Property And Real Estate Law Terms You Need To Know

When venturing into Los Angeles real estate, you might come across unfamiliar property law terms that are commonly used in these transactions.

While you don’t need to be a real estate lawyer to deal with transactions and terms like these, it would be best for you to familiarize yourself with Los Angeles property law terms. Even as a layman, understanding these terms will provide you with the advantage of knowing what you’re dealing with.

Venturing into real estate is a learning experience. Here are a few common real estate and property law terms you should know when dealing with real estate in Los Angeles:

Annual Percentage Rate (APR): A percentage of the loan amount that consists of the interest rate and loan fees charged by the lender. The best way to gauge the total cost of a loan.

Appraisal: Conducted by a qualified individual, it is a detailed written analysis of a property’s estimated value.

Adjustable Rate Mortgage: A mortgage that works using variable interest rates that fluctuate throughout the loan duration according to the lender. It is based on changes of a specified index.

Binder: Also known as an earnest money request or offer to purchase. It is a brief written agreement that acknowledges a deposit made to enter into a contract of sale for a particular property.

Broker: A broker is someone who works on a commission-basis to connect interested parties together and assist in real estate transactions between them.

Buyer’s agent: A buyer’s agent is an individual who is authorized to negotiate and participate in the sale of a property on a buyer’s behalf. A buyer’s agent does not have a relationship with sellers and works for the buyer alone.

Contingencies: Requirements that must be met before the closing of a sale. Contingencies can include obtaining a mortgage to purchase the property, the repair and renovation of a property, or conducting a house appraisal equal or higher than a sale price.

Closing costs: These are additional fees that are required to transfer a property to a buyer that are not included in the purchase price. Examples of closing costs might be escrow fees, title search fees, insurance fees, and more. A contract is required to specify which party is responsible for paying of which closing costs.

Debt-to-income Ratio: When applying for a loan, it is the amount of debt relative to your income, including your already accrued debt and your upcoming mortgage.

Default: A borrower defaults on their mortgage when they are unable to pay two or more monthly mortgage payments on time. While a concern, it does not automatically mean forfeiting your home. Often, lenders will assist you in finding a solution to avoid foreclosure.

Escrow: The procedure where a third party acts out both instructions from both the buyer and seller as a stakeholder. Handling paperwork and fund distribution also falls under escrow.

Equity: Defined as a homeowners financial interest in a given property. It is also the difference between a property’s market value and how much is owed on the property.

Foreclosure: The process of a mortgage lender assuming possession of and selling a property in the event that a borrower defaults and cannot pay off their loan.

Fixed Rate Mortgage: A mortgage that works using a fixed interest rate that is not subject to change at any time during the loan term.

Loan to Value Ratio: A percentage of the appraised value of a property, it determines the amount of a property’s value after appraisal.

Refinance: It is the process of taking out a new mortgage loan in order for the borrower to receive more favorable terms. Usually recommended to borrowers who have fixed-rate mortgages that drop below 1 percent of what is currently being paid. Refinancing can be an expensive and time-consuming process and should be considered carefully before attempting it.

Truth in Lending: A federal law that dictates lenders must fully disclose all the terms and conditions stipulated in a mortgage in writing. It was enacted to protect borrowers and ensure that they have a clear picture of their mortgage.

Underwriting: Evaluates a loan application to determine the risk for a lender to approve it.


If you’re looking to work with a real estate lawyer in Los Angeles, consider reaching out to The Law Offices of R. Grace Rodriguez. We are a local probate and estate firm that is happy to work with you to ensure that you are equipped to deal with real estate transactions. Contact 818-734-7223 or 805-364-0884 to learn more.

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