Dictionary

Acronyms and Lingo – Dictionary

Real estate has a unique language all their own, and here’s the dictionary list where you can find out what all of those crazy acronyms and strange words mean. This post is constantly updated, so check back often for new additons.

Addition – Fairly common in Costa Mesa real estate. Many of the original homes in Costa Mesa were smallish (1100 sq. ft.) when built, so owners added on or built an “addition” to the existing structure, usually in the form of a family room or a bedroom.

Adverse possession – is a process by which premises can change ownership. It is a common law concept concerning the title to real property(land and the fixed structures built upon it). By adverse possession, title to another’s real property can be acquired without compensation, by holding the property in a manner that conflicts with the true owner‘s rights for a specified period. For example, squatter’s rights are a specific form of adverse possession.

Agent- a person or business authorized to act on another’s behalf; In the state of California, a Realtor is an agent who works underneath a broker, who is typically in charge of all of a firm’s business and listings. California is one of a handful of states that allows Dual Agency(see def. below).

Appraiser- an independent third party who performs analysis of a home, providing a valuation for a bank, private individual, or a company offering a loan on a property. Appraisers use one of many methods to determine an accurate market valuation.

Appraised Value- is the valuation according to an appraiser. Normally, the funding lender relies on the standardized valuation methods of an appraiser to assess a monetary value for the specific piece of real property on which a loan will be secured (e.g. a residence).

ARM – or Adjustable Rate Mortgage. A mortgage rate that adjusts monthly, quarterly, or annually and typically follows a financial index such as the ten year bond rate.

Balearic Park – An area in Mesa Verde just north of Adams Blvd. bordered by Mesa Verde Drive West, Balearic Drive, and Shantar Drive. It currently has some of the Costa Mesa community center programs on the old Balearic elementary school site.

Buyer’s Market – A type of market where sellers are having difficulty selling a home. Buyers gain the upper hand in negotiations when there is little activity in the marketplace, which gives a Buyer leverage. Buyers in this type of market can get additional benefits, like more money off of an asking price or additional closing costs paid by the seller.

Capital Gains Tax – Currently, owning real estate provides the best tax free exclusion you can have on your income taxes. Single persons who sell their homes can profit up to $250,000 tax free when they sell. Married couples filing jointly can take up to a $500,000 gain on their sale. After those respective numbers, your gain on real estate is taxed as ordinary income.

Cash Flow Positive – An investment in real estate that produces a positive monthly balance after all the costs (mortgage, taxes, property expenses) are cleared for the property.

Cash to Close – This is the amount necessary for a buyer to pay for closing and services such as escrow fees, loan origination costs, messenger fees, title fees, recording fees, and other small costs that come up associated with buying a property. An estimate of 1 1/2% of the purchase price can be used as a guide.

Cosing Costs – These are all of the extra costs a buyer or seller pays to close a transaction beyond the loan itself, such as the title fee, the escrow fee, any points to pay on a loan origination fee, and other miscellaneous costs that come up in a transaction.

Comps – The “comps”, a.k.a the Comparable Sales, are what agents and appraisers use to value a home. The comps refer to properties with characteristics that are similar to a subject property whose value is being sought. This can be accomplished either by a real estate agent who typically attempts to establish the value of a potential client’s home or property through market analysis or, by a licensed or certified appraiser or surveyor using more defined methods, when performing a real estate appraisal.

Countrywide Financial – Now a defunct operation, it is now part of Bank of America home loans. Countrywide was a enormous originator of home loans in the 1990s and early 2000’s that got caught in a scandal for originating thousands of bad loans and ultimately had to agree to be acquired by Bank of America.

Cul-de-sac – This is a french phrase that describes a street, lane etc. that is closed on one end. It typically only has one point of entry and is advantageous for owners because it typically limits traffic on the street. Oftentimes in Costa Mesa the end of the cul-de-sac have wide circle-like turn around areas which kids love to play in and around.

Dual Agency – Because all real estate agents are licensed under a real estate broker, it is possible to work with one agent who is licensed by the same broker as the listing agent. This situation creates a dual agency. The agents could work at separate offices and be strangers to each other, but since they are licensed by the broker, they are still operating under dual agency if one agent represents the buyer and the other represents the seller. In California it is permissible to work with a single agent for a transaction, but there are pitfalls to that situation.

Duplex – A type of housing that contains two unique units (or homes) in one structure. It can also be called multi-family, or can be called high density housing.

Escrow – In California, we are required to use escrow companies to transact our real estate business. Escrow is an arrangement made under contractual provisions between buyer and seller, whereby an independent trusted third party(an escrow company) receives and disburses money and/or documents for the transacting parties, with the timing of such disbursement by the third party dependent on the fulfillment of contractually-agreed conditions by the transacting parties

Equity– When you buy a home with a loan, part of the money you pay each month goes to the lender (interest on the loan) and part of the money goes to pay the principal on the loan. The equity in a home is the monetary value that it is worth less any liens or owed expenses to banks or other parties.

Expansive Soil – A common occurence in Costa Mesa real estate, expansive soils contain minerals such as smectite clays that are capable of absorbing water. When they absorb water they increase in volume. The more water they absorb the more their volume increases. Expansions of ten percent or more are not uncommon. This change in volume can exert enough force on a building or other structure to cause damage.

Cracked foundations, floors and basement walls are typical types of damage done by swelling soils. Damage to the upper floors of the building can occur when motion in the structure is significant. Expansive soils will also shrink when they dry out. This shrinkage can remove support from buildings or other structures and result in damaging subsidence. Fissures in the soil can also develop. These fissures can facilitate the deep penetration of water when moist conditions or runoff occurs. This produces a cycle of shrinkage and swelling that places repetitive stress on structures.

Fee Simple – In English law, a fee simple (or fee simple absolute) is an estate in land, a form of freehold ownership. It is the most common way that real estate is owned in common law countries, and is ordinarily the most complete ownership interest that can be had in real property. Fee Simple ownership is the most common type of ownership in Costa Mesa real estate.

In English law, a fee simple (or fee simple absolute) is an estate in land, a form of freehold ownership. It is the most common way that real estate is owned in common law countries, and is ordinarily the most complete ownership interest that can be had in real property. Fee Simple ownership is the most common type of ownership in Costa Mesa real Estate.

FHA – Federal Housing Administration (FHA) is a U.S. governmental agency created in 1934 to help homeowners finance the purchase and repair of their homes and to stimulate housing and construction.

FHA 203k Loan – Federal Housing Administration’s rehab loan product, the FHA 203(k) loan, was designed for individuals who want to rehabilitate or repair a damaged home so they can live in it as their primary residence. These loans are endorsed by the government to encourage lenders to offer what would otherwise be considered a risky loan product.

FICO Score – A number that companies granting credit use to assess an applicant’s risk. The higher the FICO score, the lower the risk. FICO is short for Fair, Isaac and Company, which develops the mathematical formulas used to produce these scores. Scores above 720 are considered good. Scores above 800 are excellent.

Flip – Profits from flipping real estate come from either buying low and selling high (often in a rapidly-rising market), or buying a house that needs repair and fixing it up before reselling. The investor or new owner will usually perform necessary renovations and repairs, and attempt to make a profit by selling the house quickly at a higher price (closer to market value).

Fourplex – A type of property that has four units in one structure, but they all have separate entrances and services. It is also called multi-family, or can be called high density housing. Typically most people who own this type of property in Costa Mesa will not be an owner-occupant. Most times these are owned by investors to produce a return on their real estate investment.

HOA – Stands for Home Owners Association. An HOA oversees all aspects of a property, typically developments with many homes or condominiums. Their responsibilities are far ranging from general maintenance and repair to landscaping and budgeting choices for a community. Owners within an HOA usually pay a scheduled bill that contributes to the community fund to take care of all of the community.

Income Property – A type of property (usually a duplex, triplex, fourplex, or bigger) that produces income for an investor. It can also be thought of as a single family home that produces income on a monthly basis.

Junior Lien – The mortgage or debt that is placed on a property or an asset that is in 2nd position behind another lien. This is important when foreclosure strikes because often junior lien holders will get wiped out if there is not enough equity in a home to pay out a 2nd position lien holder. Oftentimes a home equity loan will be a junior lien on a property.

Leased Land – Land that is owned by another, but allows ownership of the building that sits on top of the land. Changes can be made to the building, but not to the land.

Lien – an interest placed on a property. Typically, a mortgage is a lien that has a right to a property, but other liens can exist (tax liens, mechanic’s liens, junior liens).

Loan Modification- Sometimes called a “Loan Mod”, this is an effort by a homeowner to renegotiate the terms of the original loan contract, either hoping for a reduction of principal, a temporary reduction of monthly payments, or a modification of the interest rate for the loan.

MID – or short for Mortgage Interest Deduction. The amount of money that the government allows you to deduct from your Costa Mesa real estate loan each year as a taxable write-off.

MLS- Stands for Multiple Listing Service. Most brokers input their real estate listings into a service like this that aggregates all of a region’s real estate listings into a central repository for sharing real estate data.

Negotiation Fee- Sometimes, especially during a short sale, an agent will employ a negotiator to speak directly the bank for the agent or the agent’s client. This might be a lawyer or another Realtor, and typically they are paid a fee for their involvement in the efforts to negotiate a price with the bank.

NOI – stands for Net Operating Income. This is the monthly income that an investment property produces after all expenses are paid, but not before interest and taxes are deducted.

PITI – stands for Principle, Interest, Taxes and Insurance. This is what lenders or investors look at as the total costs of holding or carrying a property on a month to month basis.

PMI – or Private Mortgage insurance, is necessary when an loan is used without putting 20% as a down payment on a purchase. The PMI insures the lender of the loan against the borrower’s default so they are not stuck with a bad debt should the homeowner not repay the loan.

Private Sale – A sale between a buyer and a seller that does not go on the open market or offered through a multiple listing service.

Professional Inspections – Typically when a buyer buys a home, he or she will perform inspections to make certain that the home is in good condition. Typically a professional home inspector will investigate the entire home, and other professionals (roofers, plumbers, electricians, contractors) will look at other details of a home for it’s soundness.

Property Tax Increses – In Orange County, the OC tax assessor is allowed to increase your real estate taxes each year by 2% per annum.

Ranch Style – Is a common style of home in Costa Mesa. The ranch style home dominates the single story market in the local costa mesa area, as it was a very popular architectural style that originated in the US after World War I, and dominated the middle class housing choice of the 1940s to 1970s. The style was exported to other nations and is also found in other countries.

Range Pricing- Was a common tool used by realtors in the early 2000’s to try to get buyers to make an offer within the set price range. They said that was the only offers that the seller would accept or review. Pricing would look something like “Offered between $419,000 – $459,000” . It has mostly flopped as a strategy because Buyers will often offer less than the lowest price in the range.

REO – Another name for a bank owned property, or in this case Real Estate Owned by the bank.

Reverse Mortgage- Or a remortgage is a form of equity release (or lifetime mortgage) available in the United States. It is a loan available to seniors aged 62 or older, under a Federal program administered by HUD. It enables eligible homeowners to access a portion of their equity. The homeowners can draw the mortgage principal in a lump sum, by receiving monthly payments over a specified term or over their (joint) lifetimes, as a revolving line of credit, or some combination thereof. The homeowners’ obligation to repay the loan is deferred until owner (or survivor of two) dies, the home is sold, or they cease to live in the property.

Short Sale – A distress sale where an owner is asking their lender to forgive a portion of the balance owed to the bank. The proceeds of a sale would be short of what is owed to the bank, thus a “short sale” is where the bank agrees to sell the property for less than it is owed.

Showing Instructions- Each listing has a different way to be shown by an agent, whether it is vacant home or a home which needs an appointment set for buyers so that they can see a home.

Single Story – A type of single family home that only has one level, or one story. Common single story homes in the Costa Mesa are are often referred to as Ranch Style homes.

Special Assessments – If you live in a property with a homeowner’s association you could be subject to the board’s decision to raise money from all association members by charging all members additional money to go into the general fund for repairs, renovations, or maintenance. A typical event that occurs is that an association would need to replace all the roofs in a condo complex and does not have enough funds available to make the replacement happen, and therefore will charge a special assessment to all residents.

Triplex – A type of property that has three units in one. It is also called multi-family, or can be called high density housing. Typically most people who own this type of property in Costa Mesa will not be an owner-occupant. Most times these are owned by investors to produce a return on their real estate investment.

Underwater Borrowers – A slang term that means that the owner of the home holds a mortgage that is a higher balance than the home is currently worth on the Costa Mesa real estate market.