Key Real Estate Terms

An independent, licensed appraiser's assessment of a property's market value, ordered by your lender. The appraisal protects the lender from financing more than the property is worth. On the Peninsula, appraisals occasionally come in below the purchase price in fast-rising markets, requiring negotiation or additional cash from the buyer.

A written agreement between a buyer and their real estate agent that defines the scope of representation, duration, and compensation terms. As of August 2024, California requires a signed buyer-broker agreement before an agent can show properties or provide substantive guidance to a buyer.

Fees and expenses beyond the purchase price that are due at closing. Buyer closing costs typically include title insurance, escrow fees, recording fees, lender fees, prorated property taxes, and prepaid interest. On the Peninsula, budget 1.5% to 2.5% of the purchase price.

Recently sold properties similar in size, location, condition, and features to the home you are evaluating. Comps are the foundation of pricing analysis -- they tell you what the market has actually paid for similar homes, which is far more reliable than asking prices or automated estimates.

A condition written into the purchase contract that must be satisfied for the sale to proceed. The three standard contingencies are inspection (your right to investigate the property), appraisal (protection if the home appraises below the agreed price), and loan (protection if your financing is not approved). Removing a contingency means you are waiving that protection.

A collection of documents the seller is legally required to provide to prospective buyers in California. Includes the Transfer Disclosure Statement, seller property questionnaire, natural hazard reports, preliminary title report, inspection reports, and any HOA documents. Disclosure packages on the Peninsula routinely exceed 200 pages.

A good-faith deposit submitted to escrow within three business days of an accepted offer, signaling the buyer's commitment. Standard on the Peninsula is 3% of the purchase price. The deposit is credited toward the buyer's down payment at closing.

The neutral third-party process and account that holds funds and documents while buyer and seller fulfill the terms of the purchase contract. The escrow officer coordinates between all parties -- agents, lenders, title company -- to ensure a clean and compliant closing.

An offer provision that automatically increases your purchase price in specified increments above competing offers, up to a defined maximum. Used strategically in multiple-offer situations to remain competitive without blindly overpaying.

A California property tax reduction available to owners who occupy their home as a primary residence. The exemption reduces the assessed value by $7,000, saving approximately $70 to $80 per year in property taxes. File with the county assessor's office after closing.

A mortgage that exceeds the conforming loan limit set by the Federal Housing Finance Agency. In Santa Clara and San Mateo counties, the 2024 conforming limit is $1,149,825. Most Peninsula home purchases require jumbo financing, which typically demands stronger credit scores, larger down payments, and more extensive documentation.

A report from the title company disclosing the current ownership, liens, easements, and encumbrances on a property. Reviewing the prelim is essential -- it reveals anything that could cloud your ownership, from unpaid tax liens to utility easements that restrict how you can use the property.

California's landmark 1978 property tax law that limits the assessed value of property to its purchase price (plus a maximum 2% annual increase) until the property is sold again. This means your property tax basis is locked at your purchase price, regardless of how much the property appreciates. Prop 13 is a significant financial advantage for long-term homeowners in Silicon Valley.

An arrangement where the seller remains in the property after closing for a specified period, typically paying the buyer a daily rate. Common in Silicon Valley when sellers need time to complete their own purchase or move. Terms are negotiated as part of the purchase contract.

An insurance policy that protects the buyer (owner's policy) and the lender (lender's policy) against defects in the property's title -- undisclosed liens, forgery, recording errors, or ownership disputes. Purchased once at closing; coverage lasts as long as you own the property.

A tax assessed by the county (and some cities) when property ownership changes. In most Peninsula jurisdictions, the county transfer tax is $1.10 per $1,000 of sale price. Some cities impose additional transfer taxes -- Palo Alto, for example, adds $3.30 per $1,000. On a $3 million home in Palo Alto, total transfer tax would be approximately $13,200.