Real Estate Glossary
Plain-English definitions of the financing, foreclosure, and California land-use terms sellers run into most — no jargon, no sales pitch, just what each term actually means.
A
ARV (After Repair Value)
ARV, or After Repair Value, is what a property would be worth on the open market once needed repairs and updates are complete — the number investors work backward from to build a purchase offer.
As-Is Sale
An as-is sale is one in which the seller states up front that no repairs will be made and no repair credits given. It limits the seller's obligation to fix things — it does not limit the legal duty to disclose known material defects.
Assumable Mortgage
An assumable mortgage lets a buyer take over the seller's existing loan balance, interest rate, and repayment terms instead of getting new financing — valuable when the existing rate is well below current market rates.
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C
Cap Rate
Cap rate (capitalization rate) is a property's annual net operating income divided by its price, expressed as a percentage — the quickest way investors compare the return profile of different income properties.
Carry-Back Financing
Carry-back financing (a seller carry-back) is when the seller finances part or all of the purchase price themselves, receiving payments directly from the buyer instead of a lump sum at closing.
Cash Buyer
A cash buyer purchases property with its own funds rather than a mortgage. The term covers very different actors — individual investors, buy-and-hold landlords, builders, iBuyers, and wholesalers who never intend to close themselves.
Cash Offer
A cash offer is a purchase offer backed by the buyer's own funds rather than a mortgage, which removes the lender from the transaction and with it the appraisal, underwriting, and loan-contingency steps that set the pace of a financed sale.
CC&Rs (Covenants, Conditions & Restrictions)
CC&Rs are the recorded rules an HOA or developer attaches to a property's title, governing everything from paint colors to short-term rentals — and they run with the land to every future owner.
Closing Costs
Closing costs are the transaction expenses settled through escrow at the close of a sale — title, escrow, transfer taxes, recording, prorated property taxes and HOA dues, and any payoffs required to clear title — separate from the agent commission.
Coastal Bluff
A coastal bluff is the steep face where coastal land meets the shore. Bluff-top parcels carry setback requirements derived from measured erosion rates, and California restricts the shoreline armouring that owners often assume is available.
Coastal Zone
The Coastal Zone is the strip of California along the shoreline where the Coastal Act applies. Development inside it generally requires a Coastal Development Permit, issued either by the local government under a certified Local Coastal Program or by the Coastal Commission.
Contract for Deed (Land Contract)
A contract for deed, or land contract, is an installment sale where the buyer makes payments directly to the seller and takes possession, but the seller keeps legal title until the contract is paid in full.
D
Deed of Trust
A deed of trust is the security instrument California uses instead of a mortgage to secure a home loan, involving borrower, lender, and a neutral trustee — a structure that lets a lender foreclose without going to court.
Defensible Space
Defensible space is the buffer zone of reduced, managed vegetation around a structure — required under California law within 100 feet of buildings in wildfire-prone areas — that slows fire spread and protects the home.
Documentary Transfer Tax
Documentary transfer tax is the tax a California county charges when a deed transferring real property is recorded. Counties commonly levy it at $0.55 per $500 of consideration, and some charter cities add a further tax of their own.
Due-on-Sale Clause
A due-on-sale clause is mortgage language letting a lender demand full repayment the moment title transfers to someone else — the main legal obstacle to informal loan assumptions and subject-to sales.
E
Easement
An easement is a legal right for someone other than the owner to use a defined portion of the land for a specific purpose — like a shared driveway, utility line, or access road — that stays attached to the title after a sale.
Entitlements
Entitlements are the government approvals — zoning confirmation, permits, variances, subdivision maps — that give a landowner legal permission to develop or use a parcel in a specific way before construction can begin.
Escrow
Escrow is the neutral third-party process that holds funds, documents, and instructions between a buyer and seller until every condition of a sale is satisfied, at which point title and money change hands simultaneously.
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FAIR Plan
The California FAIR Plan is the state's insurer of last resort — a pooled-risk fire insurance option for homeowners who can't get or afford a standard policy, typically due to high wildfire risk.
FHSZ (Fire Hazard Severity Zone)
An FHSZ is a state-mapped designation — Moderate, High, or Very High — that CAL FIRE assigns based on terrain, vegetation, weather, and fire history, and it drives insurance, disclosure, and building-code requirements.
Flag Lot
A flag lot is a parcel shaped like a flag on a pole — most of the buildable land sits behind a neighboring property, connected to the street only by a narrow access strip or shared driveway.
Forbearance
Forbearance is a temporary agreement with your mortgage servicer to pause or reduce payments for a set period during financial hardship, with the missed amount repaid later rather than forgiven.
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H
Hard Money Loan
A hard money loan is short-term, asset-based financing from a private lender rather than a bank, priced mainly on the property's value and exit plan rather than the borrower's credit.
Highest and Best Use
Highest and best use is the legally permissible, physically possible, and financially feasible use of a property that produces the greatest value — the baseline appraisers and investors use to judge what a parcel is really worth.
Holding Costs
Holding costs are the ongoing expenses — property taxes, insurance, utilities, maintenance, loan payments, HOA dues — that accrue every month a property sits unsold, whether occupied, vacant, or mid-renovation.
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L
Landlocked Parcel
A landlocked parcel has no legal, recorded access to a public road — even if a dirt path physically reaches it — making it difficult to finance, insure, or develop until an access easement is established.
Lease Option
A lease option gives a tenant the right, but not the obligation, to buy the property later at agreed-upon terms while renting it in the meantime — used when a buyer needs time to qualify for financing.
Lis Pendens
A lis pendens is a recorded notice that a lawsuit affecting title to a specific property is pending — it clouds the title and warns any potential buyer or lender that ownership could change based on the case's outcome.
Loan Modification
A loan modification permanently changes the terms of an existing mortgage — lowering the rate, extending the term, or rolling missed payments into the balance — to make payments affordable again after a hardship.
Lot Split
A lot split divides one legally recorded parcel into two or more independently sellable parcels — a process that requires local approval and, in California, can now happen more easily under SB 9 for qualifying lots.
N
Notice of Default
A Notice of Default (NOD) is the first official step in California's non-judicial foreclosure process — a recorded notice stating the borrower has fallen behind, starting a statutory countdown before a trustee's sale can be scheduled.
Notice of Trustee's Sale
A Notice of Trustee's Sale is the recorded notice setting the date, time, and location of a California foreclosure auction — typically filed at least 90 days after the Notice of Default and posted at least 20 days before the sale.
P
Parcel Number (APN)
An Assessor's Parcel Number (APN) is the unique identifier a county assessor assigns to a piece of land for tax and record-keeping purposes — the standard way to reference a property before it even has a street address.
Perc Test
A perc (percolation) test measures how quickly water drains through soil on a parcel — the standard way a county environmental health department determines whether a septic system can legally be installed there.
Probate
Probate is the court-supervised process of validating a will — or applying intestacy law if there isn't one — paying debts, and distributing a deceased person's assets, including real estate, to heirs or beneficiaries.
Proposition 19
Proposition 19 is the California measure, effective 16 February 2021, that narrowed the parent-child property tax exclusion and, separately, let homeowners who are 55 or older, severely disabled, or wildfire victims carry their assessed value to a replacement home.
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R
Reinstatement
Reinstatement is paying a lender everything owed — missed payments, late fees, and foreclosure costs incurred so far — in one lump sum to bring a defaulted loan current and stop the foreclosure process before the trustee's sale.
Right of Redemption
The right of redemption is a borrower's statutory right to reclaim foreclosed property by paying the full amount owed within a set period after a sale — a right that generally does not exist after a California non-judicial trustee's sale.
S
SB 9
SB 9 is the 2021 California law requiring most cities to ministerially approve splitting a single-family lot into two parcels and/or building up to two units per lot, without the discretionary hearings a project would normally need.
Septic System
A septic system treats wastewater on the property itself — typically a tank and a leach field — instead of connecting to a public sewer. It is common on rural and foothill parcels across Northern California and materially affects how a property sells.
Setback
A setback is the minimum required distance between a structure and the property line, road, or another building, set by local zoning code to preserve light, access, fire separation, and privacy between neighboring parcels.
Short Sale
A short sale is selling a property for less than the amount owed on the mortgage, with the lender agreeing in advance to accept the shortfall instead of pursuing the full balance — an alternative to letting the loan go to foreclosure.
Stepped-Up Basis
Stepped-up basis is the federal income tax rule that resets the cost basis of inherited property to its fair market value at the date of the owner's death — which is why heirs who sell soon after often owe little or no capital gains tax.
Subject-To
A subject-to sale transfers ownership to a buyer while the seller's existing mortgage stays in the seller's name and continues to be paid by the buyer — title passes "subject to" the existing loan rather than new financing.
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