Here are expanded definitions of common real estate terms.
Escrow. Refers to the settlement process once a contract is accepted. Once the property is sold, it can be referred to as “in escrow”. The escrow officer is a neutral intermediary who acts on written instructions from both parties in the transaction. Their normal tasks include ordering payoff demands from all lienholders, collecting copies of reports and associated transaction paperwork, requesting loan funds from the lender, accepting funds from the buyer to close, arranging for the signing of the final transaction documents (including the Grant Deed), recording the legal documents, and dispersing the funds after closing
Listing. A contract between a broker and a seller that gives the broker the right to represent the seller in the sale of their home. It is usually exclusive, meaning that if the property sells to any party the broker is entitled to compensation.
Liquidated Damages. A clause found in all real estate contracts that, if initialed by all parties, sets the buyer’s deposit as the amount of the damages in the event of a breach of contract by the buyer. In California, the maximum deposit subject to liquidated damages on residential homes is 3% of the purchase price, regardless of the amount of the deposit.
Notice of Default (NOD). A formal legal document filed by a lender in a non-judicial foreclosure that notifies the borrower that the lender intends to foreclose on the property. Usually filed when the buyer is seriously delinquent on the property (90 days or more). It is filed at the lender’s discretion. Once a Notice of Default is filed, the borrower has 90 days to bring the loan current. If the loan is not brought current or “cured”, then the lender has the right to file a Notice of Sale, and ultimately sell the property at a Trustee’s Sale.
Notice of Sale. A formal legal document filed by the lender after a Notice of Default. Once the Notice of Trustee Sale is filed, the lender can sell the property at a Trustee Sale as soon as 20 days after the notice is filed, or longer at the lender’s discretion.
Short Sale. A “pre-foreclosure” situation where there is not enough proceeds to pay off the loans and liens on the home at the current market value, or in other words the proceeds are short of the amount needed to break even. A successful short sale requires the lienholder (usually the lender) to accept less than the full payoff balance in order to close the escrow. The seller must qualify for hardship for a short sale to be effective.
Staging. The process of having a design or staging expert furnish a home, arrange existing furniture, suggest minor cosmetic improvements (painting, window coverings, etc), adding accents and touches to finish rooms, and more. The purpose is to make the home more appealing to potential buyers, and help the home sell faster and for a higher price.
Trustee Sale. The final step in the foreclosure process where the lender puts the home up for auction, usually at the courthouse steps. The lender will generally bid the outstanding loan balance, and buyers may put in competing bids to purchase the home. The property in this situation is purchased all cash, via cashier’s check, and the purchaser accepts the home in “as is” condition subject to any other outstanding liens.