Glossary

The following definitions are taken from the www.cmhc.ca and www.realtylink.org websites.

Buying or selling a home, whether for the first time or the fifth time, can be a little confusing. This glossary of some of the most common real estate terms that you're likely to encounter will help you better understand the language of real estate.

Adjustment Date: The day from which all calculations of interest, tax adjustments, utility bill adjustments (if applicable) are made to the credit of either the buyer or the seller. This is usually (but not always) the same as the possession date.

Amortization: The period of time required to reduce the mortgage debt to zero when all regular blended payments are made on time and provided the terms (payment and interest rate) remain the same.

Appraisal: A process for estimating the market value of a particular property.

Appreciation: The increase in value of something because it is worth more now than when you bought it.

Assessed Value: The value of a property, set by the B.C. Assessment Authority, and used by the local municipality for the purposes of calculating property tax.

Closing Costs: Costs in addition to the purchase price of the home, such as legal fees, transfer fees and disbursements, that are payable on the closing day. They range from 1.5% to 4% of a home's selling price.

Closing Date: The date at which the sale of a property becomes final and the new owner takes possession.

CMHC: Canada Mortgage and Housing Corporation. A Crown corporation that administers the National Housing Act for the federal government and encourages the improvement of housing and living conditions for all Canadians. CMHC also develops and sells mortgage loan insurance products.

Conditional Offer: An Offer to Purchase that is subject to specified conditions, for example, the arrangement of a mortgage. There is usually a stipulated time limit within which the specified conditions must be met.

Commitment Letter/Mortgage Approval: Written notification from the mortgage lender to the borrower that approves the advancement of a specified amount of mortgage funds under specified conditions.

Conventional Mortgage: A mortgage loan up to a maximum of 80% of the lending value of the propert y. Typically, the lending value is the lesser of the purchase price and market value of the propert y. Mortgage loan insurance is usually not required for this type of mortgage.

Conveyance: The term used to describe the process of transferring the seller's title to the buyer and indicates all the necessary steps to complete the transfer. A conveyancing lawyer is a lawyer (or notary) responsible for the conveyance process (this is normally the buyer's lawyer).

Counteroffer: If your original offer to the vendor is not accepted, the vendor may counteroffer. This means that the vendor has amended something from your original offer, such as the price or closing date. If a counteroffer is presented, the individual has a specified amount of time to accept or reject.

Credit Report: The main report a lender uses to determine your creditworthiness. It includes information about your ability to handle your debt obligations and your current outstanding obligations.

Curb Appeal: How attractive the home looks from the street. The first impression you have of a home is important. A home with good curb appeal will have attractive landscaping and a well­ maintained exterior.

Deed: A legal document that is signed by both the vendor and purchaser, transferring ownership. This document is registered as evidence of ownership.

Deposit: Money placed in trust by the purchaser when an Offer to Purchase is made. The sum is held by the real estate representative or lawyer/notary until the sale is closed and then it is paid to the vendor.

Depreciation: The decrease in value of something because it is now worth less than when you bought it.

Down Payment: The portion of the home price that is not financed by the mortgage loan. The buyer must pay the down payment from his/her own funds or other eligible sources before securing a mortgage.

Easement: This is where someone else has the right for access to or over another person' s land for a specific purpose, such as a driveway or public utilities.

Encroachment: An intrusion onto an adjoining property. Common examples are a neighbour's fence, storage shed, or overhanging roof line that partially (or even fully) intrudes onto your property.

Equity: The difference between the price for which a home could be sold and the total debts registered against it. Equity usually increases as the mortgage is reduced through regular payments. Market values and improvements to the property may also affect equity.

Foreclosure: The legal process where the lender takes possession of your property and sells it to cover the debts you have failed to pay off. When you default on a loan and the lender feels that you are unable to make payments, you may lose your home to foreclosure.

High-Ratio Mortgage: A mortgage loan higher than 80% of the lending value of the property. This type of mortgage may have to be insured -for example by CMHC or a private company­ against payment default.

Land Transfer Tax: Payment to the provincial government for transferring property from the seller to the buyer. See Property Transfer Tax.

Lien: A claim against a property for money owing. A lien may be filed by a supplier or a subcontractor who has provided labour or materials but has not been paid.

MLS - Multiple Listing Service: A multiple listing service is a real estate agents' cooperative service that contains descriptions of most of the homes that are for sale. Real estate agents use this computer-based service to keep up with properties they are listing for sale in their area.

Mortgage: A mortgage is a security for a loan on the property you own. It is repaid in regular mortgage payments, which are usually blended payments. This means that the payment includes the principal {amount borrowed) plus the interest {the charge for borrowing money). The payment may also include a portion of the property taxes.

Mortgage Life Insurance: Mortgage life insurance provides coverage for your family should you die before your mortgage is paid off. This insurance can be purchased through your lender and the premium added to your mortgage payments. However, you may want to compare rates for equivalent products from an insurance broker.

Mortgage Loan Insurance: If you have a high-ratio mortgage {more than 80% of the lending value of the property) your lender will probably require mortgage loan insurance, which is available from CMHC or a private company.

Mortgage Payment: A regularly scheduled payment that is often blended to include both principal and interest.

Offer to Purchase: A written contract setting out the terms under which the buyer agrees to buy the home. If the Offer to Purchase is accepted by the seller, it forms a legally binding contract that binds those who have signed it to certain terms and conditions.

Operating Costs: The expenses that a homeowner has each month to operate a home. These include property taxes, property insurance, utilities, telephone and communications charges, maintenance and repairs.

Property Disclosure Statement: This form enables sellers to disclose known defects. If the seller decides not to complete the form and does not disclose 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.

Property Insurance: Insurance that you buy for the building(s) on the land you own. This insurance should be high enough to pay for the building to be re-built if it is destroyed by fire or other hazards listed in the policy.

Property Taxes: Taxes charged by the municipality where the home is located based on the value of home. In some cases the lender will collect a monthly amount to cover your property taxes, which is then paid by the lender to the municipality on your behalf.

Property Transfer Tax: Payment to the provincial  government  for  transferring  property  from the seller to the buyer. In the 1994 provincial government's budget, the PTT was eliminated for first-time buyers under certain circumstances.

Reserve Fund: This amount is set aside by the homeowner on a regular basis so that funds are available for emergency or major repairs. Setting aside 5% of your monthly take-home pay will give you a well-funded reserve.

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, et c.; no permanent structure may be built on a right of way.

"Subject-to" Clause: A statement of condition to be fulfilled by the benefiting part which must include a specific deadline for removal.

Statement of Adjustments: Closing statements in a real estate transaction that set out the source of funds that make up the purchase price, adjustments to and from the purchase price, the final amount required from the purchase and the amount due to the seller. Lawyers will prepare a statement for the seller and the buyer.

Survey or Certificate of Location: A document that shows property boundaries and measurements, specifies the location of buildings on the property and states easements or encroachments.

Title: A freehold title gives the holder full and exclusive ownership  of the land and building for an indefinite period. A leasehold title gives the holder the right to use and occupy the land and building for a defined period .

Title Insurance: Insurance against loss or damage caused by a matter affecting the title to immoveable property, in particular by a defect in the title or by the existence of a lien, encumbrance or servitude.

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.

Warranty (New Home Warranty Program): A guarantee that if something covered under the warranty needs to be repaired it will be. If the builder doesn't repair it, the repair will be made by the organization that provided the warranty. All provinces and Yukon Territory have New Home Warranty programs for newly built homes. However, there are currently no such programs in Nunavut or the Northwest Territories.

Zoning Regulations: Strict guidelines set and enforced by municipal governments regulating how a property may or may not be used.