Bay Area Real Estate Glossary: 45 Terms Every Buyer and Seller Needs to Know

Escrow is a neutral third party — an escrow company or attorney — that holds all money, documents, and instructions until every condition of the sale is met. Neither the buyer nor the seller can access the funds or the deed during this period. Only when both sides have fulfilled their obligations does escrow "close" and the property transfer to the new owner.

The legally binding contract between buyer and seller that outlines every detail of the sale: price, closing date, contingencies, what stays with the property, and who pays what. In California, the standard form is the California Residential Purchase Agreement (RPA), published by the California Association of Realtors. Once signed by both parties, this is a binding contract — not a letter of intent or a "formality."

The deposit a buyer submits within 3 business days of offer acceptance to demonstrate serious intent. It's held in escrow and credited toward your down payment at closing. If you back out of the deal without a contractual reason (a valid contingency), the seller may keep your deposit. If the seller backs out, you get it back.

Fees paid at the close of escrow by both buyer and seller, in addition to the purchase price and down payment. Buyer closing costs typically include lender origination fees, appraisal, title insurance, escrow fees, and prepaid property taxes/insurance — usually 1.5–3% of the loan amount. Seller closing costs include agent commissions, transfer taxes, and their share of escrow fees.

A report generated early in escrow that shows the legal history of a property's ownership — any liens, easements, encumbrances, or ownership disputes that could affect your right to the property. This tells you if the seller truly owns what they're selling free and clear, or if there are any strings attached.

Insurance that protects you (and your lender) against any past claims on the property that weren't discovered in the title search — a long-lost heir claiming ownership, a contractor lien that wasn't paid decades ago, a forged deed in the chain of title. You pay a one-time premium at closing; coverage lasts as long as you own the property.

The legal document that transfers ownership of real property from seller to buyer. When escrow closes, the deed is recorded with the county recorder's office. From that moment, you are the legal owner. In California, the most common type is a "grant deed" which guarantees the seller has clear title and has not sold it to anyone else.

A tax charged by the county (and sometimes city) when a property changes hands. In most Bay Area counties, the standard rate is $1.10 per $1,000 of sale price — so $1,650 on a $1.5M sale. Some cities add their own transfer tax on top. Oakland, for example, charges significantly more than the county baseline.

A property sold by a trustee on behalf of a trust, often because the original owner has passed away and the home is held in a living trust. Common in the Bay Area where many long-term homeowners set up trusts as part of estate planning. Trust sales can move slightly slower than standard sales because the trustee — not the original owner — is making decisions.

A formal, signed document required to remove a contingency from your purchase contract. California uses active removal — meaning the contingency does NOT auto-expire when its deadline passes. You must affirmatively sign the CR document for it to be lifted. Once signed, you can no longer back out using that contingency without risking your earnest money deposit.

A formal notice issued by a seller to a buyer (or vice versa) when the other party misses a contractual deadline. Once served, the recipient typically has 24–48 hours to perform the required action — sign a Contingency Removal, complete an inspection, deposit funds — or risk losing their earnest money deposit and having the contract canceled.

A condition that must be met for the sale to proceed. The three main contingencies in California are: (1) Inspection contingency — you can review the home inspection and cancel if you find serious issues; (2) Loan contingency — the deal is conditional on you actually getting your mortgage approved; (3) Appraisal contingency — if the home appraises below the purchase price, you can renegotiate or cancel without losing your deposit. Contingencies are your legal exit doors.

When more than one buyer submits an offer on the same property simultaneously. The seller reviews all offers — usually by a set deadline — and chooses which to accept, counter, or reject. In the Bay Area, receiving 5–15 offers on a desirable property is routine. Multiple offers almost always drive the final sale price above the list price.

When a buyer offers more than the list price. In the Bay Area, this is not an anomaly — it's the norm in desirable neighborhoods. Sellers sometimes deliberately list below market value to attract multiple offers and create a bidding war. A home listed at $1.3M in Fremont may routinely close at $1.5M+.

An addendum to your offer that automatically increases your bid by a set increment above the highest competing offer, up to a maximum price you've pre-set. Example: "I offer $1.4M, escalating $10,000 above any competing offer up to $1.6M." If the next highest offer is $1.45M, your effective offer becomes $1.46M — automatically.

When the seller doesn't accept or reject your offer outright, but responds with modified terms — typically a higher price, different closing date, or changed contingency terms. A counter-offer voids the original offer; you can accept, counter back, or walk away entirely.

A second offer accepted by the seller, positioned to take the #1 spot automatically if the primary deal falls through. As a backup buyer, you are contractually committed to buy if the first deal collapses — but you're free to cancel your backup position if a better opportunity comes along before the primary deal falls through.

When a seller lists their property "as-is," they're signaling they will make no repairs regardless of what an inspection finds. You can still do an inspection (and should) — but the seller won't fix anything or give credits. In California, sellers still must disclose known material defects even in an as-is sale.

The number of days a property has been actively listed for sale on the MLS. A low DOM (under 7 days in the Bay Area) typically means strong demand and competitive offers. A high DOM (30+ days in the Bay Area) is a signal that something about the property or price is putting buyers off.

Recent sales of similar properties in the same neighborhood, used to estimate what a home is worth. Comps are the data foundation for your offer price, the appraisal, and the listing price. A good comp is similar in size, age, condition, location, and lot size, and ideally sold within the past 90 days.

A seller's market exists when there are more buyers than homes for sale — prices rise, homes sell fast, and buyers compete with multiple offers, often waiving contingencies. A buyer's market is the reverse — more homes than buyers, prices soften, sellers make concessions, and buyers can negotiate. A "balanced market" is roughly 4–6 months of inventory.

A pre-approval is a lender's formal commitment to lend you a specific amount, based on verified documentation — pay stubs, tax returns, bank statements, credit pull. A pre-qualification is a much weaker, unverified estimate based on self-reported information. In Bay Area offers, a full underwritten pre-approval letter is essentially mandatory to be taken seriously.

Any mortgage that exceeds the conforming loan limit set by Fannie Mae and Freddie Mac. In 2026, the limit is $1,209,750 in Bay Area counties (Santa Clara, San Mateo, San Francisco, Alameda). Any loan above this is a jumbo loan — held by the lender's own portfolio, not sold to Fannie/Freddie. Jumbo loans require higher credit scores (700+), larger down payments (20%+), and 6–12 months of cash reserves.

Insurance you pay monthly to protect the lender (not you) if you put down less than 20% on a conventional loan. PMI typically costs 0.5–1.5% of the loan amount annually. On a $1M loan that's $5,000–$15,000 per year added to your monthly payment. PMI can be removed once you reach 20% equity, either through paydown or appreciation.

An acronym for the four components of your monthly housing payment: Principal (paying down the loan), Interest (the cost of borrowing), Taxes (monthly property tax escrow), and Insurance (homeowner's insurance escrow). Lenders use PITI to calculate your debt-to-income ratio, not just the principal + interest portion.

Your total monthly debt payments (PITI + car payments + student loans + credit card minimums) divided by your gross monthly income. Lenders use DTI to measure how much of your income goes to debt. Conforming loan max is typically 45–50%; jumbo loans often require 43% or lower. A lower DTI signals lower lending risk.

The loan amount divided by the property's appraised value, expressed as a percentage. A $1.2M loan on a $1.5M home = 80% LTV. The lower the LTV, the less risk for the lender. Lenders use LTV to determine down payment requirements, PMI obligations, and interest rates. 80% LTV (20% down) is the golden threshold — crossing it unlocks better rates and no PMI.

A mortgage backed by the Federal Housing Administration, designed to help buyers with lower credit scores or smaller down payments. Historically allowed 3.5% down payments and had more flexible qualification standards. Important 2025 update: As of May 25, 2025, FHA loans are no longer available to non-permanent residents — including H1B visa holders. If you're on a work visa, FHA is no longer an option.

Restricted Stock Units are a form of equity compensation at tech companies. For mortgage purposes, lenders can typically count RSU income toward your qualifying income — but only if you have a 2-year history of receiving RSUs and there's a reasonable expectation they will continue. Lenders will average your RSU income over 2 years and add it to your base salary to determine how much home you can afford.

A short-term loan that lets you tap the equity in your current home to fund the down payment on a new home — before your current home is sold. Typically 6–12 months, higher interest rate, and you're carrying two mortgages temporarily. Used when you want to buy first, then sell — rather than selling first and potentially being homeless while you search.

The strongest tier of lender letter. Unlike a standard pre-approval where the lender reviews your application, a fully underwritten pre-approval means an actual underwriter has already reviewed and approved your full file. This is Tier 3 of the three pre-approval levels — above pre-qualification (Tier 1) and standard pre-approval (Tier 2).

A professional examination of the home's physical condition — roof, foundation, plumbing, electrical, HVAC, windows, and more — conducted by a licensed inspector. The buyer typically pays $500–$1,000 for this. The inspector produces a written report documenting all deficiencies, from minor maintenance items to major structural concerns. In the Bay Area, buyers often do inspections before making an offer (during the open house period) to stay competitive.

An independent valuation of a home's market value, commissioned by the lender after your offer is accepted. An appraiser visits the property and analyzes comparable sales to determine what the home is "worth" according to lenders. If the appraised value comes in below your purchase price, your lender will only loan against the lower appraised value — leaving you to cover the gap in cash, or renegotiate the price with the seller.

A California-required report disclosing whether a property is in any of six natural hazard zones: flood, fire, earthquake fault, seismic hazard zone, dam inundation area, or wildland fire. Sellers must provide this report to buyers before they remove contingencies. If you're in a FEMA flood zone or a high-fire zone, your insurance costs can be dramatically higher.

When the same real estate agent or brokerage represents both the buyer and the seller in the same transaction. In California, this is legal but requires written disclosure and consent from both parties. The conflict of interest is significant: the agent cannot fully advocate for either side when they're representing both simultaneously.

California's 1978 property tax law that caps property taxes at 1% of your purchase price and limits annual increases to a maximum of 2% per year, regardless of how much your home's market value rises. When you buy a home, your tax basis resets to your purchase price. Your neighbor who bought the same house in 1995 may pay $1,800/year in property taxes while you pay $18,000/year — this is Prop 13 working exactly as designed.

California's 2020 constitutional amendment that significantly changed two things: (1) Inheritance — children who inherit a parent's home can only keep the low Prop 13 tax base if they move in within 1 year and make it their primary residence; otherwise it's fully reassessed at market value. (2) Portability — homeowners 55+ can now transfer their Prop 13 tax base to a replacement home anywhere in California, up to 3 times.

A special annual tax charged in newer developments (typically post-1982) to fund the infrastructure built for that community — schools, roads, fire stations. Unlike property tax, Mello-Roos is a flat annual fee, not a percentage of home value. It appears as a separate line item on your property tax bill and can range from $1,000 to $5,000+ per year. It eventually expires when the bond is paid off.

An organization of residents in a planned community, condo building, or townhome development that sets rules and collects monthly dues for shared maintenance (pools, landscaping, common areas, building exterior). HOA dues can range from $150/month for a basic community to $1,200+/month for luxury condo buildings. HOAs also have the power to fine you for violations, place liens on your property, and restrict what you can do with it.

The listing agent represents the seller and is hired to market the property, manage offers, and negotiate in the seller's best interest. The buyer's agent represents the buyer and has a fiduciary duty to find the best property, negotiate the best terms, and advocate exclusively for the buyer. They are paid from the seller's side of the transaction — but as of the 2024 NAR Settlement, commission arrangements must now be explicitly agreed in writing with the buyer before touring homes.

The portion of your home's current market value that you actually own — what's left after subtracting your outstanding mortgage balance. If your home is worth $1.5M and you owe $900K, you have $600K in equity. Equity grows as your mortgage is paid down and as the home appreciates in value. It can be accessed via a refinance, HELOC, or sale.

A growing scam in real estate transactions where criminals impersonate escrow officers via spoofed emails and provide fraudulent wire instructions. Buyers send their downpayment or EMD to the scammer's account instead of the real escrow company.

The original purchase price of your property plus any documented capital improvements, plus buying costs like closing fees — minus any depreciation claimed. Your capital gains tax is calculated on the difference between your sale price and your adjusted basis. Every dollar you add to your basis (through improvements) reduces your taxable gain by a dollar.

A federal tax provision that allows you to exclude up to $250,000 (single) or $500,000 (married filing jointly) of capital gains from the sale of your primary residence from federal AND California taxes. Requirements: you must have owned and lived in the home as your primary residence for at least 24 months out of the 5 years before the sale. The 24 months don't need to be consecutive.

A U.S. tax law requiring that when a "nonresident alien" sells U.S. real property, the buyer must withhold 15% of the gross sale price and remit it to the IRS at closing. The withheld amount is a prepayment of estimated tax — not the actual tax owed. If you overpaid, you get a refund when you file. If you underpaid, you owe the balance. This affects Bay Area H1B sellers who are not yet U.S. residents for tax purposes.