Real estate terms you should be aware of:
Technical jargon in any profession can create confusion and misunderstanding for those not up on the lingo. The real estate industry is no exception. The following are commonly used real estate terms, followed by a plain English explanation.
Abstract: A written history of the title to a parcel of real estate as recorded in a land registry office.
Agency: The relationship between an individual and agent which arises out of a contract (written or oral) in which the agent is employed and authorized by the individual to represent him or her in business transactions with a third party.
Agreement for Sale: An agreement for the purchase of real estate property in which the purchase price is paid in installments and the title is not conveyed to the purchaser until the purchase price is paid in full.
Agreement for Purchase and Sale: A contract by which one party agrees to sell and another agrees to purchase.
Amortization: The number of years it takes to repay the entire amount of a mortgage.
Appraisal: An estimate of a property's market value, used by lenders in determining the amount of the mortgage.
Appreciation: The increase in a property's value over time.
Assessed Value: A valuation placed on the property as a basis for municipal taxation.
Assumption of a mortgage: The taking of title to property by an individual where he or she assumes liability for an existing mortgage against the property and they become personally liable for the payment of such mortgage debt.
Balance due on completion: The amount of money the purchaser will be required to pay to the seller to complete the purchase , after all adjustments have been made. Blended mortgage payments Equal or regular mortgage payments, consisting of both a principal and an interest component.
Broker: A real estate professional licensed by Ontario to facilitate the sale, lease or exchange of a property.
Buy-down: 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 the purchaser) in one lump sum or monthly installments.
Caveat Emptor: A Latin expression meaning "Let the buyer beware". Because the onus of examining the goods or property being purchased is on the buyer, the buyer is therefore at risk.
Chattel: Personal property which is tangible and moveable.
Closing: The real estate transaction's completion, when the parties involved agree that all legal and financial obligations have been met and 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.
Commission: Monies paid to an agent upon the sale or lease of property, usually as a percentage of the amount involved.
Common elements: The portions of a condominium development owned in common (shared) by the unit owners.
Contract: A contract is a legally binding agreement between two or more cable persons. The agreement says that in return for a lawful and genuinely intended act a certain value will be placed. The contract must be in writing.
Conventional mortgage: A first mortgage issued for up to 75% of the property's appraised value or purchase price, whichever is lower.
Counteroffer: One party's written response to the other party's offer during the negotiation of a real estate purchase between buyer and seller.
Covenant: An agreement contained in a deed and creating an obligation. It may be positive, stipulating the performance of some act, or it may be negative and restrictive, forbidding other acts.
Creditor: A person to whom a debt is owed by another person usually called a debtor.
Date of Completion: The date specified in the agreement of purchase and sale, when the purchaser is to deliver the balance of money due and the seller delivers a duly executed deed and vacant possession of the property.
Debt service ratio: The percentage of a borrower's gross income that can be used for housing costs, including mortgage payment and taxes (and condominium fees, where applicable).
Deed: A legal document in writing, duly executed and deliver, that conveys (transfers) ownership of a property to the buyer.
Deposit: The payment of money or other valuable consideration as pledge for fulfillment of the contract.
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 neighbor's fence, storage shed or overhanging roof line that partially (or even fully) intrudes onto your property are examples of encroachments.
Equity: The difference between the price for which a property can be sold and the mortgage(s) on the property. Equity is the owner's "stake" in a property.
Exclusive Listing: A document giving the sole right to offer a described piece of property for sale, according to the terms of the agency agreement.
Foreclosure: Court actions taken by a mortgagee, when default occurs on a mortgage, causing forfeiture of the property.
Intestate: A person who dies without a will or leaves one which is defective in form.
Land Transfer Tax: Payment to the provincial government for transferring property from the seller to the buyer.
Lease: A contract between landlord and tenant for the occupation or use of the landlord's property by the tenant for a specified time and for a specified consideration.
Lien: Any legal claim against a property, filed to ensure payment of a debt.
Listing: An oral or written agreement between a property owner and a broker authorizing the broker to offer the owner's real property for sale or lease.
Mortgage: The conveyance of property to a creditor as security for payment of a debt; i.e., the lender or creditor.
Mortgagee: The one to whom property is conveyed as security for the payment of a debt; i.e., the lender or creditor.
Mortgagor: The one who makes the mortgage, i.e., the borrower or debtor.
Multiple Listing: An arrangement between brokers, usually real estate board members, whereby each broker presents his listings to the other members, who may negotiate the transaction.
Multiple Listing Service: A system for relaying information to realtors about properties for sale.
Open mortgage: A mortgage that can be prepaid or renegotiated at any time and in any amount, without penalty.
Power of Attorney: Delegated written authority to a person allowing that person to act on the behalf of another person.
Principal: The employer of an agent or broker who gives the agent or broker the authority to do some act for him or her. In real estate, usually the owner of a property.
Real Estate: Real Estate includes real property, leasehold and business whether with or without premises, fixtures, stock-in-trade, goods or chattels in connection with the operations of the business (Real Estate Business and Brokers Act).
Real Estate Broker: A person who represents a principal or owner in a real estate trade.
Realtor: A registered word which may only be used by an active member of a real estate board affiliated with the Canadian Real Estate Association.
Salesperson: An employee of a broker authorized to trade in real estate (as defined within the Ontario Real Estate Business Brokers Act). Also can be referred to as a Sales Representative.
Title: The legal evidence of ownership in a property.
Title search: A detailed examination of the ownership documents to ensure there are no liens or other encumbrances on the property and no questions regarding the seller's ownership claim.
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 payment goes to interest. If rates go down, a larger portion of the payment is applied to the principal.
Vendor-take-back mortgage: When sellers use their equity in a property to provide some or all of the mortgage financing in order to sell the property.
Zoning regulations: Strict guidelines, set and enforced by municipal governments, regulating how a property may or may not be used.