I built this glossary because I got tired of watching clients nod along in meetings when they didn't actually know what "contingency" or "Mello-Roos" meant, and honestly, I don't blame them. Real estate and mortgage paperwork is full of terms that get thrown around like everyone already knows them. This is a plain-English reference for anyone buying or selling in Torrance, Redondo Beach, Manhattan Beach, Hermosa Beach, Palos Verdes, or Long Beach, with California-specific rules called out where they matter, because California real estate law is genuinely different from the rest of the country.
If you're working with me, use this as a reference during your transaction, and if a term isn't here or something's unclear, ask me directly.
Jump to a term
1031 Exchange
ADU (Accessory Dwelling Unit)
Appraisal Gap
As-Is
Buyer's Agent vs. Listing Agent
Clear Cooperation Policy
Close of Escrow (COE)
Comps (Comparable Sales) / CMA
Contingency
Days on Market (DOM)
DTI (Debt-to-Income Ratio)
Dual Agency
Earnest Money Deposit (EMD)
Escalation Clause
Escrow
FIRPTA
FSBO (For Sale By Owner)
Grant Deed vs. Quitclaim Deed
HOA (Homeowners Association)
HOA Transfer Fee
Home Warranty
Homestead Exemption / Homeowners' Exemption
JADU (Junior Accessory Dwelling Unit)
LTV (Loan-to-Value Ratio)
Mello-Roos
MLS (Multiple Listing Service)
NHD Report (Natural Hazard Disclosure)
PITI
Pocket Listing / Coming Soon
Pre-Approval vs. Pre-Qualification
Proposition 13
Proposition 19
Rate Lock
REO (Real Estate Owned)
Seller Concessions
Short Sale
Supplemental Tax Bill
TDS (Transfer Disclosure Statement)
Title Insurance
Underwriting
1031 Exchange
A provision in the federal tax code (Section 1031) that lets an owner of investment or business property defer capital gains tax by selling and reinvesting the proceeds into a "like-kind" replacement property. It comes with strict deadlines, 45 days to identify a replacement property and 180 days to close, and requires a qualified intermediary to hold the funds. It does not apply to a primary residence.
ADU (Accessory Dwelling Unit)
A secondary, independent living unit on the same lot as a house, with its own kitchen, bathroom, and entrance, sometimes called a granny flat or in-law unit. California law has made ADUs significantly easier to build over the last several years and limits how much cities can restrict them in most residential zones. In the South Bay, ADUs are increasingly used as rental income or space for extended family, and can add real resale value when done legally with permits.
Appraisal Gap
The difference between the agreed sale price and the value the lender's appraiser assigns the home. If the appraisal comes in low, the buyer either has to make up the difference in cash, renegotiate the price, or cancel under an appraisal contingency (if they kept one). In competitive South Bay markets, buyers often waive or cap the appraisal contingency to make their offer more competitive.
As-Is
A sale where the seller states upfront they won't make repairs or give credits based on what an inspection turns up. Buyers can still inspect the property and still have the right to negotiate or walk away under their contingencies, "as-is" just means the seller isn't committing to fix anything in advance. It does not excuse a seller from California's legal disclosure obligations.
Buyer's Agent vs. Listing Agent
A buyer's agent represents the purchaser's interests, negotiating price and terms, coordinating inspections, and advising on offer strategy. A listing agent represents the seller, marketing the property and negotiating on their behalf. Each owes a fiduciary duty exclusively to their own client, which is different from a dual agent representing both sides (see Dual Agency).
Clear Cooperation Policy
A National Association of Realtors MLS rule requiring listing agents to submit a new listing to the MLS within one business day of publicly marketing it, meant to prevent quiet, off-market "pocket listings" that only reach a narrow buyer pool. In 2026, NAR added a "delayed marketing" option that lets sellers place a listing in the MLS as visible to other agents while holding it back from public sites like Zillow for a limited time, without violating the policy. The rules around this are actively evolving, so ask your agent what applies to your specific MLS.
Close of Escrow (COE)
The date the transaction officially completes, funds are disbursed, the deed records with the county, and ownership legally transfers to the buyer. "Closing" and "close of escrow" are used interchangeably in California. Keys typically change hands on or shortly after this date, per the contract terms.
Comps (Comparable Sales) / CMA
"Comps" are recently sold (or actively listed) properties similar in size, condition, and location to a subject home, used to estimate its value. A CMA (Comparative Market Analysis) is the report an agent puts together using those comps to recommend a listing price or help a buyer decide what to offer, distinct from a formal bank appraisal, though the methods overlap.
Contingency
A condition in the purchase contract that must be satisfied for the deal to move forward, giving the buyer (or seller) the right to cancel and get their deposit back if it isn't met. Common ones in California include the inspection, appraisal, and loan contingencies, each with its own deadline written into the contract. Waiving contingencies can make an offer more competitive but increases the buyer's risk.
Days on Market (DOM)
The number of days a property has been actively listed for sale, tracked by the MLS from the listing date to when it goes into contract. Buyers and agents use DOM as a signal of demand and pricing, a low DOM in the South Bay generally means a home was priced well or the market is hot; a rising DOM can signal it's overpriced.
DTI (Debt-to-Income Ratio)
The percentage of a borrower's gross monthly income that goes toward debt payments, including the proposed mortgage. Lenders use DTI, alongside credit score and assets, to decide how much you qualify to borrow, most conventional loans cap DTI around 43-50%, though this varies by loan program and lender.
Dual Agency
A situation where one agent (or one brokerage) represents both the buyer and the seller in the same transaction. It's legal in California but requires written, informed disclosure and consent from both parties, since the agent's ability to advocate fully for either side is inherently limited. Some buyers and sellers prefer to avoid it for that reason.
Earnest Money Deposit (EMD)
A deposit, often 1-3% of the purchase price in the South Bay, that a buyer submits shortly after opening escrow to show they're serious about the purchase. It's held by the escrow or title company, applied toward the buyer's down payment/closing costs at closing, and is generally refundable if the buyer cancels within an active contingency period, but can be at risk if they cancel outside of one.
Escalation Clause
A clause in an offer stating the buyer will automatically increase their price by a set increment above any competing offer, up to a specified cap, if a higher bid comes in. It's a tool for multiple-offer situations, but it can tip your hand to the seller about your ceiling, so it's used strategically, not by default.
Escrow
A neutral third party (an escrow company, in California, separate from the title company) that holds funds and documents during a transaction and makes sure all the contract's conditions are met before releasing money and recording the deed. "Being in escrow" refers to the period between accepted offer and closing.
FIRPTA
The Foreign Investment in Real Property Tax Act, a federal law requiring a buyer to withhold a percentage (typically 15%) of the sale price when purchasing property from a foreign seller, remitting it to the IRS toward the seller's potential capital gains tax liability. Exemptions and reduced rates apply in certain situations, so foreign sellers should get tax guidance before closing.
FSBO (For Sale By Owner)
A property being sold directly by the owner without a listing agent. FSBO sellers still need to comply with all of California's mandatory disclosure requirements (TDS, NHD, etc.), going without an agent doesn't reduce legal obligations, just professional support and MLS/marketing exposure.
Grant Deed vs. Quitclaim Deed
A grant deed is the standard deed used in most California sales, it guarantees the seller actually owns the property and hasn't already transferred it to someone else. A quitclaim deed transfers whatever interest the grantor has, if any, with no guarantees about clear title, and is typically used between family members, in divorces, or to clear up a title issue rather than in an arm's-length sale.
HOA (Homeowners Association)
An organization that manages a condo, townhome, or planned community, enforcing rules (CC&Rs) and maintaining shared spaces in exchange for mandatory monthly or quarterly dues. Buyers should review the HOA's financials, reserve fund, and any pending litigation before closing, this is standard due diligence in South Bay condo and townhome purchases.
HOA Transfer Fee
A fee charged by an HOA or its management company to process ownership records and provide required disclosure documents when a property changes hands. It's separate from monthly dues, typically a few hundred dollars, and who pays it (buyer or seller) is negotiated in the contract.
Home Warranty
A service contract, typically paid for one year at a time, that covers repair or replacement of major home systems and appliances (HVAC, plumbing, water heater, etc.) for a service call fee, separate from homeowners insurance. Sellers in the South Bay often offer one as a buyer incentive, and buyers sometimes purchase their own for peace of mind after closing.
Homestead Exemption / Homeowners' Exemption
These are two different things that get confused. The Homeowners' Exemption is a property tax benefit, filing a one-time form with the county assessor reduces your home's taxable assessed value by $7,000, saving roughly $70/year on your tax bill. The Homestead Exemption is a separate legal protection that shields a portion of a primary residence's equity from most creditors in bankruptcy or judgment situations; California's homestead exemption amount is substantial and adjusts periodically for inflation.
JADU (Junior Accessory Dwelling Unit)
A smaller variation of an ADU, up to 500 square feet, built within the existing walls of a single-family home (often a converted bedroom), sharing a bathroom with the main house and requiring only an efficiency kitchen. California allows JADUs under separate, more flexible rules than standalone ADUs, and a property can often have both an ADU and a JADU.
LTV (Loan-to-Value Ratio)
The loan amount expressed as a percentage of the property's appraised value or purchase price, whichever is lower. An 80% LTV means a 20% down payment; higher LTV loans (less money down) generally require mortgage insurance and can come with a higher interest rate, since they carry more risk for the lender.
Mello-Roos
A special tax, authorized by California's Community Facilities Act of 1982, that funds infrastructure and services (schools, roads, sewers) in certain newer developments, it appears as a separate line item on the property tax bill, on top of the standard 1% Prop 13 rate, and typically lasts 20-40 years. Properties subject to it must disclose it to buyers before closing; it's more common in newer master-planned communities than in most of the established South Bay, but worth checking on any newer-construction property.
MLS (Multiple Listing Service)
The database that real estate agents use to list properties for sale and share them cooperatively with other brokers, feeding most of the major public search sites like Zillow and Redfin. The South Bay is served primarily by the CRMLS (California Regional MLS) and CLAW/CRISNet in parts of LA County.
NHD Report (Natural Hazard Disclosure)
A California-mandated report, ordered by the seller or their agent, disclosing whether a property sits in any of six statutory hazard zones, flood, fire, earthquake fault, seismic hazard, and others. It's typically prepared by a third-party NHD company and delivered to the buyer as part of the disclosure package; sellers can face liability if it's not provided.
PITI
Shorthand for the four components of a typical monthly mortgage payment: Principal, Interest, Taxes, and Insurance. Lenders use PITI, not just principal and interest, to calculate what a buyer can actually afford and to figure debt-to-income ratio.
Pocket Listing / Coming Soon
A "pocket listing" is a property being marketed privately by an agent without being entered into the MLS, limiting exposure to a narrow buyer pool, generally restricted under NAR's Clear Cooperation Policy. "Coming Soon" is a distinct, MLS-recognized status that lets a listing appear in the MLS ahead of its active marketing date, giving agents lead time without violating cooperation rules, the property is technically in the system, just not yet fully live.
Pre-Approval vs. Pre-Qualification
Pre-qualification is a quick, informal estimate of what you might be able to borrow based on self-reported financial info, with no verification. Pre-approval is a more rigorous process where a lender actually verifies income, assets, and credit and issues a conditional commitment letter, this is what sellers and listing agents want to see attached to a competitive offer in the South Bay market.
Proposition 13
The 1978 California ballot measure that caps property tax at 1% of assessed value (plus local voter-approved add-ons like Mello-Roos or bonds) and limits annual increases in assessed value to 2%, regardless of market appreciation. The property is reassessed to current market value when it changes ownership, which is why longtime owners often pay far less tax than a new buyer of the identical house next door.
Proposition 19
A 2020 ballot measure (effective 2021) that changed two things: it lets homeowners over 55, severely disabled, or wildfire/disaster victims transfer their existing low Prop 13 tax base to a replacement home anywhere in California, up to three times. It also significantly narrowed the parent-child exclusion, an inherited home no longer keeps the parent's tax base unless the child moves in as their primary residence, and even then only up to a set value cap above the original assessed value.
Rate Lock
A lender's commitment to hold a specific interest rate for a set period (commonly 30-60 days) while a loan is processed, protecting the borrower from rate increases before closing. Locks usually come with an expiration date and sometimes a fee to extend if the transaction runs long.
REO (Real Estate Owned)
A property that a lender has taken back through foreclosure and now owns directly, typically sold through a listing agent rather than at auction. REOs are usually sold as-is and can move slower than traditional sales due to bank approval processes, though they're relatively uncommon in the current South Bay market.
Seller Concessions
Costs the seller agrees to cover on the buyer's behalf, most often a credit toward the buyer's closing costs or rate buydown, negotiated as part of the offer. They're a common lever in slower markets or when a home needs work the seller doesn't want to complete themselves.
Short Sale
A sale where the property sells for less than what's owed on the mortgage, requiring the lender's approval of the reduced payoff before the deal can close. Short sales typically take much longer to close than a standard sale due to lender review and are less common now than during the 2008-era downturn.
Supplemental Tax Bill
A one-time, separate property tax bill California counties issue after a home changes ownership or new construction is completed, reflecting the difference between the previous assessed value and the new market-based value. It's in addition to the regular annual property tax bill and can catch new buyers off guard if they aren't expecting it, the amount is prorated for the remainder of the fiscal year in which the sale closed.
TDS (Transfer Disclosure Statement)
A mandatory California form (Civil Code 1102) in which the seller discloses known material facts about a property's condition, items like roof age, past repairs, known defects, or neighborhood nuisances. Most residential resale transactions require it, and a seller who fails to disclose known issues can face legal liability after closing.
Title Insurance
A policy that protects against financial loss from defects in a property's title, things like undisclosed liens, forged documents, or ownership disputes from before the current purchase. In California, an owner's policy and a lender's policy are typically purchased separately at closing, with local custom (and sometimes negotiation) determining who pays.
Underwriting
The lender's formal review process where an underwriter verifies a borrower's income, assets, credit, and the property itself against the loan program's guidelines before issuing final loan approval. It happens after pre-approval and before "clear to close," and can generate additional document requests that buyers need to respond to quickly to stay on schedule.
Still have questions?
If a term isn't here, or something in your transaction doesn't make sense, just ask. I'd rather explain it in plain English than have you guess.