Real Estate Terms

Glossary of Real Estate Terms

Here are some useful real estate terms to help you navigate your way.

Adjustment Date

The date agreed to by both parties for the allocation and adjustment of property taxes, interest, utilities, rents and other appropriate items. This date is usually the same as the possession date. (See Seller’s and Buyer’s statements).



Agreement For Sale

The Seller agrees to sell the property to a Buyer on credit terms. Normally the Seller carries the financing himself and the Buyer arranges a payment with the Seller. The Seller remains on the title as registered owner. Very similar to a first mortgage. The agreement for sale is the registered contract.



Amortization

The paying off of debt with a fixed repayment schedule in regular installments over a period of time. Consumers are most likely to encounter amortization with a mortgage or car loan.



Appraised Value

A report made by a qualified person giving an estimate of value, based on experience, comparable sales and pertinent data relating to the property.



Asking Price

The price placed on the property for sale by the Seller.



Assessed Value

Used for the purpose of assessing property tax by a local municipality, this property value is assessed by the B.C. Assessment Authority.



Blended Payments

Payments consisting of principal and interest components, paid during the amortization period of a mortgage.



Buy Down

A mortgage financing technique where the buyer attempts to obtain a lower interest rate for at least the first few years of the mortgage.



Buyer’s Agent

The date agreed to by both parties for the allocation and adjustment of property taxes, interest, utilities, rents and other appropriate items. This date is usually the same as the possession date. (See Seller’s and Buyer’s statements).



Caveat

A note placed on the register in the Land Titles Office at the instigation of a person who claims a certain interest in the land. In B.C., a caveat remains in force for only 2 months, then lapses.



Chattels

Personal property not attached or affixed to the land or property. Also refers to appliances, etc. in a rental property.



CMHC

Canada Mortgage and Housing Corporation. A Crown corporation which provides information services and mortgage loan insurance.



Co-Op Suite

A co-op is a company formed to create and operate defined living spaces within a building. A Buyer purchases shares in the company that normally owns the building. The purchase of these shares usually entitles the owner to the sole use of a suite in a co-op building through a long term lease or shareholder’s agreement.



Commissions

In B.C. it is illegal to receive “net” commissions (i.e. any amount of money given on the sale of the property over and above the agreed price.)



Completion Date

The date on which the Seller is entitled to the net proceeds of the sale and the Buyer is entitled to the transfer of the title. Real Estate commissions and legal fees are paid out at this time.



Consideration

Something done or promised (i.e. deposit money) to be done by one party in return for something done or promised to be done by the other party (i.e. the transfer of title to the property).



CTAM

Cash to a new mortgage to be arranged.



Debt-Service Ratio

The measurement of debt payments to gross household income which may include, in addition to the main wage earner’s salary, salaries of other wage earners, commissions, bonuses, overtime, etc.



Deposit

Money taken at the time of acceptance or upon final subject removal as a sign of good faith. This money is held in a real estate company’s trust account pending the completion of the purchase and are credited towards the purchase price.



Designated Agency

The essence of the system of “designated agency” is that the brokerage has contractual duties to the buyer or seller who has engaged it and agency duties are provided by the REALTOR® appointed by the brokerage as the “Designated Agent” for that client.



Dual Agent

A real estate broker or salesperson who acts as agent for both the Seller and the Buyer in the same transaction. Both Buyer and Seller are the agent’s clients.



Encumbrances

Anything that affects or limits the title to property such as a mortgage, lease, easement, etc.



Equity

The difference between the price for which a property could be sold and the total debts and mortgages registered against it.



Fixtures

All things attached to the property or growing on it. To avoid this dispute, specify in writing any items that will not be included in the sale of the property. Better yet, remove them prior to offering the property for sale.



FSR

Floor Space Ratio. A City zoning term that defines the maximum allowable square footage to be built or occupied in a building in relation to its lot size.



Gross Debt Service

The amount of money needed to pay principal, interest, taxes and sometimes, energy costs. If the dwelling unit is a condominium, all or a portion of common fees are included, depending on what expenses are covered.



Gross Debt Service Ratio

The percentage of gross annual income needed to cover payments associated with housing payments. (Mortgage, principal and interest, taxes, secondary financing). Primarily used by the mortgagee (lender). Most lenders prefer the GDS be no more than 30% of a purchaser’s gross annual income (before deductions).



Gross Taxes

The total amount of taxes owing as per your B.C. Assessment and municipal property tax bill before any deductions are made.



High Ratio Mortgage

A situation where the loan exceeds 80% of the appraised value (or the selling price – whichever is lower). This loan must be insured by C.M.H.C., G.E. Capital (Mortgage Insurance Canada) or other insuring agencies for a fee.



Highlight Sheet / Feature Sheet

An information and marketing sheet given to the public and other sales agents that outlines details of the property for sale.



Lease

A lease is a rental for a fixed period of time. Leases over 3 years duration should be registered in the Land Titles Office.



Listing Agreement

A contract between a Seller and a real estate company whereby the real estate agent agrees to find a ready, willing and able Buyer for a listed property on certain terms stipulated by the Seller. The Seller agrees to pay a stated amount of commission if the salesperson is successful.



Market Value

The highest price paid for a piece of property which has been exposed ‘for sale’ in the open market allowing a reasonable time to find a Buyer.



MLS® Listing

Multiple Listing Service. A listing service handled by the Real Estate Board that issues print and online listing information comprising details of properties for sale on MLS® in our market areas.



Mortgage

A specific form of security for a debt, more specifically, property or chattels as security for payment of a debt. The borrower is the mortgagor and the lender is the mortgagee.



Mortgage Insurer

In Canada, high-ratio mortgages (those representing greater than 80% of the property value) must be insured against default by either CMHC or private insurers. The borrower must arrange and pay for the insurance, which protects the lender against default.



Mortgagee

The person or financial institution lending the money, secured by a mortgage.



Mortgagor

The property owner borrowing the money, secured by a mortgage.



Net Taxes

The amount owing after allowable deductions made such as homeowners’ grant and senior citizen’s deductions.



Offer

Offer to Purchase. A promise made by one party, the offeror, to another party, the offeree. A legal agreement which offers a certain price for a specified piece of real estate.



Open Houses/Agents’ Opens

An agent’s open is an open arranged by the listing agent to allow all other agents in the area to view the property for their prospective Buyers, normally on a weekday morning. A public open house is usually held for a two hour time period between 1 and 5 p.m. on weekends when the listing agent will be present and potential Buyers will be encouraged to drop in. (Sellers are advised to be absent during these times.)



P.C.D.S. or P.D.S.

See Property Disclosure Statement.



P.I.T.

Principal, Interest and Taxes. A method of combined mortgage payment.



Possession Date

The date the Buyer is entitled to possession of the property at twelve noon that day, subject to existing tenancies.



Pre-Approved Mortgage

A situation where a mortgagee (lender) will appraise a property prior to putting it on the market and set the ceiling mortgage funds that it will lend to a Buyer who meets its internal qualifications.



Property Disclosure Statement

The Property Disclosure Statement is designed to protect all persons involved in real estate transactions. It provides a written record of representations made and, as importantly, not made, allowing the Buyer the opportunity to review the condition of your property so you’re less likely to overlook a defect. Disclosure can make the property more attractive to potential Buyers who often require completion of this form to reduce any risk of misunderstanding.



Seller Take-Back Mortgage

A situation where a Seller will agree to hold the mortgage in the case of a Buyer who may or may not qualify for a conventional mortgage, or as a way to attract Buyers by offering a lower interest rate. The Seller must be secured in his loan.



Seller’s Agent

The Seller’s Agent, also known as a Listing Agent, represents the Seller under the listing agreement with the Seller, typically through the MLS® system. In dealing with prospective Buyers — customers– the Seller’s Agent can provide a variety of information and services to assist the Buyer in his/her decision-making. The Seller’s Agent does not represent the Buyer.



Seller’s Statement Of Adjustments

The statement indicates the balance of cash to be forwarded to the Seller after all adjustments.



Seventy-Two Hour Clause

A protection clause for the Seller who accepts an offer which is subject to the sale of a property that the Buyer owns. The Buyer must remove his subjects within 72 hours or the Seller has the right to deal with the new offer to purchase. This clause is sometimes written as either a 24 or 48 hour clause.