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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.

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