About Financial Title Company .................................. 2

Tips to Help Sell Your Home ...................................... 3

Home Improvements................................................. 4

Home Selling Process................................................ 5

Inspection Process..................................................... 6

What is Escrow?....................................................... 7

The Escrow Process ................................................... 8

Life of an Escrow ...................................................... 9

Title Insurance ........................................................ 10

Who Pays What?.................................................... 11

Estimating Your Proceeds ........................................ 12

Moving Expenses.................................................... 13

Moving Checklist .................................................... 14

Tax Calendar.......................................................... 15

Glossary ........................................................... 16-17

Contents

About Financial Title Company

2

Financial Title Company is a subsidiary of Mercury Companies, Inc., one of the nation’s largest providers of real estate-related services. As part of this great organization, Financial Title Company has become one of the fastest-growing title companies in the country.

Great people are the most important component of our company. Outstanding customer service is the hallmark of this superior team. We attract the best people in the industry and empower them to make a difference.

We are especially grateful to our clients who have trusted us with their transactions. We work very hard to give you the finest service possible, day in and day out, in every aspect of our business.

We look forward to assisting you with our title and escrow services.

For more information or to locate one of our convenient branch offices, please talk with your Financial Title Company representative or visit our website at www.financialtitlecompany.com.

People usually decide within two minutes whether they like your home. The first impression is often the lasting impression. And they start forming their opinion before they even walk in the front door. So it’s smart to ask yourself if your home is as presentable as it can be for a faster sale at the best price. Here are time-tested tips suggested by the top real estate agents to make your home more presentable. A good rule to follow is to improve cosmetic aspects of your home, which will improve your chances of selling. Avoid making major changes unless they will increase the value of your home more than the cost of the improvement.

Tips to Help Sell Your Home

Outside1. Invest in landscaping where it can be seen at first sight.

A well-manicured lawn, neatly clipped shrubbery and cleanly swept walks create a good first impression.

2. Cut back overgrown shrubbery that looks scraggly or keeps light out of the house.

3. Paint your house if necessary. This can probably do more for sales appeal than any other factor. If you decide against painting, at least consider touching up front shutters and window frames.

4. Inspect the roof and gutters. Any missing shingles to replace? Gutters and down spouts in place? Need paint or repair?

5. Consider putting flowers outside the front door.6. Repaint the front door.

Living Areas7. The kitchen is the most important room in the

house. Make it bright and attractive. If dull, paint cabinets and put up perky new curtains.

8. Clean the ventilating hood in the kitchen.9. If the kitchen floor is worn, put down new flooring.

Replace any loose tiles.10. Remove any appliances that you keep on your

counters. Clean counters make the room look larger.11. Repair dripping faucets. 12. Use special cleaning products to remove stains from

toilets, bathtubs, sinks and showers.13. If sink and bathtub drain too slowly, unclog them.14. Have all plaster in top shape. Cracks (or nail-pops,

visible seams in dry walls) are easy to fix.15. Check ceilings for leak stains. Fix the cause of the

damage, repair the ceiling and paint.16. Stick to conventional white paint outside and easy-

to-work-with pastels inside.17. If you have a fireplace, clean it out and lay some

logs in it to make it look inviting.18. Wash windows.19. Replace broken glass.

20. Mend torn screens.21. Check to see that all windows will open and close.22. Replace burned-out light bulbs. Use brighter light

bulbs.23. Make sure every light switch works.24. Make the floors shine; clean and polish them; and

nail down any cracking boards or stair treads.25. Straighten up the closets—get rid of excess

items. Use air freshener to eliminate musty odors. Lubricate any sticky or squeaking doors.

26. Clean out attic, basement and garage and dispose of everything you are not going to move, and package everything you won’t need until you’re settled in your new home.

When Your House is Being Shown27. Keep room draperies and shades open to let in light.

This also makes rooms appear larger.28. Have your home well lighted during showing.29. Neatness makes a room look bigger. Avoid clutter.30. If possible, leave your furniture and rugs in the

house for showing it.31. Avoid having dirty dishes in the sink or on counters.32. Keep any toys in the children’s rooms. Bikes,

wagons and skateboards should be made as inconspicuous as possible.

33. Keep radio, stereo, TV off or turned way down.34. Take your family away if your broker is holding an

open house.35. Refer direct inquiries you receive about seeing your

house to your Realtor® to take advantage of his professional skills in selling your home.

36. Don’t mention furniture or furnishings you wish to dispose of unless asked. Such discussion can kill the sale.

37. Take pets outdoors when your house is being shown.38. Let the real estate agent show your house, and don’t

tag along. Answer questions candidly when asked, but don’t offer answers to unasked questions.

3

Home remodeling projects can help sell a home, though some provide higher paybacksfor homeowners than others. Project costs and resale amounts vary by area.

REMODELING PROJECT AVG. COST AVG. RESALE % $ RECOUP

Master Suite $27,055 $24,744 91%

Minor Kitchen Remodeling $5,835 $6,042 104%

Major Kitchen Remodeling $17,170 $16,270 95%

Bathroom Addition $9,205 $9,046 98%

Attic Bedroom with Bathroom $6,443 $5,292 82%

Family Room Addition $21,565 $18,199 84%

Remodeling Project $27,221 $24,019 88%

Sunroom Addition $23,682 $15,950 67%

Deck Addition $6,620 $4,782 72%

Home Office Addition $8,114 $4,801 59%

Second Story Addition $50,596 $42,438 84%

Exterior Remodeling $15,450 $11,536 75%

Home Improvements

4

These figures have been gathered from various remodeling experts, web sites, and articles. Remodeling costs and any possible recoupment vary by area and contractor, so the numbers are approximations.

Prepare home for viewing by prospective buyer

Market property

Review contract presented

Escrow opened and title report ordered

Home inspections completed

Inspection reports submitted to Escrow Officer

Appraisal

Loan Payoff Requested

Buyer’s loan documents drawn by lender (if applicable)

Documents executed at Financial Title

Funding by lender (if applicable)

Final closing documentation and balance of funds receipted

Recording and distribution of funds and documents

Congratulations on the sale of your home!

Home Selling Process

1

2

3

4

5

6

7

8

9

10

11

12

13

14

5

THE INSPECTION PROCESSDuring the contingency period, your Realtor will order physical inspections as specified in your purchase agreement. Legislation mandates, (under civil code 1102), that the seller has the responsibility to reveal the true condition of the property on a disclosure statement. This may help you determine what kinds of property inspections you feel are desired or necessary. Your Realtor will help you arrange for these.

STRUCTURAL PEST CONTROL PROCESSA licensed inspector will examine the property for any active infestation by wood destroying organisms. Most termite reports classify conditions as Section I or Section II.

SECTION I CONDITIONSSection I conditions are those currently causing damage to the property. These conditions generally need to be corrected before a lender will make a loan on a home. The seller generally pays for the inspection and any Section I repair work.

SECTION II CONDITIONSSection II conditions are those not currently causing damage but which are likely to, if left unattended. Costs for repairs are generally negotiated.

GEOLOGICAL INSPECTIONA soils engineer will perform an inspection of the soil conditions and the stability of the ground beneath the structure, as well as research past geological activity in the area. Typically, the buyer pays for this inspection.

HOME INSPECTIONThis inspection encompasses roof, plumbing, electrical, heating, appliances, water heater, furnace, exterior siding, and other visible features of the property. A detailed report will be written with recommendations, often times the recommendation is to consult a specialist (such as a structural engineer). The buyer usually pays the inspection fee.

WHO PAYSYour Purchase Agreement will specify who is responsible for the costs of inspections and for making any needed corrections or repairs. The cost is negotiable between the parties and should be considered carefully. Your Realtor will advise you what is customary and prudent.

Inspection Process

6

Escrow is defined as a neutral party holding funds and documents until all parties to the escrow have performed. All instructions to escrow are requested in writing. When the escrow holder has mutually agreeable written instructions and funds adequate to comply with those instructions, the escrow is closed.

The escrow account is an independent depository wherein all funds, instructions, and documents for the sale of your home are held, including the buyer’s down payment, lender’s funds, documents for the new loan, hazard and title insurance, inspection reports, and your grant deed. At the close of escrow, the “escrow holder”, such as Financial Title Company, delivers these items to the appropriate parties, disburses the funds, and processes the associated paperwork.

WHAT DOES AN ESCROW HOLDER DO?

The escrow holder’s duties include:• Serving as the neutral agent and the liaison

between all parties involved.• Requesting a preliminary title search to determine

the status of title to the property.• Requesting a beneficiary statement if debt or

obligations are to be taken over by the buyer.• Requesting a payoff demand from beneficiaries.• Complying with the lender’s requirements as

specified in their instructions to escrow.• Securing releases of all contingencies or other

conditions imposed on the escrow.• Preparing or securing the deed and other

documents related to escrow.• Prorating taxes, interest, insurance and rents.• Preparing escrow instructions.• Receiving purchase funds from the buyer.• Receiving loan funds from buyer’s lender.• Closing the escrow pursuant to instructions

supplied by the seller, buyer and lender.• Recording the deed and any other documents.• Disbursing funds as authorized by the instructions,

including charges for title insurance, recording fees, real estate commissions and loan pay-offs.

• Preparing final statements for all parties involved in that account for the disposition of all funds held in the escrow account.

• Requesting the title insurance policy.

What is Escrow?

7

8

The Escrow Process

Your escrow is opened shortly after you execute the purchase agreement to sell your home. It cannot be successfully completed until all escrow instructions have been complied with and all parties have signed escrow documents.The length of escrow can range from a few days to several months, depending on the terms of the purchase agreement.

OPENING THE ESCROW

Often, the real estate agent opens the escrow for you. As soon as you execute the sales agreement, the buyer’s agent will place the initial deposit into an escrow account. At the opening of escrow, you may be asked to provide identification information such as your birth date and social security number. This information remains confidential.

THE LOAN PROCESSUnless the buyer is paying all cash, the next step will be for the buyer to select a lender and apply for a mortgage loan. Your real estate agent will keep you informed of the buyer’s loan progress.The loan(s) on your property will be paid off at the close of escrow, unless the buyer takes over your existing loan(s). It is important that you still make your mortgage payments so that you do not damage your credit by incurring late fees.Also, it is very important for you to provide complete information on each loan against your property as soon as possible so the escrow officer can order loan payoff demands. The information should include the name of the lender, the lender’s address and phone number and your loan number.If your property has a Homeowner’s Association, you may be asked to provide the name, address and phone number.

THE CLOSING PROCESS

Signing Escrow InstructionsYour escrow officer or real estate agent will contact you to make an appointment to sign your escrow instructions and your grant deed. At this time, the escrow officer will inform you of the estimated amount of proceeds you will receive from the sale of your home. At your appointment, it is important that you bring either your valid drivers license or passport so that signatures can be notarized.When the buyer’s loan is approved, the loan documents are sent to the escrow officer. When the buyer has signed loan documents, the escrow officer will give them to the lender for a final review. The review usually occurs within a few days, after which the lender advises the escrow officer that the lender is ready to fund the loan. If all conditions of the escrow have been satisfied, the escrow officer will inform you of the date the escrow will close and will take care of the technical and financial details.

The Close of Escrow

Close of escrow signifies legal transfer of title and occurs when your grant deed is filed with the county recorder.

Your escrow officer will prepare a final settlement statement and transfer the proceeds of the sale.

After your existing loan is paid off, your lender is required by law to issue a full reconveyance (release of their loan). The deed of reconveyance will be recorded and the original returned to you.

9

The Life of an Escrow

THE ORDER IS OPENED AT FINANCIAL TITLE COMPANY

ORDER PRELIMINARY REPORT FROM FINANCIAL TITLE COMPANY

PRELIMINARY REPORT RECEIVED AND REVIEWED

ORDER DEMANDS AT CLIENT’S REQUEST

RECEIVE DEMANDS AND REVIEW, NOTIFY CLIENT

ORDER STATEMENT OF IDENTITY ON BUYERS & SELLERS AND CLEAR GENERAL INDEX MATTER

ORDER BENEFICIARY STATEMENT AT CLIENT’S REQUEST

RECEIVE BENEFICIARY STATEMENT, REVIEW TERMS OF TRANSFER AND NOTIFY CLIENT

BILL FROM TERMITE COMPANY, ROOFERS, APPLIANCE INSPECTION COMPANIES AND HOME WARRANTY

COMPANIES ARE BEING TRANSFERRED TO THE ESCROW AT THE DIRECTION OF THE CLIENT

LOAN DOCUMENTS RECEIVED FROM LENDER

CALL REAL ESTATE BROKER, AGENT OR CLIENT FOR TERMS

PREPARE BUYERS AND SELLERS INSTRUCTIONS AND ALL RELATED

DOCUMENTS

SCHEDULE APPOINTMENT TO SIGN PREPARED DOCUMENTS

REVIEW FILE TO DETERMINE THAT ALL CONDITIONS HAVE BEEN MET AND ALL DOCUMENTS ARE PROPERLY EXECUTED, NOTARIZED AND GOOD FUNDS RECEIVED

(FOR BUYER AND SELLER)

REQUEST LOAN FUNDS FROM THE LOAN COMPANY DO POLICY WRITE-UP AND FORWARD DOCUMENTS TO THE RECORDING DESK

LOAN FUNDS RECEIVED AND DEPOSITED

DOCUMENTS RECORDED AT COUNTY RECORDERS OFFICE

CLOSE FILE, PREPARE STATEMENT AND DISBURSE FUNDS

Title Insurance

10

WHAT IS TITLE INSURANCE?

Title Insurance, unlike other forms of insurance, such as automobile or life insurance, involves a one-time premium, which insures against previous actions resulting in a compromise of the integrity of your real estate ownership.

When your escrow closes, the title company issues a policy of title insurance to Buyer. An additional policy insuring the new lender is often issued concurrently.

HOW DOES IT WORK?

Financial Title conducts a thorough search and evaluation of the Public Records, looking for situations that may cloud the title to your new home, such as:

Are all taxes and special assessments paid?

Does anyone have special rights to the property that would limit your ownership?

Has the death of a former owner or the filing of a will affected title to the property?

Are there undisclosed heirs or spouses of the seller?

Are there any lawsuits or claims recorded against the property itself, or suits or judgments filed against the seller?

WHAT ABOUT HIDDEN RISKS?

Claims that cannot be discovered by examination of the Public Records, called “hidden risks,” could arise long after you’ve purchased the property.

Here are just a few of the most common hidden risks that can cause a loss of title or create an encumbrance on title:

False impersonation of the true owner of the property.

Forged deeds, releases or wills. Other types of fraud. Undisclosed or missing heirs. Instruments executed under invalid or expired

power of attorney. Misinterpretations of wills. Deeds by persons of unsound mind. Deeds by minors. Deeds by persons supposedly single, but in fact

married, or have registered domestic partners. Liens for unpaid estate, inheritance, income or

gift taxes.

WHAT ABOUT PREMIUMS?

Title insurance involves a one-time premium, paid when you close the real estate transaction. Who will pay the premium is negotiable between the parties, but the typical breakdown is shown on the following page.

TITLE INSURANCE: THE END RESULT

By obtaining a title policy from Financial Title Company, you are backed by the strength and security of one of the nation’s largest title insurers.

Who Pays What In Your County?

11

The fees below reflect traditional fee splits by county. *Your real estate contract may differ as a result of the current market conditions in your area.

Title insurance policy premiumsEscrow fee*Notary fees*Property tax proration (from date of acquisition)Special delivery/courier fees, if requiredDocument preparation fees*Document recording charges*Homeowners’ association transfer fee and prorated duesCity Conveyance Tax*Home Warranty according to contractInspection fees according to contract (termite*, roof, property, geological, etc.)Matters of record against the buyer (tax liens, judgments, etc.) and fees required to clear themFire insurance premium for fi rst yearAssumption/change of records fee, for takeover of existing loanLender’s new loan charges*Interest on new loan from date of funding to 30 days prior to fi rst payment dateOther prorations (rents, insurance, etc.), if applicableReal Estate commissionDocument transfer tax (based on sales price)

Notary feesProperty tax proration (to date of acquisition)Special delivery/courier fees, if requiredDocument preparation feesDocument recording chargesHomeowners’ association statement fee and prorated duesCity costs*Home Warranty according to contractWork/repairs required according to contractMatters of record against the property or seller (loans, tax liens, judgments, etc.) and fees required to clear them (statement fees, reconveyance/trustee fees and pre-payment penalties)Bonds and assessments according to contract

CONTR

A

COST

AALA

MEDA

EL DORA

DO

SAN M

ATEO

PLACE

R

SANFR

ANCISCO

SANJO

AQUIN

SACR

AMENTO

$1.10PER

$1.10PER

$1.10PER

$1.10PER

$1.10PER

$1.10PER

$1.10PER

$1.10PER

$1.10PER

$1.10PER

SONOMA

SANTA

CLARA

B B S/B S/B S B S/B B S B S/B S/B S/BB B S/B S/B S B S/B B S B S/B S/B S/BB B B B B B B B B B B B BB B B B B B B B B B B B BB B B B B B B B B B B B BB B B B B B B B B B B S/B BB B B B B B B B B B B B BB B S/B B S S/B S S/B B B/S S S S

B/S B/S B S B/S S N/A B/S B/S N/A N/A B/S N/AB B B B B S B B B B/S B S B

B B B B B B B B B B/S B B B

B B B B B B B B B B B B B

B B B B B B B B B B B B B

B B B B B B B B B B B B B

B B B B B B B B B B B B B

B B B B B B B B B B B B B

B B B B B B B B B B/S B B BS S S S S S S S S S S S SS S S S S S S S S S S S S

S S S S S S S S S S S S SS S S S S S S S S S S S SS S S S S S S S S S S S S

S S S S S S S S S S S B/S S

S S S S S S S S S S S S S

S S S S S S S S S S S S S

S S S S S S S S S S S S S

S S S S S S S S S B/S S S SS S S S S S S S S B/S S S S

S S S S S S S S S S S S S

S S S S S S S S S S S S S

FRES

NO

TULA

RE

MADERA

$1.10PER

$1.10PER

$1.10PER

SALES PRICE

Estimated Balance 1st Loan

Interest

Prepayment Penalty

Estimated Balance 2nd Loan

Interest

Prepayment Penalty

Reconveyance Fees

Brokerage Fee

Assessments (if any)

Recording Fees

County Transfer Tax

City Fees/Inspections (if any)

VA/FHA Costs (if applicable)

Title & Escrow Fee

Termite Inspection/Repairs

Roof Inspection/Repairs

Pool Inspection/Repairs

Property Inspection/Repairs

Other Inspection/Repairs

Home Protection Plan (warranty)

Taxes

Homeowner’s Association Dues (if any)

Drawing/Notary Fees

Buyer’s Closing Cost Credits (if any)

Trans. Coord. Fee

Geo/Flood/Seismic Report

Regulatory Compliance

Miscellaneous

TOTAL CHARGES

ESTIMATED TOTAL NET

Estimating Your Proceeds

12

MADERA

Moving Expenses

13

WHEN YOU MEET THE IRS DEFINITION OF A QUALIFYING MOVE, THE FOLLOWING ITEMS MAY BE CONSIDERED TAX DEDUCTIBLE:

• The travel cost to look for a home in the area of a new job. Your home shopping expedition does not have to be successful for the cost to be deductible.

• The cost of having your furniture and other household items shipped, including the cost of packing, insurance and storage for up to 30 days.

• The cost of getting your family to the new hometown, including food and lodging expense on the trip.

• The cost of lodging and 80% of food expenses for up to 30 days in the new home town, if these temporary living expenses are necessary, due to the fact that you have not yet found your ideal home or it is not ready when you arrive.

• Certain costs associated with the sale of your old home and purchase of the new one. These expenses, including real estate commissions, legal fees, state transfer taxes and appraisal and title fees, could be used either to reduce the gain on the sale of the previous home or to boost the basis of the new one. However, it’s usually beneficial to count them as moving expenses up to the allowable dollar limits, for this gives you an immediate tax benefit.

• Seek the advice of a tax attorney or CPA for the most up-to-date information.

BEFORE YOU LEAVE:Address ChangePost Office: Give forwarding addressCharge Account, Credit CardsSubscriptions: Notice requires several weeksFriends and Relatives

BankCancel any automatic payment or direct deposit arrangementsTransfer funds and arrange check cashing in new cityArrange credit references

InsuranceNotify company of new location for coverageLife, Health, Fire and Auto

Utility CompaniesGas, Electricity, Water, Telephone, Fuel, Garbage & Cable TV

Delivery ServiceLaundry, Newspaper, changeover services

ChildrenRegister in school.Transfer school records.Arrange for day care.

Medical, Dental, Prescription HistoriesAsk Doctor and Dentist for referral; transfer needed prescriptions, eyeglasses, X-rays.Obtain birth records, medical records, etc.

PetsConsult a veterinarian about moving your pet.Obtain all records.Ask about regulations for licenses, vaccinations, tags, etc.

DON’T FORGET TO:Empty freezer: plan use of foods.Defrost freezer and clean refrigerator. Place charcoal inside to dispel odors.Have appliances serviced for moving.Clean rugs or clothing before moving: have them moving wrapped.Clean and/or repair furniture and curtains.Plan for special care needs for your infants and pets.

Check with your moving counselor on insurance coverage, packing and unpacking labor, arrival day method and time of expected payment.Assemble first day items – soap, toilet paper, pencils, paper, toiletries, bath towels, utility knife, scissors, trash bags, etc. Obtain relocation package from Real Estate agent or Chamber of Commerce in your new city.Arrange for storage.Find out about tax-deductible moving expenses.Obtain all personal records from lawyers and accountants.Assemble packaging materials.Have car checked and serviced for the trip.Pack a day or two worth of extra clothing in case of delay.

ON MOVING DAY:Make a list of every item and box loaded onto the truck.Carry enough cash or travelers checks to cover cost of moving services and expenses.Carry jewelry and documents yourself; or use registered mail.Carry an assortment of toys for the children (if needed).Let a close friend or relative know route and schedule you will travel including overnight stops; use them as your message headquarters.Double check closets, drawers, and shelves to be sure they are empty.Turn off all appliances and lock all doors and windows.Leave all old keys needed by new owner with Realtor or neighbor.Let the movers know where you can be reached

AT YOUR NEW ADDRESS:Check off all boxes and items as they come off the truck.Install new locks.Check on service of gas, electricity, water, telephone, garbage and cable T.V.Check pilot light on stove, hot water heater and furnace. Have appliance checked.Ask mail carrier for mail he or she may be holding for you.Apply for state driver’s license (or just address change id needed).Visit city officer and voter registration.Register car within five (5) days after arrival in state or a penalty may be paid when getting new license plates.Obtain inspection sticker and transfer motor club membership.Arrange for medical services: doctor, dentist, veterinarian, etc.

Moving Checklist

14

Owner must own and occupy the property on January 1st to be eligible for application exemption.Penalties for delinquency are 10% on the date of delinquency, plus $10.00 costs for delinquent 2nd installment. Thereafter, 1.5% per month of original tax amount until paid.Property may be sold at public auction after 5 years delinquency.

Tax Calendar

1st Installment July 1 – Dec 31 2nd Installment Jan 1 – June 30

Beg

inni

ng o

f Fis

cal T

ax Y

ear –

July

1

Tax

bills

mai

led

last

wee

k of

Oct

ober

1st

Inst

allm

ent d

ue –

Nov

embe

r 1

1st I

nsta

llmen

t Del

inqu

ent –

Dec

embe

r 10

Ass

essm

ent D

ate

– Ja

nuar

y 1

2nd

Inst

allm

ent d

ue –

Feb

ruar

y 1

2nd

Inst

allm

ent D

elin

quen

t – A

pril

10La

st d

ay to

file

for V

eter

ans o

f hom

eow

ners

exe

mpt

ions

10

0% -

Apr

il 1

File

by

Dec

embe

r 1 fo

r 80%

15

Glossary

These definitions are to acquaint the seller with terms commonly used in real estate transactions. These terms are intended to be general and brief and are not complete and wholly accurate when applied to all possible uses of the term. Please consult your real estate agent for more information or questions regarding these terms.

Acknowledgement: A formal declaration made before an authorized official (usually a notary public), by the person who has executed (signed) a document, that such execution is his/her own act and deed. In most instances a document must be acknowledged (notarized) before it can be accepted for recording.

Adjustable Rate Mortgage (ARM): A mortgage with an interest rate that changes over time in line with movements in the index.

Adjustment Period: The length of time between interest rate changes on an ARM. For example; a loan with an adjustment period of one year is called a one year ARM, which means that the interest rate can change once a year.

Amortization: Repayment of a loan in equal installments of principal and interest, rather than interest-only payments.

Annual Percentage Rate (APR): The total finance charge (interest, loan fees, points expressed as percentage of the loan amount).

Appraisal: An opinion of value based on factual analysis. Legally, an estimation of value by two disinterested persons of suitable qualifications.

Assessments: Specific and special taxes (in addition to general taxes) imposed on real property to pay for public improvements within a specific geographic area.

Assumption of Mortgage: A buyer’s agreement to assume the liability under an existing note that is secured by a mortgage or deed of trust. The lender must approve the buyer in order to assume the loan.

Beneficiary: Lender

Cap: The limit on how much an interest rate or monthly payment can change, either at each adjustment or over the life of the mortgage.

CC&R’s: Covenants, Conditions, and Restrictions. A document that controls the use, requirements and restrictions of a property.

Closing Statement: The financial disclosure statement that accounts for all of the funds received and expected at the closing.

Contingency Clause: A provision in some ARM’s to a fixed rate loan, usually after the first adjustment period. The new fixed rate is generally set at the prevailing interest rate for fixed rate mortgages. This conversion feature may cost extra.

Conventional Mortgage: A mortgage or deed of trust not obtained under a government insured program such as FHA or VA.

Conveyance: Transfer of title to land. Includes most instruments

by which an interest in real estate is created, mortgaged or assigned.

Deed: Written instrument by which the ownership of land is transferred from one person to another.

Deed of Trust: Written instrument by which the ownership of land is transferred to a trustee as security for a debt or other obligation. Also called Trust Deed. Used in place of mortgages in many states.

Documentary Transfer Tax: A state tax on the sale of real property, based on the sale price.

Due on Sale Clause: An acceleration clause that requires full payment of a mortgage or deed of trust when the secured property changes ownership.

Earnest Money: The portion of the down payment delivered to the seller or escrow agent by the purchaser with a written offer as evidence of good faith.

Easement: Gives one party the right to go onto another party’s property. Utilities often get easements that allow them to run pipes or phone lines beneath private property.

Encumbrance: A claim, lien, charge, or liability attached to and binding real property. Any right to, or interest in, land which may exist in one other than the owner, but which will not prevent the transfer of fee title.

Escrow: A procedure in which a third party acts as a stakeholder for both the buyer and the seller, carrying out both parties instructions and assuming responsibility for handling all of the paper work and distribution of funds.

Federal National Mortgage Association: Popularly known as Fannie Mae. A privately owned corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by FHA or guaranteed by VA, as well as conventional home mortgages.

Fee Simple: An estate in which the owner has unrestricted power to dispose of the property, as he wishes including leaving by will or inheritance. It is the greatest interest a person can have in real estate.

Finance Charge: The total cost a borrower must pay, directly or indirectly, to obtain credit according to Regulation Z.

Graduated Payment Mortgage: A residential mortgage with monthly payments that start at a low level and increase at a predetermined rate.

Grant Deed: Grant Deed is a document which legally transfers your title to the property to the new owner.

16

Glossary

Home Inspection Report: A qualified inspector’s report on a property’s overall condition. The report usually includes an evaluation of both the structure and mechanical systems.

Home Warranty Plan: Protection against failure of mechanical systems with the property. Usually includes plumbing, electrical, heating systems and installed appliances.

Index: A measure of interest rate changes used to determine changes in an ARM’s interest rate over the term of the loan.

Joint Tenancy: An equal, undivided ownership of property by two or more persons. Upon death of any owner, the survivors take the decedent’s interest on the property.

Lease: An agreement by which an owner of real property gives the right of possession to another for a specific period of time and for a specified consideration (rent). Title does not pass.

Legal Description: A method of geographically identifying a parcel of land, which is acceptable in a court of law. A description of a parcel of land sufficient to identify the property such as a lot and tract number.

Lien: A legal hold or claim on property as security for a debt or charge.

Loan to Value Ratio: The relationship between the amount of the appraised value of the property, expressed as a percentage of the appraised value.

Margin: The number of percentage points the lender adds to the index rate to calculate the ARM interest rate at each adjustment.

Mechanics Lien: A lien created by statute for the purpose of securing priority of payment for the prices or value of work performed and materials furnished in construction or repair of improvements to land and which attaches to the land as well as the improvements.

Negative Amortization: Negative amortization occurs when monthly payments fail to cover the interest cost. The interest that isn’t covered is added to the unpaid principal balance, which means that even after several payments you could owe more than you did at the beginning of the loan. Negative amortization can occur when an ARM has a payment cap that results in monthly payments that aren’t high enough to cover the interest.

Note: A unilateral agreement containing an express and absolute promise of the signer to pay to a named person, order, or bearer, a defined sum of money at a specified date or on demand. Usually provides for interest and, concerning real property, is secured by a mortgage or trust deed.

Notice of Default: A notice filed to show that the borrower under a mortgage or deed of trust is in default (behind on the payments).

Origination Fee: A fee or charge for establishing a new loan.

PITI: Principal, interest, taxes and insurance.

Point: An amount equal to 1% of the principal amount of the investment or note. The lender assesses loan discount points at closing to increase the yield on the mortgage to a position competitive with other types of investments.

Prepayment Penalty: A fee charged to a mortgagor who pays a loan before it is due.

Private Mortgage Insurance (PMI): Insurance written by a private company protecting the lender against loss if the borrower defaults on the mortgage.

Promissory Note: A promise in writing, and executed by the maker, to pay a specified amount during a limited time, or on demand, or at sight, to a named person, or on order, or to bearer.

Proration: To divide (prorate) property taxes, insurance premiums, rental income, etc., between buyer and seller proportionally to time of use, or the date of closing.

Purchase Agreement: A written document in which the purchaser agrees to buy certain real estate and the seller agrees to sell under stated terms and conditions. Also called a sales contract, earnest money contract or agreement for sale.

Realtor®: A real estate broker or associate active in a local real estate board affiliated with the National Association of Realtors.

Reconveyance: An instrument used to transfer title from a trustee to the equitable owner of real estate, when title is held as collateral security for a debt. Most commonly used upon payment in full of a trust deed. Also called a Deed of Reconveyance or release.

Recordation: Filing for record in the office of the county recorder.

Statement of Identity: Also called Statement of Information, a confidential form filled out by the buyer and seller to help Title Company determine if any liens are recorded against either. Very helpful when people with common names are involved.

Tax Lien: (1) A lien for nonpayment of property taxes. Attaches only to the property upon which the taxes are unpaid. (2) A federal income tax lien. May attach to all property of the one owing taxes.

Title Insurance Policy: A policy that protects the purchasers, mortgagee or other party against losses.

Transfer Tax: State tax on the transfer of real property. Based on purchase price or money changing hands. Also called documentary transfer tax.

VA Loan: A loan that is guaranteed by the Veterans Administration and made by a private lender.

17

Notes

18

Notes

19