California Real Estate Glossary: 50 Terms Every Buyer and Seller Should Know

California real estate has its own vocabulary — and misunderstanding even one key term can cost you in a transaction. Here are 50 essential terms explained in plain English, organized by topic.

Contracts and Offers

RPA (Residential Purchase Agreement): California's standard home purchase contract, published by the California Association of Realtors. Over 16 pages covering price, contingencies, disclosures, and closing terms. Counteroffer: A seller's or buyer's modified response to the other party's offer — changes price, terms, or contingencies. Multiple Counteroffer: A seller presenting identical counteroffers to multiple buyers simultaneously — each buyer must accept without modification; seller then selects their preferred buyer. Acceptance: The moment all parties sign the fully agreed-upon contract — this is when a binding purchase agreement exists. Contingency: A condition that must be satisfied for the sale to proceed — common types: inspection, appraisal, loan, sale of buyer's current home. Contingency Removal: The buyer signs a Contingency Removal form (CR) eliminating a specific contingency — after removal, the buyer's deposit is at risk if they cancel for that reason. Escalation Clause: A buyer agrees to beat competing offers by a set amount up to a maximum price. Back-Up Offer: An offer accepted in secondary position — if the primary buyer cancels, the backup buyer immediately steps in.

Money and Financing

EMD (Earnest Money Deposit): The buyer's good-faith deposit, typically 1–3% of purchase price, held in escrow. Liquidated Damages: If a buyer cancels after contingency removal, the seller may keep up to 3% of purchase price as liquidated damages (if both parties initialed the clause). Pre-Qualification: A lender's estimate of what you might borrow based on self-reported information — not verified. Pre-Approval: A lender has reviewed your income, credit, and assets and issued a conditional commitment. Underwriting: The lender's detailed review of your full application, verifying all documents before final loan approval. DTI (Debt-to-Income Ratio): Your monthly debt payments divided by gross monthly income — most lenders want this under 43–45%. LTV (Loan-to-Value Ratio): Loan amount divided by appraised value — higher LTV = less equity, usually triggers PMI under 80% LTV. PMI (Private Mortgage Insurance): Required on conventional loans with less than 20% down — typically 0.5–1% of loan amount annually. PITI: Principal, Interest, Taxes, Insurance — the four components of your monthly mortgage payment. APR (Annual Percentage Rate): The true cost of your loan annually, including interest rate plus fees — use this (not just interest rate) to compare loan offers.

Property and Title

Title: Legal ownership of the property. Title Insurance: Protects against undiscovered title defects (unpaid liens, unknown heirs, recording errors) — lender's policy required at closing; owner's policy optional but recommended. Preliminary Title Report (PTR): Report revealing all recorded liens, easements, and encumbrances on the property — reviewed during escrow. Easement: The legal right of someone other than the owner to use a portion of the property (e.g., a utility easement, shared driveway). Lien: A legal claim against a property as security for a debt — must be cleared before title transfers. Grant Deed: The document that legally transfers ownership from seller to buyer — recorded at the county recorder's office at closing. Deed of Trust: California's equivalent of a mortgage — secures the lender's interest in the property. Vesting: How you hold title (sole ownership, joint tenancy, tenancy in common, community property) — has significant estate planning implications.

Disclosures

TDS (Transfer Disclosure Statement): California-required seller disclosure of known material defects and property condition. NHDS (Natural Hazard Disclosure Statement): Discloses whether the property is in a flood zone, earthquake fault zone, wildfire hazard zone, or other natural hazard area. SPQ (Seller Property Questionnaire): A supplemental disclosure covering HOA issues, permit history, neighborhood nuisances, and more. PEAD (Pandemic/Occupancy Exhibit): Now used for post-close rent-back agreements — seller remains in the home after close as a tenant for an agreed period.

California-Specific Terms

Prop 13: 1978 initiative capping property tax at 1% of assessed value with a maximum 2% annual increase — assessed value resets to purchase price at sale. Prop 19: 2021 initiative limiting parent-child property tax transfer exclusion to primary residences and allowing seniors 55+ to transfer their tax base statewide. Mello-Roos: Special tax districts (Community Facilities Districts) that fund public infrastructure — disclosed on the NHDS; can add $1,000–$5,000+ to annual property taxes. FAIR Plan: California's insurer of last resort for properties that can't get standard homeowner's insurance — often required in high wildfire risk areas. AB 1482: California Tenant Protection Act — limits rent increases and requires just cause for eviction in most residential rentals 15+ years old. SRA (State Responsibility Area): Areas where CalFire (not local fire departments) is primarily responsible for fire prevention — must be disclosed to buyers. HFHSZ (High Fire Hazard Severity Zone): CAL FIRE designation for areas with elevated wildfire risk — triggers additional disclosure and defensible space requirements.

The Transaction Process

Escrow: The neutral third party holding funds and documents until all closing conditions are met. Close of Escrow (COE): The date the deed records and ownership transfers. Proration: Dividing ongoing costs (property taxes, HOA dues) between buyer and seller based on the closing date. HUD/ALTA Settlement Statement: The closing document itemizing all funds received and disbursed. Recording: The county recorder's official filing of the grant deed — this is the legal moment of transfer. Possession: When the buyer physically receives the keys — typically at or after recording on the closing date.

Working With Agents

Listing Agent: Represents the seller — markets the property, negotiates on the seller's behalf. Buyer's Agent: Represents the buyer — helps find properties, advises on offers, negotiates for the buyer. Dual Agency: When one agent or brokerage represents both buyer and seller in the same transaction — legal in California with disclosure, but limits each party's representation. CMA (Comparative Market Analysis): An agent's analysis of recent comparable sales to establish a property's market value. MLS (Multiple Listing Service): The database where agents list properties for sale — buyers' agents use it to search inventory. Referral Fee: A fee paid by an agent to a referring party — BAM charges agents 25% of their earned commission as a referral fee; sellers pay nothing.

Whether you're buying your first home or selling your fifth, understanding these terms helps you make better decisions at every step. Find your buyer's agent free through BAM or find your listing agent — Haven AI matches you with the highest-performing agent for your situation, at no cost to you.