Get answers to your questions about 'REALTOR® talk'

A

Appraisal – Primarily used by banks and lenders to determine the worth of a property, the appraisal is a written justification of a home price. It is based largely on comparable sales and current market activity.

Appreciation – An increase in a property’s value due to multiple factors, such as inflation, improvements and market conditions.

Assessment – The value placed on a property for taxation purposes.

 Assumable Mortgage – Taking on the mortgage of the previous home-owner. The person who assumes the mortgage must qualify before assuming the loan.

B

Bridge Loan – A loan used by sellers who close on a newly purchased home prior to selling their old home. The bridge loan covers the down payment and other costs associated with the new home (while equity is tied up in the unsold home).

C

Chain of Title – A list of the people who have held title on a piece of property over a period of time.

Clear Title – A title that is free of liens, causing no questions as to who owns the property.

Closing – Simply put, closing is the signing of all documents and the exchanging of money to render the buyers the official homeowners.

Commission – In real estate transactions, the funds paid to a REALTOR® who has satisfied the terms of the listing contract. It is usually the case that the seller pays the commission for both the listing agent and the purchasing agent; however, this varies by transaction.

Comparable Sales ("Comps") – The sale prices of similar properties sold recently in a vicinity. Comps are used to determine market value and listing price. ("Pulling comps.")

Conditions/Contingencies – Items that must be addressed prior to a contract becoming legally binding for either party. Conditions and contingencies in real estate transactions frequently include financing and home inspections.

Curb Appeal – This is the first impression of a house, as seen from the street or, more recently, in photos on online listing services, such as MLS.ca/REALTORS.ca.

D

Deed – The legal document that shows title of a property.

Deposit – Money a buyer offers to secure a property. The deposit is included in the full purchase price (it is not separate or outside of the purchase price).

Depreciation – A decrease in a property’s value due to multiple factors.

Down Payment – The amount of the purchase price of the property that a buyer pays (outside of a mortgage or bridge loan). In Canada, the down payment usually begins at 5% of the full purchase price of the home.

E

Encroachment – A piece of the property or real property that sits illegally on neighboring property. Examples include additions to the home, such as a garage, or a section of a fence.

Equity – Simply put, the difference between the value of the home and the amount owing on a mortgage.

Exclusive Listing – A contract that states that one real estate agent will have exclusive rights to sell the property for a period of time. No other agent can sell the home in that time, and the owner cannot sell the home privately.

F

Fair Market Value – The value that the market determines a property to be worth. Fair market value often exists in a range: the highest price that a reasonable person would pay and the lowest price that a reasonable person would be for a property.

Fixed Rate Mortgage – A mortgage with an interest rate that does not change during the term of the loan.

H

Home Inspection – Conducted by a professional (certified or licensed) home inspector, a home inspection is a full evaluation of the structural and mechanical elements of the home & land.

Home Owners' Association (HOA) – An association – usually managed by a builder or property management company – that cares for common areas of properties (e.g., condominiums) and neighborhoods (e.g., sidewalks, manmade lakes). Owners of properties in areas with an HOA will pay a monthly or annual fee to the HOA, which is most often a non-profit organization.

Housing Bubble – A housing bubble is the product of such rapid increases in the values of properties (e.g., houses, condos) that those values are no longer sustainable with current income levels and other economic elements. A housing bubble typically bursts when the market is no longer able to buy real estate, increasing inventory and forcing prices down.

I

Inspection – See Home Inspection

L

Legal Description – The description of a property – usually including coordinates – as it is registered with the Land Titles Office.

Lender – The institution (e.g., bank, mortgage broker) or the person representing the institution that is lending a buyer the required finances for the property.

Lien – A legal claim against a property that must be cleared up prior to a party taking possession of a property.

M

Mortgage – Simply put, the amount of money a home purchaser borrows from a lender or lending institution (e.g., bank) to finance the purchase of the home, outside of the deposit and/or down payment.

O

Original Principal Balance – The initial amount of a mortgage before interest is added and any payments are made against the mortgage.

P

Personal Property – Elements of a property that are not attached to the home (are not real property). Sellers often take personal property with them when they move, unless the purchasing contract includes those items as part of the sale of the property.

Pre-Approval – Prior to having an offer accepted on a home, a buyer will meet with a lender to apply for a mortgage, offering his/her debt, income and savings and allowing a credit check. The lender determines if the potential buyer will be approved for a home based on the information provided by the buyer as well as assumptions made about the loan amount, the interest rate and the term of the loan. A pre-approval does not guarantee that a mortgage will be approved; therefore, when submitting an offer on a home, always make it conditional on financing if you will require any financing. (See Pre-Qualification below.)

Pre-Qualification – In contrast to pre-approval, pre-qualification includes a meeting with a lender but may not include a review of a credit report or written documentation.

Prime Rate – The set interest rate that a bank will charge its preferred customers. The interest rate on a mortgage is usually prime + a percentage determined by the lender.

Principal – The amount of a mortgage not including interest.

Purchase Agreement (Purchase Contract) – A written contract that states the terms & conditions of the sale of the property, signed by both the buyer and the seller.

R

Rate Lock – A guaranteed interest rate for a specific period of time during a mortgage.

Real Estate Agent – A real estate professional who is licensed to market properties as well as negotiate ethically and enter into transactions for the sale of real estate.

Real Property – Elements of a property that are attached to the home/property.

REALTOR® – A licensed real estate agent who is an active member of a local real estate board.

S

Second Mortgage – An additional amount of funds taken out on a property when equity has been established.

Security – Articles or properties that are offered as collateral to secure a loan (a secured loan).

T

Title – A legal document that shows a party’s ownership or interest in a property.

Title Search – A search at the Land Titles Office normally conducted under the guidance of a real estate lawyer that checks for conflicts with ownership of the property, ensures there are no liens/claims against the property and ensures the seller is legally entitled to sell the property.