De-mystifying Real Estate Terminology
When you decide to buy a home, you will probably discover a whole new language used to described the property, financing, legalities and people involved in a home purchase.
However, it is not as complex as you'd first think - most phrases refer to ideas and things with which you may already be familiar. Here, for your convenience, is a list of some of the more common terms used in real estate.
General Real Estate Terms
Broker: The real estate professional licensed by the province of British Columbia to facilitate the sale or rental of a property.
Buyer's Market: A residential real estate market in which the number of properties for sale significantly exceeds the number of buyers.
Buydown: When the seller reduces the interest rate on a mortgage by paying the difference between the reduced rate and market rate directly to the lender - or to the puchaser - in one lump sum or monthly payments.
Closing: The real estate transaction's completion, when the deed to the property is transferred from the seller to the buyer.
Closing Costs: Expenses in addition to the purchase price for buying and selling a property. Some examples of closing costs are legal fees and land transfer tax.
Common Elements: The portions of a condominium development owned in common (shared) by the unit owners.
Counter Offer: One partys written response to the other partys offer during negotiation of a real estate purchase between buyer and seller.
Easement: A legal right to use or cross (right of way) another person's land for limited purposes. A common example is a utility company's right to run wires or lay pipe across a property.
Encroachment: An intrusion onto an adjoining property. A neighbour's fence, storage shed or overhanging roof line that partially (or fully) intrudes onto your property are encroachments.
Fixtures: Permanent improvements to a property that are normally included with the purchase unless specifically excluded in an Offer to Purchase. Wall-to-wall carpeting and installed appliances are often considered fixtures.
Listing Broker: The real estate practitioner who is appointed, by way of a listing agreement signed by a property owner, to offer a property for sale.
Multiple Listing Service (MLS®): A system for relaying information to REALTORS about properties for sale.
REALTOR®: A trademarked name describing real estate professionals who are members of a local real estate board and/or a provincial real estate association and the Canadian Real Estate Association.
Selling Broker: The broker who finds the buyer for a property.
Survey: A professionally prepared document that provides accurate details about a property's location, boundaries, size and legal description, as well as any improvements to the property.
Vendor: The seller in a real estate transaction.
Zoning Regulations: Strict guidelines set and enforced by municipal governments regulating how a property may or may not be used.
Financial and Banking Terms
Amortization: The number of years it takes to repay the entire amount of a mortgage.
Appraisal: An estimate of a property's market value. It is used by lenders in determining the amount of the mortgage.
Appreciation: The increase of a property's value over time.
Blended Mortgage Payments: Equal or regular mortgage payments, consisting of both a principal and an interest component.
Capital Gain: The increase between the purchase price and selling price.
Closed Mortgage: A mortgage that cannot be prepaid, renegotiated or refinanced during its term without significant financial penalties.
Conventional Mortgage: A first mortgage issued for up to 75 per cent of the property's appraised value or purchase price, whichever is lower.
Debt Service Ratio: The percentage of a borrower's gross income that can be used for housing costs, including mortgage payments and taxes.
Deposit: The monies paid by the buyers at the time an offer is submitted on the purchase of a property (normally not exceeding 10 per cent of the purchase price).
Down Payment: The difference between a property's purchase price and the amount financed.
Equity: The difference between the price for which a property can be sold and the mortgage(s) on the property. Equity represents the owner's "stake" in a property.
First Mortgage: The first security registered on a property. Additional mortgages are "secondary" to the first mortgage.
Land Transfer Tax: Payment to the provincial government for transferring property from the seller to the buyer, normally paid by the purchaser.
Mortgage Term: The length of time a lender will loan mortgage funds to a borrower.
Second Mortgage: A second financing arrangement, in addition to the first mortgage, also secured by the property (usually at a higher rate and for a shorter term than the first mortgage).
Variable Rate Mortgage: A mortgage for which payments are fixed, but whose interest rate changes in relationship to fluctuating market interest rates. If market rates go up, a larger portion of the mortgage payment goes to interest. If rates go down, a larger portion is applied to the principal.
Vendor Take-Back Mortgage: When a seller uses equity in his or her property to provide some or all of the mortgage financing in order to sell the property.
Contractual and Legal Terms
Chattels: Removable personal items that are not normally included in the sale of a home, but may be added to the purchase price to make the property more attractive. (Examples include microwave ovens, portable dishwashers and laundry appliances.)
Deed: a legal document that conveys (transfers) ownership of a property to the buyer.
Lien: Any legal claim registered against a property, filed to ensure payment of a debt.
Listing Agreement: The contract between the listing broker and owner, authorizing the listing broker to facilitate the sale or lease of a property.
Mortgage: A contract between a borrower and lender. The borrower pledges a property as security to guarantee repayment of the mortgage debt.
Mortgagee: The lender.
Mortgagor: The borrower.
Title: The legal evidence of ownership of the property.
Transfer of Land: A Land Titles document that conveys (transfers) ownership or "title" of a property to the buyer.
Multiple Listing Service, MLS®, REALTOR® and REALTORS® are registered trademarks of the Canadian Real Estate Association. REALTOR® identifies a real estate practitioner who is a member of the Association.