Shaun Nilsson, Toronto Real Estate Agent

Here is a fairly detailed list of real estate terms you may encounter when selling, or searching for your Perfect Home.

Acceleration

The right of the mortgagee (lender) to demand the immediate repayment of the mortgage loan balance upon the default of the mortgagor (borrower), or by using the right vested in the Due-on-Sale-Clause.

Acknowledgment

A formal declaration before an authorized official (usually a notary public) by a person who has executed a document, that he did in fact execute (sign) the document.

Addendum

Something added. Items added to a document, letter, contract, escrow instructions, etc.

Agent

A person who acts or has the power to act for another. A real estate agent acts on behalf of the principal (the buyer or seller) and has a fiduciary responsibility towards the principal. Buyer’s Agent: a agent who represents the buyer and owes fiduciary duties to the buyer. Seller’s Agent: an agent who represents the seller and owes fiduciary duties to the seller. They are usually referred to as the listing agent who is authorized by a property owner to find a buyer or a tenant for the property.

Agreement of Sale

A written agreement of contract in which the seller agrees to sell and the buyer agrees to buy under specific terms and conditions.

Amenities

Features that enhance and add to the value or desirability of real estate. Common amenities include swimming pools, professional landscaping, gourmet kitchen and so on.

Amortization

The reduction of a debt over time by making periodic payments, usually monthly, a portion of which is interest and a portion of which reduces the outstanding amount of the debt. The monthly mortgage payments remain the same over the life of the loan, even though the proportion of principal to interest changes over time. In the early part of the loan period the principal repayment is very small and interest repayment is very high. At the end of the loan that relationship is reversed.

Appraisal

An estimate of the value of property, made by a qualified professional called an “appraiser”.

Appraiser

Someone who practices appraisal. Appraisers’ work involves appraising, review (the process of critically studying a report prepared by another), or consulting (the process of providing information, analysis of real estate data, and recommendations on diversified problems in real estate, other than estimating value).

Assessment

A local tax levied against a property for a specific purpose, such as a sewer or street lights.

Assessor

One appointed to assess property for taxation.

Assignment

A transfer or making over to another the whole of any property, real or personal, or of any estate or right therein. To assign is to transfer.

Assumption

The agreement between the buyer and seller where the buyer takes over the payments on an existing mortgage from the seller. Assuming a loan can usually save the buyer money since this is an existing mortgage debt, unlike a new mortgage where closing costs and new, probably higher, interest rates will apply.

Bond

An insurance agreement by which one party is insured against loss or default by a third party. In the construction business a performance bond ensures the interested party that the contractor will complete the project.

Breach

Violation of an obligation in a contract.

Bridge Loan

A loan, usually short term, that finances the portion of the purchase price not provided by the mortgage loan and the down payment. A bridge loan is commonly used when a purchaser has not sold his existing home before he closes on his purchase of a new home. The bridge loan is paid off when the old home is sold, out of the proceeds of that sale.

Broker

A real estate professional who has acquired a higher level of training and experience than a sales agent. A minimum number of classes must be taken along with passing a state exam to acquire a brokers license. Generally they are a legal representative or a proprietor of the office. Brokers usually charge a fee or receive a commission for their services.

Building Code

A set of stringent laws that control the construction of buildings, design, materials and other similar factors.

Building Line or Setback

Distances from the ends and/or sides of the lot beyond which construction may not extend. The building line may be established by a filed plat of subdivision, by restrictive covenants in deeds or leases, by building codes, or by zoning ordinances.

Buy-down

When the lender and or the home builder subsidized the mortgage by lowering the interest rate during the first years of the loan. While the payments are initially low, they will increase when the subsidy expires.

Buyers’ Market

A market condition which occurs in real estate where more homes are for sale than there are interested buyers.

Cash Flow

The amount of cash derived over a certain period of time from an income-producing property. The cash flow should be large enough to pay the expenses of the income producing property (mortgage payment, insurance, maintenance, utilities, etc.)

Capital Gain

Income that results from sale of a capital (tangible) asset.

Capitalization

An appraising term used in determining value by considering net operating income and a percentage of reasonable return on investment.

Chain Of Title

A history of conveyances and encumbrances affecting the title as far back as records are available.

Closing

The end of the transaction when the seller hands over the title to the buyer in exchange for payment. Also called settlement.

Closing Costs

Costs the buyer must pay at the time of the closing in addition to the down payment which may include points, title charges, credit report fee, document preparation fee, mortgage insurance premium, inspections, appraisals, prepayments for property taxes, deed recording fee, and homeowners insurance. Closing costs can vary considerably from one financial institution to another.

Cloud (On Title)

An outstanding claim or encumbrance which adversely affects the marketability of title.

Commission

Money paid to a real estate agent or broker by the seller as compensation for finding a buyer and completing the sale. Usually it is a percentage of the sale price: 5 percent on houses is typical.

Construction Loan

A short term interim loan to pay for the construction of building or homes. These are usually designed to provide periodic disbursements to the builder as he progresses.

Contingency

A condition that must be met before a contract is binding. Contingencies include: the property must appraise for sales price or buyers approving of various inspections.

Contract Sale or Deed

A contract between purchaser and a seller of real estate to convey title after certain conditions have been met. It is a form of installment sale.

Conventional Loan

A fixed rate and fixed term loan that is made without government insurance.

Conveyance

The transfer of the title to land from one to another.

Co-operative or Co-op

In a residential co-operative, the buyer purchases shares in the co-op corporation which is made up of the residents in the co-op property. The buyer owns the shares rather than owning real property. In exchange he has the right to lease and occupy a co-op unit.

Covenants

Agreements written into deeds and other instruments stating performance or non-performance of certain acts or noting certain uses or non-uses of property.

Credit Report / History

Lenders will investigate your credit record which is a history of your debts. They get a report from a credit reporting agency (TRW, Equifax, TransUnion) which shows if you pay you debts on time and with who you have current debts with.

Debt-to-income Ratio

The ratio, expressed as a percentage, which results when a borrower’s monthly payment obligation on long-term debts is divided by his or her gross monthly income.

Deed

A legal document by which property title is transferred from one owner to another.

Default

Failure to meet legal obligations in a contract, specifically, failure to make the monthly payments on a mortgage.

Depreciation

Decline in value of a house due to wear and tear, adverse changes in the neighborhood, or any other reason.

Economic Obsolescence

Loss of useful life and desirability of a property through economic forces, such as change in zoning, changes in traffic flow, etc., rather than deterioration.

Encroachment

An obstruction, building, or part of a building that intrudes beyond a legal boundary onto neighboring private or public land, or a building extending beyond the building line.

Encumbrance

A legal right or interest in land that affects a good or clear title, and diminishes the land’s value.

Equity

The value of the property less the amount of unpaid mortgages and any outstanding liens.

Escalation Clause

A clause in a lease providing for an increased rent at a future time due to increased costs to lessor, as in cost of living index, tax increases, etc.

Escrow Instructions

This discloses when the escrow should be closing and when possession should take place, proration of property taxes, transfer taxes, release of funds and the basics of satisfying the escrow demands.

Estate

The ownership interest of a person in real property. Also refers to a deceased person’s property.

Exclusive Agency Listing

A written agreement giving the broker the right to market an owner’s property for a certain period of time, but also allowing the owner to sell the property during that period without paying a commission.

Exclusive Right – to Sell

A written agreement between the agent and the owner whereby the owner promises to pay a fee or commission to the broker if his property is sold during the listing period, regardless of whether the broker is responsible for the sale.

Fair Market Value

That price a property will bring given that both buyer and seller are fully aware of market conditions and comparable properties.

Functional Obsolescence

Loss in value due to out-of-date or poorly designed equipment while newer equipment and structures have been invented since it’s construction.

Grantee

That party in the deed who is the buyer or recipient.

Grantor

That party in the deed who is the seller or giver.

Home or Property Inspection

A detailed inspection of the physical structure, the plumbing, electrical and heating systems and the overall condition of the home. Typically the cost is $400-$500 and up, and the results are detailed in a multiple page report.

Homeowners Insurance

Insurance that protects the homeowners from Casualty losses or damage to the home or personal property and from liability damages to other people or property. Homeowners insurance is required by the lender and may be included in the monthly mortgage payment.

Home Owners’ Association

An association of homeowners within a community formed to improve and maintain the quality of the community. An association formed by the developer of condominiums or planned developments.

Housing Expense-to-Income Ratio

The ratio, expressed as a percentage, which results when a borrower’s housing expenses are divided by his or her gross monthly income.

Interest

A charge paid for borrowing money.

Irrevocable

The time before which an offer must be legally completed and executed in order to make it a binding agreement.� The irrevocable time is the specific time that a party receiving a revised or original offer must respond before the offer is invalid and can not be made binding.� The “decision-making time”.

Joint Tenancy

Joint ownership by two or more persons with right of survivorship. Upon the death of a joint tenant, his interest does not go to his heirs, but to the remaining joint tenants.

Lease

A contract between the owner of real property, called the lessor, and another person referred to as the lessee, covering all conditions by which the lessee may occupy and use the property.

Lease With Option To Purchase

A lease where the lessee has the option to purchase the leased property. The terms of the purchase option must be set forth in the lease.

Legal Description

The geographical identification of a parcel of land.

Lien

A hold or claim on the property of another to satisfy an unpaid debt or obligation.

Listing Contract

An agreement between a homeowner and a licensed real estate broker that authorizes the broker to market the property for sale during a given time period.

Loan-to-Value Ratio

The ratio of a mortgage loan principal to the property’s appraised value or its sales price, whichever is lower. Loan-to-value ratios vary depending upon the individual lender’s policy.

Market Value

The highest price a buyer will pay for a property and the lowest price the seller will accept in a typical market.

Mortgage

A lien on real estate given by the buyer to secure money borrowed to purchase the real estate.

Mortgage Broker

An individual or company that obtains mortgages for others by finding lending institutions, insurance companies or private sources to lend the money. The mortgage broker may also handle collections and disbursements.

Mortgage Insurance

A policy that provides protection for the lender in case of default and or which guarantees repayment of the loan if the borrower becomes disabled or dies.

Multiple Listing

A listing taken by a member of an organization of brokers, whereby all members have an opportunity to find a buyer.

Notary Public

One who is authorized by federal or local government to attest authentic signatures and administer oaths.

Offer

A proposal to purchase real estate at a particular price, subject to other specified terms and conditions. Acceptance of the offer by the seller creates a purchase contract. A counteroffer is a different offer made in response to the initial offer.

Option

A right given, for consideration, to purchase or lease property upon stipulated terms within a specific period of time.

Point

An amount equal to one percent of the loan amount paid to a lender for making the loan. A lender may charge the borrower several points in order to provide the loan.

Power of Attorney

A legal document authorizing one person to act on behalf of another.

Prepayment

A privilege in a mortgage permitting the borrower to make payments in advance of their due date.

Prepayment Penalty

Money charged for an early repayment of debt. Prepayment penalties are allowed in some form, but are not necessarily imposed in many states.

Pre-qualification

Getting pre-qualified for a loan is a free process and normally takes between 15 minutes to an hour on the phone. The lender will ask you some basic questions about your household income, time on the job, credit history, down payment and personal savings. You should get pre-qualified before looking for properties so you and your real estate agent know in what price range to start looking.

Principal

One of the parties to a transaction. For example, the buyer and seller are principals in the purchase of real property. Also the amount of debt, not counting interest, left on a loan.

Purchase Agreement

An agreement between buyer and seller denoting price and terms of the sale.

Real Estate Salesperson (Agent)

A licensed person who works under the direction of a broker selling and renting real estate.

Real Estate Broker

A middle man or agent who buys and sells real estate for a company, firm, or individual on a commission basis. The broker does not have title to the property, but generally represents the owner.

Realtor

A Realtor is a real estate professional who is a member of the Canadian Real Estate Association (CREA) and subscribes to its strict Code of Ethics. This professional is committed to protecting and promoting private ownership of real property, establishing and maintaining high professional standards of practice, and creating unity in CREA organization and respect for the real estate profession.

Recision

The cancellation of a contract. With respect to mortgage refinancing, the law that gives the homeowner three days to cancel a contract in some cases once it is signed if the transaction uses equity in the home as security.

Refinance

Obtaining a new mortgage loan on a property already owned.
Often to replace existing loans on the property.

Restrictive Covenants

Private restrictions limiting the use of real property. Restrictive covenants are created by deed and may “run with the land,” binding all subsequent purchasers of the land, or may be “personal” and binding only between the original seller and buyer.

Second Mortgage

A mortgage made subsequent to another mortgage and subordinate to the first one.

Sellers’ Market

More buyers than sellers.

Special Assessments

A special tax imposed on property, individual lots or all property in the immediate area, for road construction, sidewalks, sewers, street lights, etc.

Survey

A map or plat made by a licensed surveyor showing the results of measuring the land with its elevations, improvements, boundaries, and its relationship to surrounding tracts of land.

Title

Ownership of real property. Title is transferred from one party to another through a document called a deed.

Title Insurance

Protection for lenders and homeowners against financial loss resulting from legal defects in or other claims against the property’s title. The cost of the policy is usually a function of the value of the property and is often borne by the purchaser and or seller.

Title Search

An examination of municipal records to determine the legal ownership of property. Usually is performed by a title company.

Trust

A property interest held by one person for the benefit of another.

Trustee

A party who is given legal responsibility to hold property in the best interest of or “for the benefit of” another.

Underwriting

The decision whether to make a loan to a potential home buyer based on credit, employment, assets, and other factors and the matching of this risk to an appropriate rate and term or loan amount.

Variable Interest Rate

A fluctuating interest rate which can go up or down depending on the going market rate.

Waive

To relinquish, or abandon. To forego a right to enforce or require anything.

Zoning Ordinances

The acts of an authorized local government establishing building codes, and setting forth regulations for property land usage.