).
CERTIFICATE OF ELIGIBILITY – A document issued by the Veterans Administration that certifies eligibility for a VA loan.
CERTIFICATE OF OCCUPANCY – Issued by an appropriate jurisdictional entity, this document certifies that a building complies with all building codes and is safe for use or habitation. In San Francisco, the year this certificate is issued impacts rent control and condo status greatly. The date to be concerned about is June 13, 1979.
CERTIFICATE OF REASONABLE VALUE (CRV) – Usually based on an independent appraisal, a CRV for a particular property establishes the maximum amount which can be secured by a VA mortgage. There are other requirements for FHA loans, a condo Homeowners Association, for example, must be incorporated and approved independently by HUD.
CERTIFICATE OF TITLE – or simply, TITLE, The document designating the legal owner of a parcel of real property, which is usually provided by a title or abstract company and recorded with a county assessor/treasurer.
CERTIFIED GENERAL APPRAISER – Generally, a professional who has met the local or state requirements to value property objectively, who has otherwise passed the appropriate certification exam(s), and is capable of appraising any type of real property.
CERTIFIED RESIDENTIAL APPRAISER – A sub–classification of appraiser who is only licensed to appraise residential property, usually up to a four-unit building.
CHAIN OF TITLE – The complete history of ownership of a piece of property the links one owner to another and so forth. Important for lenders and title insurance purposes to ensure not outstanding ownership interests; settled expectations.
CHATTEL – Any personal property which is not attached to or an integral part of real property. Chattel is not commonly taken into consideration when appraising the value of real property. The term originates from the slave trade.
CLEAR TITLE – Presumptive or actual ownership rights over real property that is not otherwise encumbered (restricted) by a counter–claim, claim, secured claim or lien. This is essential for a lender and it is what title insurance is supposed to assure.
CLOSING – Close of Escrow – this is the stage in the purchase process during which documents are signed and down payment money and mortgage money is collected and transferred. Closing represents the culmination of all of our efforts. By the end of closing you should have had title changed and exchanged, previous loans paid off and new one started, if applicable. You should also have keys in hand. Some areas of the country do not have title escrow companies and periods but use lawyers instead.
CLOSING COSTS – These are the fees paid to the lender, third parties like couriers or notaries. Term also encompasses escrow company fees as well as title insurance premiums and recording fees. You will receive an estimate of these costs at various points before and during ESCROW.
CLOSING DISCLOSURE – The updated version of the closing statement, which is a document detailing the final financial arrangements, payouts, and transfers between the buyer, seller, taxes collected and fees paid to brokers. New lending regulations per Dodd-Frank reforms now mandate a mandatory waiting period from when buyers receive their CD to when they can sign loan documents and from when the transaction can close (see TRID or here).
CLOUD ON TITLE – An encumbrance or error actual or purported on real property, which, if valid, would affect the rights of the owner to sell clear title or a buyer to receive as such. For example: Mr. A sells Lot 1, tract 1 to Ms. B. The deed/title is mistakenly drawn to read Lot 2, tract 1. A cloud is therefore cast on Lot 2 by the recording of the incorrect deed. The cloud may be removed by quitclaim deed, or if necessary, by court action through a quiet title action; compare lis pendens.
CO–BORROWER – A second person sharing obligation on the loan and title on the property.
COLLATERAL – An asset which is placed at risk to secure the repayment of a loan; such as the house.
COLLECTION – The process a lender or creditor takes to pursue a borrower who is delinquent on his or her mortgage payments in order to bring a mortgage current again. Includes documentation that may be used in foreclosure proceedings.
CO–MAKER/CO-SIGNER – A second party who signs a loan, along with the borrower, and becomes liable for the debt should the borrower default.
COMMON LAW – As opposed to statute law. Laws that have been established by custom, usage and judicial precedent over time— stare decisis.
CAP – Associated with Adjustable Rate Mortgages. The upper limit on how high monthly payments or how much interest rates may change within a certain time period or the life of the mortgage.
CAPITAL – Accumulated goods and money which is most often used to generate additional income.
CAPITAL EXPENDITURE – An outlay of funds designed to improve the income–producing capabilities of an asset or to extend its economic life that may be tax-deductible. Home improvements to primary residences that is ‘remodeling’ are not generally deductible. Consider investment property improvement however.
CASH–OUT REFINANCE – Refinancing a mortgage at a higher amount than the current balance in order to transform a portion of the equity into cash if a property is appraised and worth more than the current mortgage amount.
CAVEAT EMPTOR – Literally translated: ‘’Let the buyer beware.’’ A common business tenet whereby the buyer is responsible for verifying any and all claims by the seller of property. In other words, buyers are to do full diligence before completing a purchase, although instances of fraud or misrepresentation are not covered by this proviso. Used more so in commercial transactions as California has implemented wide consumer protection laws.
CENSUS TRACT LOAN PROGRAM – A fixed rate loan with a low 3 to 5% Down payment, no cash reserve requirement, no mortgage insurance premiums and easier qualifying ratios. Subject to borrower meeting income limits and attendance of a 6-hour training course on home ownership as well as geographic location of a qualified census tract that has been determined as a targeted neighborhood in which median incomes are too low.
CERTIFICATE of DEPOSIT – A document showing that the bearer has a certain amount of money, at a particular amount interest, on deposit with a financial institution.
CERTIFICATE OF DEPOSIT INDEX – An index based on the interest rate of a six month CD.
COMMISSION – A percentage of the sales price or a fixed fee negotiated by an agent to compensate for the effort expended to sell or purchase property via LISTING AGREEMENT or MLS AGREEMENT and paid directly by seller or landlord.
COMMON AREA ASSESSMENTS – For TICs and condominiums, assessed fees that are charged to the tenants or owners of properties to cover the costs of maintaining common areas shared with other tenants or owners in accord with governing documents like a TIC AGREEMENT or CC&Rs.
COMMON AREAS – For condos and TICs, any area, such as entryways, foyers, pools, yards, building exterior, garage space, laundry rooms, roofs, recreational facilities or the like, which are shared by the tenants or owners of property near by owned by the Homeowner Association or equivalent.
COMMUNITY HOME BUYERS’ PROGRAM – A fixed rate loan with a low 3 to 5% Down payment, no cash reserve requirement, and easier qualifying ratios. Subject to borrower meeting income limits and attendance of a 4 hour training course on home ownership.
COMMUNITY PROPERTY – In some jurisdictions like California (and coastal states), any property which has been acquired by a married couple during the marriage with the presumption that the ownership of property is considered equal unless stipulated otherwise by both parties as separate property; consider there is a right to will (devise) property to others than the other spouse.
COMPARABLE SALES – COMPS – An abbreviated term used by appraisers to describe properties which are similar in size, condition, location and amenities to a subject property who’s value is being determined. The Uniform Standards of Professional Appraisal Practice (USPAP) establish clear guidelines for determining a comparable property.
COMPOUND INTEREST – Interest paid on the principal amount, as well as any accumulated interest that has been capitalized.
CONCESSIONS – Additional value granted by a buyer or seller (or neighbor) to entice another party to complete a transaction typically granted during an escrow period for discoveries or developments previously unknown. Certain lenders will have an upper limit on seller-based concessions so as not to impact a loan made in a material manner.
CONDOMINIUM – A property within another envelope where an individual three-dimensional space — a unit — is individually owned and titled differently from other units, but common areas and amenities are shared by all owners through a homeowner association. Importantly, condominium homes are exempt from rent control laws in San Francisco; governed by the Davis-Sterling Act, which regulate common interest developments in California.
CONDOMINIUM CONVERSION – The conversion of a property with one title over several individual, contained and discrete living areas (e.g. rental property such as an apartment complex) into several individual-titled properties (condos) through subdivision that are adjacent to each other.
CONSIDERATION – Anything which is, legally, of value, that induces one to enter into a contract. In other words, a buyer offers money to purchase a property. The consideration is the money. I promise to give you my property the consideration is the property.
CONSTRUCTION LOAN – A loan made to a builder or homeowner that finances the initial construction of a property, but is replaced by a traditional mortgage once the property is completed. Usually requires owner to put down a much higher down payment that will become the equity in the completed property that will be worth more, e.g., 40% down payment will become the 20% equity in a completed development.
CONTINGENCY – Some action, event or condition that must occur before something else can take place. In real estate buying the number of conditions/contingencies are contained and defined by the purchase offer contract. The number and extent of conditions may impact an offer’s strength or weakness.
CONTRACT – A legally binding agreement, oral or written, between two parties. Importantly, for any transaction involving real property transfers or obligations greater than 1 year (e.g., annual lease) must be in writing according to the Statute of Frauds.
CONVENTIONAL MORTGAGE – A traditional, real estate financing mechanism that is not backed by any government or other agency (FHA, VA, etc.) that conforms to their guidelines.
CONVERTIBLE ARM – A mortgage that begins as an adjustable, that allows the borrower to convert the loan to a fixed rate within a specific timeframe. There should be an upper limit for interest rates.
CONVEYANCE – The transfer of title to land or associated rights related to land. Includes most instruments by which an interest in real estate is created, mortgaged or assigned. It’s the formal term of a seller relinquishing their ownership over property or a lender giving up their mortgage lien upon repayment.
COOPERATIVE (CO–OP) – A form of ownership where each resident of a multi-unit property owns a share in a cooperative corporation that in turns owns the building, with each resident having rights to a specific unit within the building. There are only 13 buildings of this kind in San Francisco; much more common in New York City for example.
CORPORATE RELOCATION – A situation where a person’s employer pays all or some of the expenses associated with moving from one location to another, usually over a substantial distance. Relocation expenses often include the amounts, such as brokerage fees, incurred in the selling and buying of the employee’s primary residence.
COST OF FUNDS INDEX (COFI) – An index of financial institution’s costs used to set interest rates for some Adjustable Rate Mortgages.
COVENANT – An agreement that is solemn and serious and seldom changeable absent some effort whereby one party commits and agrees to X; e.g. stipulation in any mortgage that, if not met, can be cause for the lender to foreclose. Covenants also govern condo developments and will ‘run with the land.’
CREDIT – A loan of money for the purchase of property, real or personal. Credit is either secured by an asset, such as a home, or unsecured like a line of credit or credit card.
CREDIT HISTORY – A record of debt payments, past and present. Used by mortgage lenders in determining credit worthiness of individuals. Lenders typically rely on information from the three major consumer credit rating respository or FICO scores.
CREDITOR – A person (or entity) to whom money is owed, like your bank, seller or family.
CREDIT REPORT – A detailed report of an individual’s credit, employment and residence history prepared by a credit bureau. Used by lenders to determine credit worthiness of individuals.
CREDIT REPOSITORY – Large companies that gather and store financial and credit information about individuals who apply for credit, like TransUnion, Equifax and Experian.