Glossary of Common Real Estate Terms



Acceptance: A positive response to an offer or counteroffer. An acceptance may be "conditional," "express," "implied" or "qualified."

Adjustment Date: The date on which all adjustments of prepaid expenses, taxes, utilities, rents, interest, and similar items will be calculated.

Adjustments: Those items of a financial nature which are to be settled between the parties as of the Adjustment Date. The usual items for adjustment are annual property taxes, water rates, local utilities, garbage removal, Strata Fees, Interest on assumed mortgages, and rents, but can also include fuel in a tank, prepaid cable services, insurance, and any other item for which one or the other of the parties should be compensated before the transaction is fully completed.

Amortization: The length of time over which a loan will be retired in full, generally by way of monthly or weekly payments of principal and interest.

Annual Property Taxes: A tax levied on a property based on the result of multiplying the assessed value time the "Mil Rate" or rate of tax per $1000 of Property value.

Appraisal: A determination of the market value of a piece of property done by a qualified professional trained in appraisal techniques and familiar with the local market. The usual phrase used is. "The value at which a given property will sell, between a willing seller and a willing purchaser, given a reasonable period of time for exposure to the market.

Appreciation: The increase in the value of a property over time.

Assessed Value: The value placed on a property by the B.C. Assessment Authority for the purposes of determining annual property Taxes. Assessed Value multiplied by the "Mil Rate" equals the tax levy for the year.

Assumption of Mortgage: An agreement allowing the buyer to assume responsibility for the seller's existing mortgage loan instead of getting a new loan in his or her own name.

Base rate, Prime Rate: Generally the lowest interest rate charged by a lender to its most preferred customers. Some loans are expressed as being "X" percentage points above Prime Rate. The Base or Prime Rate plus the percentage agreed upon are used to determine the amount of interest due on a variable rate mortgage loan.

Blended Payment Mortgage: A mortgage with blended payments of principal and interest. Generally resulting in the same monthly payment over the term of the loan.

CMHC - Canada Mortgage and Housing Corporation: A Crown Corporation that insures High Ratio (over 75% of the appraised value) mortgages against default.

Closing: The act of completing the registration of the Land Transfer to the Purchaser in the Land Title Office, obtaining Mortgage Funds, if any, and Paying out the Balance of Sale Proceeds to the Vendor.

Closing Costs: Expenses over and above the purchase price for buying and selling a property.

Closing Date: The date upon which the closing is to take place.

Cost of Borrowing: The annual cost of credit over the life of a loan, including interest, service charges, brokerage, loan fees, CMHC or other mortgage insurance.

Conventional Mortgage: A mortgage loan where the mortgage loan does not exceed 75% of the appraised value of the property and is therefore not required to be insured by a government agency such as CMHC.

Convertibility: The ability to change a loan from a variable rate schedule to a fixed rate.

Covenants: Usually called Restrictive Covenants because they restrict the use of real property. Often required as part of the subdivision process by the approving authority, these are charges registered against the title, and binding upon all subsequent owners. These covenants govern how a property may be used. The most common are Covenants for in favour of the Ministries of Health, Environment or Highways.

Conveyance: The term used to describe the process of transferring the seller's title to a property to a buyer and includes all the steps necessary to complete that transfer. A lawyer or notary usually executes this process.

Counter offer: An offer made by the seller back to the buyer altering one or several terms and/or conditions of the offer as originally written. A counter offer may in turn be countered back by the buyer. This process continues until both seller and buyer agrees to all terms and conditions.

Deed: In other jurisdictions, a deed is the title to your property. In B.C. the title is properly called a "Certificate of Indefeasible Title" and referred to commonly as the "Title".

Default: Breach of a contract. Failure to do or not to do something that you have agreed either to do or not to do.

Density: The number of dwelling units per acre. Allowable densities are determined by the Zoning bylaws of the local government.

Deposit: A sum paid to secure the right to purchase a home or property at terms agreed upon by the buyer and seller. The Deposit should be sufficient to satisfy the Seller that the Purchaser would not willingly forfeit the deposit if he or she found another home more to their liking after the Interim Agreement was made but before closing.

Down payment: The net difference between the purchase price and the mortgage amount.

Duplicate Certificate of Indefeasible Title: A duplicate copy of the original title that may be signed out of the Land Title Office if the property is free of financial encumbrances. The Duplicate must be returned to the Land Title Office before the owner can deal with his property in any way. As a result, the Duplicate title may be "Hypothecated" or given as security to a lender who will hold the title until the loan is repaid.

Easement: A right-of-way granted to a person or company allowing access to or use of the grantor's land. The most common are utility easements for the servicing of properties with utilities such as water, sewer, gas, and hydroelectric power. There are also access easements for driveways and access lanes etc.

Encroachment: An intrusion onto an adjoining property. Common examples are a fence, storage shed, or overhanging roofline that partially (or even fully) extends over the property line of the adjoining property.

Encumbrance: A lien or charge, whether financial or non-financial, registered against the title to the property. An easement is a non-Financial Charge, while a mortgage, Judgment or Claim of Builder's Lien would be a financial charge.

Equity: The difference between the appraised value of a property and the debt that owes against it.

Fee Simple: Ownership without conditions. The English Common Law provided for a number of ways of owning title to land. The word "Fee" meant ownership and additional words added described the style of ownership. "Fee Simple" was simple ownership, without any reservations or terms. An estate limited absolutely to a person and his or her heirs and assigns forever without limitation or condition. The name survives today.

Fire insurance, All Risk Broad Form Insurance Coverage: Insurance against loss by fire, wind, storms, or other common hazards that a homeowner can purchase.

Fixed Rate Mortgage: A mortgage with a fixed interest rate for the term of the loan.

Foreclosure: A legal process by which the lender takes possession and ownership of a property when the borrower defaults on the mortgage obligations.

Grantee: Properly called the "Transferee" in B.C., the Grantee is the buyer, the person who receives the transfer of title to the property from the seller.

Grantor: Properly called the "Transferor" in B.C. the Grantor is seller, the person who transfers title to the property to the buyer.

High Ratio Mortgage: A mortgage loan in which the amount borrowed exceeds 75% of the appraised value of the property.

Interest: The cost paid to a lender for borrowed money.

Interim Agreement: The agreement entered into between Buyer and Seller which sets out the Purchase Price, the Property to be transferred, the Particulars as to date and terms, and the Parties to the transaction.

Joint Tenancy: The form of ownership in which the Registered Owners of equal interests in the property declare that there shall be an automatic right of survivorship. If one dies, the other automatically becomes the owner of the entire property. The property does not form part of the deceased's estate and is deemed to pass to the surviving owner the moment before death.

Land Title Fees: The fees paid to the Land Title Office for the processing and recording of a Transfer or Mortgage document.

Lease: A contract entered into between a Landlord and a Tenant for the rental of a property for a specific period of time.

Lien: Any legal claim against a property, filed to ensure payment of a debt.

Market Value: The price a property will sell for, given reasonable time and market exposure, to a willing buyer from a willing seller. Comparable recent sales and current listings can be used to help determine a property's probable market value range.

Mortgage Broker: A licensed professional who places mortgage loans on behalf of clients for a fee with various mortgage lenders, depending on the type of loan and the qualifications of the borrower. To compete with Mortgage Brokers, most banks now have in-house mortgage specialists who are mobile and will come to your home or office to arrange a mortgage loan with their bank.

Mortgage Lender: A Bank, Credit Union, Trust Company, life insurance company or private company that lends money on the security of land, houses, and real estate.

Mortgagee: The lender who makes a mortgage loan.

Mortgagor: The Borrower who grants a mortgage against his property to the lender to secure a mortgage loan.

Mortgage Loan: A loan agreement where the security is the borrower's real property. The mortgagor (borrower) agrees to repay the loan, and interest, and during the term of the mortgage (lender) to keep the home insured, to pay all taxes and to keep the property in good condition.

Mortgage Application Fee: The fee charged by the mortgage lender for preparing a mortgage application, conducting credit checks, etc.

Multiple Listing Service® (MLS®): A current and comprehensive listing system for relaying property information to the various real estate boards' member REALTORS. This service offers the widest exposure to properties listed for sale.

Offer: a written contract setting out the terms under which the buyer agrees to buy. Upon acceptance by the buyer and seller, it forms a legally binding contract, subject to the terms and conditions stated in the document.

Open Mortgage: A mortgage that can be prepaid or renegotiated at any time and in any amount, without penalty.

Occupancy Permit: The local building inspector's certification that the property has been fully completed in accordance with the building code and local regulations.

PIT: The standard components of a monthly residential mortgage payment: Principal, Interest, and Taxes. Some lenders do not include the Tax component and allow the borrower to pay their own taxes annually.

Possession Date: The date on which the purchaser is to take occupancy of the premises.

Prepayment Privilege: The right to pay all or part of a mortgage loan in advance of the required payment date. While a standard mortgage does not permit any prepayment, most lenders will allow a borrower to prepay a portion, typically 10% or 15% of the principal, once in each year. They may also allow a similar increase in the monthly payment once in each year.

Principal: The amount borrowed, excluding interest and other charges.

Promissory Note: A legal document verifying the existence of a debt and an unsecured promise to repay it, setting out the terms of repayment and the interest rate to be paid.

Property Condition Statement: This form enables sellers to disclose known defects. If the seller decides not to complete the form and does not disclose known defects, he or she can still be held liable. The form also serves as a checklist for buyers enabling them to address concerns about the property's condition on the spot. The British Columbia Real Estate Association developed this form. Submission of the form is required before any listing is placed on the Real Estate Board's MLS® system.

Property Taxes: A levy affected by location and the value of the property as determined by BC Assessment. The rate of taxation is determined by local government and assessed annually.

Property Transfer Tax also called PPT, Property Purchase Tax: A Land Transfer Tax levied on the transfer of a real property by the Provincial Government. The rate is 1% on the first $200,000.00 and 2% on the balance. Certain exemptions exist for transfer between spouses or between certain related parties, and there are exemptions for people who have never owned real estate before. Many restrictions apply. Please consult the current rules to ensure that you qualify for an exemption before making a commitment to purchase your property.

Realtors: Real estate professionals licensed by the Real Estate Council of BC who are members of the various Real Estate Boards and the British Columbia and Canadian Real Estate Associations. Only these professionals can call themselves Realtors.

Rights of Way: Are indicated on title at the Land Title Office; often for use of utilities or city or municipality in order to make repairs to pipes, etc.; no permanent structure may be built on a right of way.

Sales Contract: In BC, this is properly called an "Interim Agreement of Purchase and Sale".

Statement of Adjustments: A Statement prepared to include the purchase price, deposit, real estate commissions, legal fees, property purchase tax, property taxes and all adjustments that should be made between the parties. The net result of the transaction is clearly set out for the vendor or purchaser to see.

Statutory Building Scheme: A Special form of Restrictive Covenant that is filed by the developer to establish special building and design guidelines and land use controls for the subdivision which are over and above those of the municipality.

"Subject-to" Clause: A statement of a condition to be fulfilled before the contract will become firm and binding; must include a specific deadline for removal.

Surveyor's Certificate of Location: A survey to determine that the buildings or improvements located on a property are properly situated within the boundaries of the property and that the distance from the buildings to the property lines complies with local regulations. Note that a Surveyor's Certificate of Location does not establish property boundaries.

Tenancy in Common: The form of ownership in which the Registered Owners of interests in the property declare that there shall be NO automatic right of survivorship. If one dies, his or her share is distributed in accordance with their Will or the Estate Administration Act, if intestate. The property forms part of the deceased's estate and passes to the Personal Representative of the Deceased upon filing a Probate Order with the Land Title Office.

Title: Properly called A "Certificate of Indefeasible Title". This is the proof of a person's ownership of a property. The original "Certificate of Title" cannot be removed from the Land Title Office and is in fact only an electronic record. A Duplicate of the "Certificate of Indefeasible Title" may be requested if there are no financial charges registered against the property. This Duplicate Title must be returned to the Land Title Office before the Owner can deal with his property. As such, the "Title" may be hypothecated or used as security for a loan, since the lender knows that the owner cannot dispose of the property without returning the Duplicate Title to the Land Title Office.

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.

Transfer: The written instrument, signed by the "Transferor" (seller), and delivered to the "Transferee" (buyer), by which one person conveys a property to another.

Utility Taxes: Examples may include water; sewer and garbage (may include recycling levies).

Variable Rate Mortgage: A mortgage loan where the interest rate is adjusted according to movements in the Bank of Canada Discount Rate, or the Prime Rate offered by the lending institution. Most variable rate mortgages carry the option of converting to a Fixed Rate Mortgage at any time.

Vendor Take-Back Mortgage: When sellers use their equity in a property to provide some or the entire mortgage financing in order to sell the property.

Walk-through: A final inspection of the home before closing to inspect the premises for any damage that needs to be corrected by the vendor before closing.

Warranty: A promise, either written or implied that the material and workmanship of a product is defect-free or will meet a specific level of performance over a specified period of time.

Zoning: Regulations established by local governments regarding the use of land and the location, size and height of any improvements built thereon within a specific area.



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