Real Estate Terms and Definitions
Single Family Residence
A structure maintained and used as a single dwelling unit, as in a private, detached home
Usually a property consisting of 2-4 attached units often refered to as a duplex, triplex, or fourplex. Properties with 5 or more units usually require commercial lending if financing is used.
A legal document used to create a personal liability for payment on the part of the borrower and create a lien on the mortgaged property as security for the debt.
A legal document similar to a mortgage in which title to a property is transferred to a third-party trustee as security for an obligation owed by the trustor (borrower) to the beneficiary (lender). Trust deeds are recorded in order, ie. First TD or Second TD. Priority in the case of foreclosure is given to the First TD and so on.
Sale of property by the court to settle a will, or pay legal claims of creditors from the proceeds of the sale; purchase price must be approved by the court.
The sale of a property that is held by a trust where the original trustee is either under a conservatorship due to an inability to handle his/her affairs, or the original trustee has passed away. The sale must be approved by the heirs of the property and in the case where there is a conservator it must be approved by the court.
A sale of real property that produces less money than is owed the lender (also known as a short-pay). The lender must release it’s trust deed so the property can be sold free and clear to the new buyer.
“Real Estate Owned” or the term used to describe real property involuntarily acquired by the bank through foreclosure.
A procedure in which property is repossessed or sold to satisfy the debt in the event of default in payment of the mortgage note or other terms in the mortgage document.
A report of the current record title to a property, including the current state of the title as well as recorded objections such as unpaid mortgages, liens, and easements.
A buyer’s right to inspect a home prior to purchase, usually completed by a third party in the first 17 days or sooner from the date of offer acceptance.
An agreed upon time for a provision in a contract in order to complete a certain act or happening of an event before the contract is binding.
Commonly determined by dividing annual net operating income by the purchase price to determine the rate of return (yield) on an investment property. A more accurate “capitalization rate” includes the above yield as well as a CAP rate based on risk, recapture rate on the improvement, and other market factors.
Gross Rental Multiplier
Derived by using comparable sales (comps) divided by the actual or estimated monthly rentals to determine an average. The RM can be used to determine an estimate of an income property’s market value. Also known as the Gross Income Multiplier.
An allowance or discount for estimated vacancies in a rental property. Can be determined by dividing the number of vacant units by total number of units in a property or geographic area.
Recurring expenses that are essential to the continuous operation and maintenance of a property including: taxes, insurance, utilities, maintenance, marketing and management fees. A common factor used in the South Bay is 35% of net income or net rents.