Unit 8 Escrow & Closing – California Real Estate Principles (Vocabulary Flashcards)

Vocabulary flashcards covering escrow, title insurance, land descriptions, and tax concepts from Unit 8.

Escrow

A neutral third-party trust arrangement during a real estate transaction where documents and funds are held and processed according to the purchase agreement.

Escrow holder

The neutral party (escrow company, bank, or similar) that manages the escrow and follows the principals’ instructions.

Binding contract

A legally enforceable agreement between buyer and seller that initiates and governs the escrow process.

Escrow instructions

Written directions from the buyer and seller to the escrow holder detailing how the escrow should be completed; changes require mutual agreement.

Conditional delivery

Delivery of transfer documents and funds to escrow that occurs only when specified conditions in the escrow are met.

Completed escrow

An escrow in which all terms of the instructions have been fulfilled and funds/documents are distributed.

Open escrow

The process begins when the signed purchase agreement is accepted by the escrow holder.

Title search

A review of public records to verify ownership, identify liens or encumbrances, and establish chain of title.

Preliminary title report

An initial title report that offers to issue a title insurance policy; lists encumbrances and exceptions but is not itself a policy.

Title insurance policy

A contract that insures against losses from title defects; issued after a title search; comes in standard and extended forms.

CLTA standard title policy

The standard title insurance policy commonly issued to homebuyers; covers matters of record and certain off-record risks; generally does not include a survey.

ALTA extended coverage title policy

An extended title insurance policy providing broader protection, including unrecorded hazards and certain possession rights.

Marketable title

A title that a reasonably prudent person would accept as clear and free from likely challenges; protected by title insurance.

Abstract of title

A written summary of all useful documents found during a title search.

Certificate of title

An older form of title status document (less common today) that certifies title condition; historically linked to title opinions.

Chain of title

The public record of all previous transfers and encumbrances affecting a property's title.

Lot, Block, and Tract System

A land description method describing lots within a subdivision, typically shown on a recorded map.

Public Land Survey System (PLSS)

U.S. government land description system using baselines and meridians to describe townships, ranges, and sections.

Metes and bounds

A land description using distances (metes) and natural or man-made landmarks (bounds) to delineate boundaries.

Point of Beginning (POB)

The fixed starting point used in a metes-and-bounds description.

Township

A six-by-six mile square (36 square miles) within the PLSS, subdivided into 36 sections.

Range

A north-south strip six miles wide in the PLSS grid, located east or west of a principal meridian.

Baseline

An east-west line in the PLSS used as a starting reference for measurements.

Meridian

A north-south line used with baselines to describe land under the PLSS.

Section

One square mile (640 acres) within a township; numbered 1 through 36.

Proration

Division of expenses or income between buyer and seller at closing, often based on a 30/360 year.

Impound account

A trust account set up to hold funds for future recurring costs related to a property.

Vesting

The way title will be held (e.g., sole ownership, joint tenancy, tenancy in common, or in a partnership).

Documentary transfer tax

Tax on real property transfer, usually about $.55 per $500 of price or $1.10 per $1,000; paid at closing or recording.

Ad valorem

Taxes based on the value of property; “according to value.”

Assessment roll

A list of taxable property with assessed values, used to establish the tax base.

Proposition 13

California measure (1978) limiting property tax to 1% of market value with annual increases up to 2%; reassessment on transfer.

Proposition 60

Program allowing certain 55+ homeowners to transfer their base-year tax value to a new home in the same county.

Homeowners’ exemption

Tax exemption reducing the assessed value of a primary residence by about $7,000; filed by Feb 15 and ongoing while eligible.

Veterans’ exemption

Tax exemption for qualifying veterans (often $4,000) on a residence.

Special assessments

Local taxes for specific improvements (streets, sewers, etc.); liens take priority with general tax liens.

Street Improvement Act of 1911

Law authorizing local governments to levy assessments for street improvements, based on front footage.

Mello-Roos Community Facilities Act of 1982

Law allowing special assessments for various community improvements (streets, sewers, etc.).

Tax sale

If property taxes go unpaid, the property becomes tax-defaulted; five-year redemption; tax deed issued after sale.

Grant deed

A deed with implied warranties that the grantor has no undisclosed liens and conveys title.

Deed of trust / Note and trust deed

A promissory note secured by a trust deed (loan security instrument) used in real estate financing.

Lien

A legal claim against property to secure payment of a debt or obligation.

Recording

The act of filing documents with the county recorder to give public notice and establish priority.

Note and trust deed

A loan instrument: a promissory note plus a deed of trust securing the loan.

Closing statement

A document showing all cash receipts, debits, credits, and costs at escrow closing.

Addendum / Amendment

A written addition or modification to the original escrow instructions or purchase agreement, requiring signatures.

Encumbrance

A claim, lien, easement, or other restriction that limits the property's title or use.

Pest control report / Structural pest control

Inspecti­ons or reports (termite reports) related to property condition that may be included in escrow.