The Ultimate Real Estate Terminology List

The world of buying and selling homes has its own lingo. Here's a list of the more common terms and their definitions:

A

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

Amortization: The number of years it takes to repay the entire amount of the mortgage.

Appreciation: The increase on a property’s value over time.

Appraised Value: An estimate of a property’s value which is completed by a certified professional. Typically required by lenders in determining the amount of the mortgage.

Assessed Value: The value of a property, set out by the BC Assessment Authority, for the purpose of calculating property tax. Taken on July 1 of the previous year. Only improvements completed with permit will be reflected.

B

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 buyer.

C

Closing: The real estate transaction 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.

Condominium Common Property: The portions of a condo development owned in common (shared) by the unit owners eg: pool, exercise room, lobby, etc. A strata fee is charged to every unit owner for the use of the common property.

Condominium Ownership: Shared ownership in a strata-titled property. Owners have title (ownership) to individual units and a proportionate share in the common property.

Conventional Mortgage: A first mortgage issued for up to 80% of the property’s appraised value or purchase price, whichever is lower.

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 conveyancer is a lawyer or notary public responsible for the conveyance 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.

D

Deed: A legal document that conveys (transfers) ownership of the property to the buyer.

Debt Service Ratio: The percentage of a borrower’s income that can be used for housing costs. See also Gross Debt Service Ratio and Total Debt Service Ratio.

E

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 on an adjoining property. Common examples are a neighbours fence, storage shed or overhanging roof line that partially, or even fully, intrudes onto your property.

Equity: The difference between the price fro which a property can be sold and the mortgage(s) on the property. Equity is the owner’s stake in the property.

F

Foreclosure: A legal process by which the lender takes prosession and ownership of a property when the borrower doesn’t meet the mortgage obligations.

G

Gross Debt Service Ratio (GDSR): This is the amount a lender will permit a borrower to use from his/her gross income in order to qualify for a loan for housing costs, including mortgage payment, taxes and condo fees, when applicable. See also Debt Service Ratio and Total Debt Service Ratio.

H

High-Ratio Mortgage: A mortgage that exceeds 80% of the loan-to-value ratio. High-ratio mortgages must be insured by either the Canada Mortgage and Housing Corporation (CMHC) or a private insurer to protect the lender against default by the borrower who has minimal equity invested in the property.

L

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

M

Mortgage: A contract between a borrower and a lender. The borrower pledges a property as security to guarantee repayment of the mortgage debt.

Mortgage Insurance: Government-backed (CMHC) or privately-backed insurance protecting the lender against the borrower’s default on high ratio, and other types of mortgages. It is required if playing less than 20% down or purchasing a mobile home.

Mortgage Life Insurance: Insurance that pays off the mortgage debt should the insured borrower die.

Mortgage Penalty: A fee paid by the borrower to the lender in exchange for being permitted to break a contract (mortgage agreement). Three months interest (common) or the equivalent of the loss of interest to the lender.

Multiple Listing Service (MLS): A current and comprehensive listing system for relaying property information to realtors. This service offers the widest exposure to properties listed for sale and includes total exposure on the internet (realtor.ca).

P

Principal: The mortgage amount initially borrowed or the portion still owing on the mortgage. Interest is calculated on the principal amount.

Property Disclosure Statement (PDS): 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 is still 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 form was developed by the BC Real Estate Association.

Property Taxes: This levy is affected by location and is determined by local property tax assessment practice. Tax assessments are conducted by local governments. Property taxes are paid on an annual basis.

Property Transfer Tax: Payment to the provincial government for transferring property from the seller to the buyer. However, first time home buyers are exempt under certain circumstances.

1% on the first $200,000

2% on the portion greater than $200,000 and up to and including $2,000,000

3% on the portion greater than $2,000,000

If the property is residential, a further 2% on the portion greater than $3,000,000

R

Realtors: Real estate professionals who are members of the Vancouver Island Real Estate Board (VIREB) or the British Columbia and Canadian Real Estate Associations. Only these professionals can call themselves Realtors.

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

S

Seller Take-Back Mortgage: When the seller(s) use their equity in a property to provide some or all of the mortgage financing in order to sell the property.

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

State of Title Certificate: A copy of the tile which lists charges against the property, eg: liens, mortgages, rights of way, etc.

“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 and the party to whom in the beneficiary.

T

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.

Total Debt Service Ratio (TDSR): The maximum percentage of a borrowers income that a lender will consider for all debt repayment (loans, credit cards, mortgage payment, etc).

U

Utility Taxes: Examples my include water, server and garbage (may include recycling levies).

V

Variable Rate Mortgage: A mortgage for which payments are fixed, but the interest rate changes in relation to fluctuating market interest rates. If mortgage rates increase, a larger portion of the payment goes to interest; if rates decrease, a larger portion of the payment is applied to the principal.