Glossary

What does that mean?

55 terms you'll hear from agents, lenders and escrow officers, explained without the jargon.

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3R report: The Report of Residential Building Record shows how many legal units a property has and its building permit history. Sellers must provide one. It leaves out electrical and plumbing permits, so look up the full permit history with the Department of Building Inspection (DBI) yourself.; More in “Disclosures & inspections” →

A

Accessory dwelling unit (ADU): ADUs can add rental income or space for family. Before you buy with one in mind, check the lot, ceiling height at the garage level and sewer line, and talk to a builder who has finished permitted ADUs nearby.; More in “Renovating in SF” →
Adjustable-rate mortgage (ARM): A 10/6 ARM, for example, keeps the same rate for 10 years, then adjusts every 6 months based on a market index plus a margin, within set caps. It can make sense if you expect to sell or move within the fixed period. It's a poor fit if your plan only works if rates fall.; More in “Getting a mortgage” →
Appraisal gap: Your lender lends based on the appraised value, not your offer. Win at $3.0M, appraise at $2.75M, and with the appraisal contingency waived you cover the $250k difference yourself. SF houses averaged about 124% of list price in 2026, so plan a cash cushion.; More in “Winning an offer in SF” →

B

Buyer-broker agreement: You need one before an agent tours homes with you, and no later than when you sign an offer. In California it can last at most 3 months and must state how your agent gets paid. In SF that's typically about 2.5% of the price, though it's negotiable and the seller may or may not cover it. Keep it short and specific, and negotiate the terms.; More in “Assembling your team” →

C

Capital gains exclusion: If you owned and lived in the home 2 of the last 5 years, up to $250k of profit ($500k for married couples) is tax-free when you sell. Keep receipts for every permitted improvement, because they lower your taxable gain.; More in “Taxes after you buy” →
CEA earthquake insurance: The California Earthquake Authority (CEA) sells quake policies with high deductibles, 5–25% of your dwelling coverage and at least 15% for homes insured above $1M. That means it mainly pays off if the house is badly damaged. Get a CEA quote and a private quote side by side.; More in “Insurance & earthquakes” →
Closing costs: On a financed SF purchase, buyer closing costs usually run about 1% of the price (roughly 0.8–1.2%). That covers lender, title and escrow fees and more. Points, impound deposits and any agent pay you owe are extra.; More in “Escrow to keys” →
Condo: A homeowners association runs the building and the common areas. Most of the risk sits at the building level, so read the HOA's budget, reserves and meeting minutes. A lender can turn down the building even if it approves you.; More in “SF property types decoded” →
Condo conversion: Conversion is effectively frozen in SF except for 2-unit buildings. The lottery has been suspended for years and the expedited program has been paused since 2020. Treat a 3–6 unit TIC as a permanent TIC.; More in “SF property types decoded” →
Conforming loan: Loans at or under the federal limit follow standard national rules. In San Francisco the 2026 limit for a one-unit home is $1,249,125 (higher for 2–4 units). With 20% down, that covers a purchase up to about $1.56M.; More in “Getting a mortgage” →
Contingency: Common ones cover your loan, the appraisal, the inspection and reviewing documents. In competitive SF sales, winning offers often waive all of them, so you do your checking before you offer instead of after.; More in “Winning an offer in SF” →

D

Debt-to-income ratio (DTI): Lenders add up your new housing payment plus car, student and other loan payments, then divide by your gross monthly income. Jumbo lenders usually cap it around 43%. That's a ceiling, not a comfortable target.; More in “How much home can you afford?” →
Disclosure packet: SF listings usually come pre-inspected. The packet often includes a pest report, a general inspection, roof and sewer reports, the 3R report and the state-required seller disclosures. Read all of it before offer day, ideally with your agent and inspector.; More in “Disclosures & inspections” →

E

Earnest money deposit (EMD): In SF it's customarily 3% of the price, wired to escrow within about a day of acceptance. It counts toward your down payment at closing. If you back out without a contingency to protect you, you can lose it.; More in “Escrow to keys” →
Escalation clause: It says you'll pay a set amount more than the highest competing offer, up to your maximum. They're legal but tend to work poorly in SF. Most local agents suggest one clear, well-reasoned number instead.; More in “Winning an offer in SF” →
Escrow: Once your offer is accepted, a title and escrow company holds your deposit, collects the loan funds and records the deed. In SF, escrow usually takes about 21–30 days, or about two weeks for all-cash deals.; More in “Escrow to keys” →

F

FAIR Plan: If no regular insurer will cover you, the California FAIR Plan offers fire-only coverage. You'd add a separate policy for theft, water damage and liability. Few SF homeowners need it.; More in “Insurance & earthquakes” →
Fully underwritten approval: An underwriter has already reviewed your income, assets and reserves, so the only thing left is the property itself. This is the standard in SF because most winning offers drop the loan contingency.; More in “Getting a mortgage” →

G

Gift letter: Plenty of first-time buyers get help from family. For a one-unit home you'll live in, Fannie Mae allows the whole down payment to be a gift if you have a signed gift letter and a paper trail for the transfer. Gifts over $100k a year from a foreign individual need an IRS Form 3520.; More in “Your down payment” →

H

Homeowners association (HOA): The HOA collects monthly dues, keeps reserve savings for big repairs and buys the building's master insurance. In SF, dues often run four figures a month. Check how well funded the reserves are before you buy.; More in “SF property types decoded” →
Homeowners insurance (HO-3): Your lender requires it. Getting a policy in SF is doable, though many buyers go through an independent broker. Standard policies don't cover earthquakes.; More in “Insurance & earthquakes” →
Homeowners' exemption: File with the SF Assessor to take $7,000 off your assessed value, which saves about $83 a year. The deadline is February 15. It's a two-minute form, so do it.; More in “Taxes after you buy” →

I

Impound account: Your lender collects a bit extra each month and pays your tax and insurance bills for you. Many jumbo lenders let you skip it. Either way, it usually won't pay the one-time supplemental tax bill after you buy.; More in “Taxes after you buy” →
Incentive stock options (ISOs) and AMT: Buying (exercising) ISOs and holding the shares can create an alternative minimum tax (AMT) bill due the next April, even if you can't sell the shares yet. In the year you buy a home, plan with a tax professional so that bill doesn't eat your savings.; More in “Your down payment” →

J

Jumbo loan: Any loan above the conforming limit is a jumbo. Each lender sets its own rules for down payment, credit score and income. In SF, almost every house purchase uses one.; More in “Getting a mortgage” →

L

Liquidated damages clause: If you initial it and you're buying a 1–4 unit home to live in, California law generally limits what the seller can keep to 3% of the price, unless the seller can show a larger amount is reasonable. That's why a 3% deposit is standard in SF. The protection is weaker for a property you won't live in.; More in “Winning an offer in SF” →
Listing agent: Their job is to get the seller the best price and terms. Your own buyer's agent works for you. Having your lender call the listing agent before the offer date can make your offer more convincing.; More in “Assembling your team” →
Loan-to-value (LTV): Borrow $2.4M on a $3M house and your LTV is 80%. Lenders use it to set your rate and down payment rules, and it's why an appraisal that comes in low means you need more cash.; More in “Getting a mortgage” →

M

Mello-Roos / CFD tax: Some master-planned areas, like Transbay, Mission Bay and Treasure Island, charge a Community Facilities District (CFD) tax on top of regular property tax. It shows up on the tax bill, not in HOA dues, so ask for the actual bill for the unit.; More in “Taxes after you buy” →

O

Offer date: Most SF homes are listed a bit below expected value with an offer date 7–14 days out. Buyers do their homework, then submit their best offer by that day. Expect houses to sell well over the asking price.; More in “Winning an offer in SF” →
Owner move-in (OMI) eviction: You must move in in good faith for 36 continuous months and pay relocation money. Some tenants, like seniors or families with school-age kids, can block or limit it. The rules are strict, so talk to a tenant-landlord attorney before you buy a tenant-occupied building planning to live in it.; More in “SF property types decoded” →

P

Pest report (Section 1 and Section 2): Section 1 lists active damage, like termites, dry rot or fungus. Sellers often pay for that by custom. Section 2 lists conditions likely to cause damage later, like moisture or wood touching soil, and those costs are usually negotiated and often fall to the buyer.; More in “Disclosures & inspections” →
PITI: PITI is the monthly number lenders use to judge what you can afford. For a condo, add HOA dues on top. Maintenance and repairs aren't included, so budget for those separately.; More in “How much home can you afford?” →
Points: One point costs 1% of the loan amount. Each point often lowers the rate by around a quarter of a percent, though it varies. If you might refinance or sell within about five years, buying points usually doesn't pay off.; More in “Getting a mortgage” →
Pre-approval: A lender pulls your credit and reviews your pay stubs, tax returns and bank statements, then tells you how much they'd lend. Get one before you start touring. In SF, sellers often want something stronger: a fully underwritten approval where only the property is left to check.; More in “Getting a mortgage” →
Pre-emptive offer: The goal is to get the seller to accept before the other buyers get their chance. It usually needs clean terms with no contingencies and a 3% deposit, and it often expires in about 24 hours. If the seller says no, assume your price just became everyone else's starting point.; More in “Winning an offer in SF” →
Preliminary title report: It arrives in the first week of escrow. Look for things like shared-driveway easements, old notices tied to unpermitted units, and building violations recorded by the city.; More in “Escrow to keys” →
Private mortgage insurance (PMI): PMI protects the lender, not you, on a conforming loan with under 20% down. It typically costs about 0.2–1.0% of the loan a year and drops off once you reach about 78–80% loan-to-value. Many jumbo lenders skip separate PMI at 10% down and charge a slightly higher rate instead.; More in “How much home can you afford?” →
Prop 13: Your assessed value starts at the price you paid and can rise at most 2% a year while you own the home. SF's total rate for FY 2026-27 is 1.18162182% of assessed value, plus about $800 a year in flat parcel taxes.; More in “Taxes after you buy” →

R

Rent control: SF's Rent Ordinance generally covers units in buildings first approved for occupancy on or before June 13, 1979. Annual increases are capped (1.6% for March 2026 to February 2027), and tenants can only be evicted for specific reasons.; More in “SF property types decoded” →
Rent-back: It's a cheap way to make your offer more attractive to a seller who is buying their next place. Keep it short and in writing. Stays of 30 days or more generally call for a lease, and an SF tenant can gain local tenant protections.; More in “Winning an offer in SF” →
Reserves: Lenders want proof you could keep paying the mortgage for a while if your income stopped. Jumbo lenders commonly ask for 6 to 24 months of payments left in the bank after your down payment and closing costs.; More in “How much home can you afford?” →
Restricted stock units (RSUs): If part of your pay is company stock, RSUs become yours as they vest and are taxed like salary at that point. For a public company, lenders may count them as income after about 12 months of vesting with your current employer. Stock in a private company counts as zero.; More in “Getting a mortgage” →

S

Securities-based line of credit (SBLOC): Instead of selling stocks or funds, you borrow against them, often at a floating rate. If the investments drop sharply, you may have to repay or sell at a bad time, so keep the amount you borrow modest.; More in “Your down payment” →
Soft-story retrofit: A building with a garage or open space on the ground floor can sway or collapse in a big quake. SF's mandatory program covered 5+ unit buildings. Many single-family homes over garages have the same weakness, and a voluntary retrofit can earn grants and an earthquake insurance discount.; More in “Renovating in SF” →
Special assessment: When reserves don't cover a project, like a new roof or balcony repairs, owners split the bill. Most SF HOAs don't carry earthquake insurance, so quake repairs would likely come this way. Look for planned or past assessments in the board minutes.; More in “SF property types decoded” →
Supplemental tax bill: When you buy, the county resets the home's assessed value to your price and bills you for the difference for the rest of the tax year. On a $3M house bought from a long-time owner it can run $20k–$30k. Your impound account usually won't pay it, so set the cash aside.; More in “Taxes after you buy” →

T

Tenancy-in-common (TIC): TICs are a San Francisco workaround to strict limits on condo conversion. They usually cost less than similar condos because loans come from a short list of lenders, often at higher rates with 15–25%+ down. A TIC agreement sets the rules among co-owners, so have a TIC attorney read it.; More in “SF property types decoded” →
Tender offer: Some private companies let employees sell part of their shares at set times. Once the cash lands in your account and is documented, lenders treat it as savings you can use for a down payment. Have a tax professional review the paperwork before you choose how much to sell.; More in “Your down payment” →
Title insurance: It protects you against things like forged deeds, unknown heirs or old liens from before you bought. In SF the buyer customarily pays for the owner's policy. Ask for the broader ALTA Homeowner's policy.; More in “Escrow to keys” →
Transfer tax: SF charges a percentage of the whole price, and the rate jumps at set price levels: 0.75% from $1M to $5M, then 2.25% from $5M to $10M. Because it applies to the full price, prices bunch just under those cutoffs.; More in “Escrow to keys” →

U

Unauthorized dwelling unit (UDU): Many "junior five plus in-law" listings in the Sunset, Richmond, Excelsior and Bernal have a downstairs unit that was never permitted. Since fall 2025, if the city finds one during a permit or enforcement, legalizing it is generally required. Ask about it before you buy.; More in “SF property types decoded” →

V

Vesting: Vesting decides who owns what and what happens when an owner dies. For married couples, community property with right of survivorship can save heirs a lot in capital gains tax compared with joint tenancy. Talk to an estate attorney before you sign.; More in “Escrow to keys” →

W

Wire fraud: Before you wire any money, call your escrow officer at a phone number you looked up yourself, not one from an email, and confirm the instructions. Never trust last-minute changes to wiring details.; More in “Escrow to keys” →