There are many important, terms in real estate contracts. Some are straightforward. Some are a bit confusing. Here is the second part of an extensive summary of some common, important terms in real estate contracts.
- Capital Improvement
These improvements add value to a parcel of real property while adapting the property to new uses or prolonging the life of the property. Note that maintenance is an example of something that is not a capital improvement.
- Cash Reserve
With a borrower’s commitment to a mortgage, a lender may require that the borrower has on deposit in a designated account at the time of the loan’s closing an amount equal to a pre-established number of months of principal, interest, taxes, and insurance.
- Certificate of Occupancy (C of O)
A certificate issued by a local government responsible for the use of land in the community of the property’s location declaring that the property’s structures may be occupied and that these structures and any improvements comply with the codes, ordinances, and regulations of the governing jurisdiction.
- Chain of Title
This refers to a successive conveyance of title for a specific parcel of land.
- Choice of Forum/Law
A contractual provision whereby the parties agree that the terms of the contract will be interpreted by the laws of the state designated by the parties. It also refers to a contractual provision that provides that the parties will litigate any disputes in a specific state or jurisdiction as designated by the parties.
When a transfer of ownership of a property from the seller to the buyer occurs pursuant to the terms of the sales contract.
- Closing Costs
These costs paid at the time of settlement or closing are the expenses incurred in the purchase and sale of real property. Examples of closing costs include attorney’s fees, appraisal fees, recording fees, taxes, and title insurance.
- Closing Statement
A statement that sets forth an accounting of a real estate transaction’s funds as received and distributed.
This is the underlying security for a loan that may be taken by a lender in the case of the loan’s default.
Payment of a percentage of the total purchase price to a broker for work marketing and selling the parcel of real property.
- Commission Split
The sharing of commissions between the listing agent and the buyer’s broker.
- Commitment (Origination) Fee
A fee paid to a lender for processing, underwriting and originating the mortgage.
- Commitment Letter
This is issued by a lender to a loan applicant stating funds will be provided subject to specific, written terms and conditions.
- Common Area or Common Elements
The area of a property or within a building available for use by all owners and tenants.
- Common Charge
The monthly charge assessed by a condominium or a cooperative to cover the cost of maintenance of the common areas and services.
- Comparables (Comps) aka Comparative Market Analysis
Used in establishing the fair market value of a property based on the sale of properties recently sold that are similar in size, condition, location, and amenities.
- Compensatory Damages
Compensatory damages refer to the amount of money actually lost in the case of a breached contract.
The exercise of the power of eminent domain, i.e., taking private property for public use.
- Condemnation Value
The market value of condemned property.
A contractual condition, the occurrence or failure of which, automatically creates or extinguishes a legal obligation.
A building whereby ownership is partitioned into unit interests with each apartment owner receiving a unit deed and owning an individual unit, with common areas shared with the other owners.
- Conforming Loan
A conforming loan is a mortgage issued within the framework of FNMA/FHLMC (Fannie Mae/Freddie Mac) guidelines in terms and amount. Generally, any loan which does not meet these guidelines is a non-conforming loan. A loan which does not meet guidelines specifically because the loan amount exceeds the guideline limits is known as a jumbo loan.
Consideration is anything of legal value, as recognized by law, offered as a contract’s inducement.
- Construction Loan or Mortgage
A short-term loan to obtain funds to construct an improvement to the real property.
- Constructive Eviction
This event results from some action or inaction by a landlord that renders the premises unsuitable for its contractually agreed-upon use.
Contingency is a condition in a contract that relieves a party of liability upon the occurrence or failure of a specified event.
- Contract Buyer’s Policy
Title insurance that protects the real property purchaser against defects in the seller’s title.
The transfer of title to real property.
A new offer made by either the buyer or seller, typically when rejecting a previous offer.
A contractual promise made in writing.
- Covenant Against Encumbrances
A promise in a deed that the title does not cause encumbrances except those set forth in the deed.
- Covenant for Further Assurances
A promise in a deed that the grantor will execute further assurances that may be reasonable or necessary to perfect the title in the grantee.
- Covenant of Quiet Enjoyment
A promise in a deed or lease that the grantee or lessee will not be disturbed in the use of the property because of a defect in the grantor’s or lessor’s title or lease.
- Covenant of Right to Convey
A promise in a deed that the grantor has the legal capacity to convey the title.
- Covenant of Seisin
A promise in a deed ensuring the grantee that the grantor has the title being conveyed.
- Covenant of Warranty
A promise in a deed that the grantor will defend the title against lawful claimants.
- Cubic-foot Method
A means of estimating reproduction or replacement cost using the volume of the building or structure.
- Cumulative-use Zoning
A type of zoning allowing a higher priority use distinct from the type of use designated for the area.
To learn more about real estate transactions, contact the experienced Sacramento metropolitan area/Northern California attorneys at the Montefalcon Law Offices. Contact us online or schedule a free consultation at any of our three conveniently located offices. Telephone our downtown Sacramento office at (916) 444 0440, our south Sacramento office at (916) 399-9944, or our Concord office at (925) 222-5929.