REAL ESTATE TERMS

AMORTIZATION -- The number of years it takes to repay the entire amount of a mortgage.

APPRAISAL -- An estimate of a property's market value established by a certified home appraiser, used by lenders in determining if the property qualifies for the amount of the mortgage.

APPRECIATION -- The increase of a property's value over time.

ASSESSMENT -- The value of a property, set by the local municipality, for the purposes of calculating property tax.

ASSUMABLE MORTGAGE -- A mortgage held on a property by the seller that can be taken over by the buyer, who then accepts responsibility for making the mortgage payments. Also see assumable mortgages.

BARE LAND CONDOMINIUM -- A condominium in which the units are defined in relation to the land rather than in relation to a structure. A Bare Land condominium could be a duplex or a freestanding home with its own yard. A Bare Land condominium shares all the other features of a conventional condominium except for the definition of the boundaries.

BARELY BLENDED CONDOMINIUM -- A condominium where the boundaries of the units are defined in relation to the land on which each home is constructed rather than as a volume of space defined by the interior walls of a structure. Since the home sits on the unit (the land), the owner would normally be responsible for all maintenance of the home and land (as in the case of a Bare Land Condominium). However, in a Barely Blended Condominium, the exterior maintenance of each structure and possibly the grounds are done by the Condominium Corporation. Details of such maintenance are in the bylaws.

BLENDED MORTGAGE -- A combination of two mortgages, one with a higher interest rate than the other, to create a new mortgage with an interest rate somewhere between the two original rates.

In this example, mortgage one is for $50,000 @ 11.25% and mortgage two is for $25,000 at 2.5%. I've used small numbers for simplification. The formula for calculating the blended rate is as follows:

1st amount + 2nd amount = Total Amount
or 50k + 25K = 75K

1st/total * rate1 = Av
or 50/75 x 11.25 = 7.5

2nd/total * rate2 = Av
or 25/75 * 7.5 = 2.5

Av + Av = Blended rate
7.5 + 2.5 = 10%

BLENDED MORTGAGE PAYMENTS -- Equal or regular mortgage payments, consisting of both a principal and an interest component. With each successive payment, the amount applied to interest decreases and the amount applied to the principal increases, although the total payment doesn't change. (Exception: see Variable-Rate Mortgages)

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 to the purchaser, in one lump sum or monthly installments.

BUYERS BROKERAGE AGREEMENT -- An agreement between the buyers brokerage and the buyer, which assures that the buyer will be protected and represented properly in all cases, even when the property is not listed on the MLS® system. The agreement also ensures that the agent is guaranteed to be paid for their services. If there is a shortfall on commissions from the seller, the buyer should then deduct that amount from their offer price ensuring that there is no cost to him/her. In no case should the buyer ever offer market value when a home is listed privately, since the market value reflects and inclusion of the brokerage fee. Buyers should always insist on having their agent sign a Buyers Brokerage Agreement, so that they will never be unprotected.

BYLAWS -- Upon registration of a Condominium Plan with the Land Titles office, a Condominium Corporation is created. At that time, a standard set of bylaws applies to the operation and management of the condominium and its Condominium Corporation. These are commonly called “Schedule A” bylaws because they comprise Schedule A of the Condominium Property Act.

Shortly after the Condominium Corporation comes into existence, condominium Developers will typically replace Schedule A bylaws with customized bylaws to better reflect the nature of a particular development before it goes on sale. Unit Owners can agree to add, amend or replace bylaws by a 75% majority vote in favour of adopting a Special Resolution to that effect.

CANTILEVER - a beam supported on only one end. The beam carries the load to the support where it is resisted by moment and shear stress. Cantilever construction allows for overhanging structures without external bracing.

 

CASH CALL -- See SPECIAL ASSESSMENTS

CAVEAT -- A notice placed on the Title to a unit that states that a party has interest in the Title to the unit by reason of entitlement to a legal interest in the property.

CLIENT -- A buyer or seller who is in an agency relationship with an industry member.

CLOSED MORTGAGE -- A mortgage that cannot be prepaid, renegotiated or refinanced during its term.

CLOSING -- The real estate transaction's completion, when the parties involved agree that all legal and financial obligations have been met, and the title 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.

CLOSING DATE -- The date on which the title and keys to the property are transferred from the seller to the buyer, and the money is paid.

COMMON PROPERTY -- Every part of a condominium, as described in a Condominium Plan, that is not an Owner’s Unit is Common Property that services and supports the individual Units. Ownership of the Common Property is proportionately distributed among the Unit Owners in accordance with their Unit Factors. Maintenance and repair costs for the Common Property are similarly shared by the Unit Owners, subject to special rules in the bylaws that relate to Exclusive Use areas.

CONDO DOCS -- A set of documents provide by the condominium board which explain all aspects of the management and financial condition of the corporation, and in particular, the unit in question.

CONDO FEE -- A monthly fee, established annually, paid by condominium owners for the purpose maintaining the corporations common areas, maintenance, insurance and other liabilities.

CONDOMINIUM -- A form of ownership in a property. Owners have title (ownership) to individual units and a proportionate share in the common property and expenses.

CONDOMINIUM FEES -- Condominium unit owners contribute to a fund for the payment of common property expenses including regular maintenance and services such as landscape care. Assessments for fees are levied against each unit by the Condominium Corporation on behalf of all unit owners. Assessments are based on Unit Factors that are in proportion to each unit’s ownership share of the common property.

CONDOMINIUM PLAN -- Every condominium development has a plan, registered at the Land Titles Office, that defines the perimeter of the condominium, the boundaries of each owner’s Unit, and the Unit Factors that represent each unit’s ownership share of the Common Property.

CONDOMINIUM UNIT -- Units are the parts of a condominium project that are for the private and exclusive use of individual owners. A unit can be comprised of the volume of space contained within the walls, floor and ceiling of a condominium home, as in the case of an apartment. Or a unit can be a volume of space that includes the exterior walls and roof of a condominium home, as in the case of a Bare Land condominium. A unit can also be a parking space or storage area. Details will be set out in the Condominium Plan filed at the Land Titles Office.

CONVENTIONAL MORTGAGE -- A first mortgage issued for up to 75% of the property's appraised value or purchase price, whichever is lower.

CONFIDENTIAL INFORMATION -- includes any information concerning the client including the client's financial or personal situation, the client's real estate and the transaction involving the client.

COUNTER-OFFER -- One party's written response to the other party's offer during negotiation of a real estate purchase between buyer and seller.

COVENANT --A clause in a legal document that, in the case of a mortgage, gives the parties to the mortgage a right or obligation. For example, a covenant can impose the obligation on a borrower to make mortgage payments in certain amounts on certain dates. A mortgage document consists of covenants agreed to by the borrower and the lender.

CUSTOMER -- B buyer or seller who is not in an agency relationship with an industry member.

DEFAULT --Failure to abide by the terms of an agreement such as a mortgage agreement. If the default is under a mortgage agreement, then the failure to make mortgage payments (defaulting on the loan) may cause the mortgage lender to take legal action to possess (foreclose) the mortgaged property. If the default is under the purchase agreement, then the other party may be able to terminate the agreement or seek damages for the breach, or both.

DEPOSIT --A sum of money provided by the Purchaser as a means of binding a Purchase Agreement.

DESIGNATED AGENCY -- A relationship in which one or more industry members, licensed with the same brokerage are designated in writing by the brokerage to act as sole agent for a buyer or a seller in a trade in real estate.

DESIGNATED BROKERAGE AGREEMENT -- A written service agreement between a brokerage and a buyer or a seller which sets out the terms and conditions under which one or more different individual industry members licensed with the brokerage are designated as the sole agent of the seller, or of the buyer, respectively.

DOWN PAYMENT -- The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage.

EASEMENT -- A right acquired for the use of or access to another person’s land for a specific purpose such as for a driveway or to install, maintain, repair or replace utility services. To be binding, the easement must be registered on the Title to the unit and its terms should be read carefully to understand what rights have been given.

ENCUMBRANCE -- A claim, charge, or liability attached to and binding real property. Any right to, or interest in, land which may exist in one other than the owner, but which will not prevent the transfer of fee title. an example of an encumbrance is a Home Owners Association's right to access fees against the owner for services.

ENCROACHMENT -- An improvement to a property — like a fence, carport, garage or deck — that intrudes onto another property — whether it is a neighbour’s property, a street or lane — contrary to any municipal bylaws or the terms of any easement registered on Title to the lands.

EQUITY -- A homeowner's financial interest in a property. The difference between the value of the property and the amount owing (if any) on the mortgage.

ESTOPPEL CERTIFICATE -- A written statement of a condominium unit's current financial and legal status.

EXCLUSIVE BUYER BROKERAGE AGREEMENT -- a written service agreement between a brokerage and a buyer under which the buyer grants the brokerage exclusive authority to act as agent for the buyer and the exclusive right to locate for the buyer an interest in real estate and by which the buyer may agree to compensate the brokerage on any purchase effected by the brokerage, another brokerage or the buyer.

EXCLUSIVE SELLER BROKERAGE AGREEMENT -- A written service agreement between a brokerage and a seller under which the seller grants the brokerage exclusive authority to act as agent for the seller and the exclusive right to offer for sale the seller's interest in real estate and by which the seller agrees to compensate the brokerage on any sale effected by the brokerage, another brokerage or the seller.

EXCLUSIVE USE -- The portion of the "common property" on a condominium, which is assigned to be used exclusively by one or more units, by regulation. Examples might be a balcony, parking stall or yard.

FACILITATOR -- See Transaction Facilitator.

FSBO For Sale by Owner

FACILITATION SERVICES -- Services that do not require the exercising of discretion or judgment, or the giving of confidential advice or advocating on behalf of either the buyer or the seller.

FIRST MORTGAGE -- The first security registered on a property. Additional mortgages secured against the property are "secondary" to the first mortgage.

FORECLOSURE -- A legal process by which the lender takes possession and ownership of a property when the borrower doesn't meet ("defaults on") the mortgage obligations.

GROSS DEBT SERVICE RATIO or GDS -- Used in calculating the maximum mortgage qualification amount. Formula - GDS = (PIT + CONDO FEE or HEAT) / gross annual household income. May not exceed 32%. May vary from institution to institution.

HELOC -- Home Equity Line of Credit - Used to borrow funds on the equity on your home. HELOC's are registered on title to secure payment, and are much like a 2nd mortgage, only flexible in that you need only pay the interest each month. It would be wise to register a HELOC on your home to cover unforeseen expenses where you need access to immediate cash, but unwise to neglect to pay it back as soon as you can. Any bank will usually lend you up to 75 or 80% of your "equity". Interest rates are usually about 1/2% above prime.

HIGH-RATIO MORTGAGE -- A mortgage loan for in excess of 75% of the fair market value of a unit, as determined by the lender. This type of loan must be insured against payment default. Canada Mortgage and Housing Corporation (CMHC) is a federal agency that offers high-ratio mortgage loan insurance as do several private sector companies.

INTEREST -- The cost of borrowing money, over time.

JOINT TENANCY -- A form of ownership in which two or more individuals (often spouses) have an equal share in the ownership of a property. In the event of one owner's death, his or her share is automatically transferred to the surviving owner(s), apart from the deceased's will.

LEVERAGE -- Controlling a large asset with a relatively small amount of cash. In real estate, $25,000 down payment (or less) can be used to purchase (control) a $100,000 home, for example.

LISTING AGENT -- The REALTOR® who signs a contract with an owner to sell the property.

MIL RATE -- The multiplier set by city council annually, and is multiplied against the assessed value of all homes to ensure that the budget can be fulfilled.

MLS® or MULTIPLE LISTING SERVICE® -- A real estate system who's rights are owned by the Canadian Real Estate Association (National Association of REALTORS® in the USA) for exclusive use by it's members, for relaying information to other cooperating REALTORS® and the public, regarding properties for sale.

MERIDIAN - Meridians are lines of longitude that run from north to south through the prairie provinces at regular intervals. The first meridian, also called the prime meridian, passes through Manitoba along the 98th degree of longitude with each successive meridian occurring four degrees to the west. Three medians divide Alberta: The 4th, 5th and 6th. The 4th meridian forms the border between Alberta and Saskatchewan, the 5th runs through Stony Plain and Calgary (Meridian Road), and the 6th runs through Debolt and Jasper. Land is described as being "West of …." A particular meridian. Therefore, we know that a description of "West of the 4th meridian" lies somewhere in the eastern portion of the province. The horizontal reference point for the Grid System is the US-Canada Border, which follows the 49th parallel.

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

MORTGAGE BROKER -- A licensed practitioner who, for a fee, brings together a borrower in search of a mortgage and a lender willing to issue that mortgage.

MORTGAGEE -- The lender.

MORTGAGE INSURANCE -- Government-backed or privately-backed insurance protecting the lender against the borrower's default on high-ratio (and other types of) mortgages.

MORTGAGE LIFE INSURANCE -- Insurance that pays off the mortgage debt, should the insured borrower die. MORTGAGE PAYMENT -- The regular installments made towards paying back the principal and interest on a mortgage.

MORTGAGE TERM -- The length of time a lender will loan mortgage funds to a borrower. Most mortgage terms run from six months to five years, after which the borrower can either repay the balance (remaining principal) of the mortgage, or renegotiate the mortgage for another term.

MORTGAGOR -- The borrower.

OPEN MORTGAGE -- A mortgage that can be prepaid or renegotiated at any time and in any amount without penalty.

P.I.T. --Principal, Interest, Taxes. Payments due regularly under the terms of the mortgage agreement typically include a component to pay the estimated annual property and school taxes on the property. If, for example, regular payments are to be paid monthly, then one-twelfth of the estimated annual taxes are added to the monthly mortgage payment amount. Since the tax amount is an estimate and since these taxes can change annually, the portion of the mortgage payment attributable to taxes may also change. Moreover, upon issuance of the annual tax notice by a municipality, the lender may determine that the amount of funds held in your tax account is insufficient. Therefore, the lender will require you to “top up” your tax account with an additional amount. Funds retained in your tax account typically earn a small rate of interest from the lender.

PARTIALLY OPEN MORTGAGE -- (Also called a "partially closed" mortgage.) Allows the borrower to prepay a specific portion of the mortgage principal at certain times with or without penalty.

PORTABILITY -- A mortgage feature that allows borrowers to take their mortgage with them without penalty, when they sell their present home and buy another one.

PREPAYMENT PRIVILEGE -- A mortgage feature that allows the borrower to prepay a portion or all of the principal balance with or without penalty. This privilege is frequently restricted to specific amounts and times.

PRINCIPAL -- The mortgage amount initially borrowed, or the portion still owing on the mortgage. Interest is calculated on the principal amount.

RATE (Interest) -- The return the lender receives for advancing the mortgage funds required by the borrower to purchase a property.

REAL PROPERTY REPORT -- A legal document that clearly indicates the location of all visible public or private improvements on a property, relative to the property‘s boundaries. It can be relied upon as an accurate representation of the improvements on a property. A Real Property Report is normally required when the boundaries of the unit are set in relation to the land, as with a Bare Land condominium, rather than in relation to the buildings, as with a conventional condominium

REALTORS® -- Real Estate Professionals who are members of a local real estate board and the Canadian Real Estate Association. Only these professionals can call themselves REALTORS®.

REFINANCING -- The process of obtaining a new mortgage, usually at a lower interest rate, to replace the existing mortgage.

RELAXATION PERMIT -- Where the municipality relaxes its bylaws to allow for an improvement on the property.

RESERVE FUND -- A fund created from a portion of the Condominium Fees paid by all unit owners, set aside and managed by the Condominium Corporation to pay for major repairs or the replacement of common property elements, where such repair or replacement is not part of the regular ongoing annual maintenance program. Properly called a Capital Replacement Reserve Fund, it is usually held in secure liquid investments such as guaranteed investment certificates, bonds, mortgage investment funds or money market funds and is not intended for regular or annually recurring maintenance expenses such as trash disposal or snow removal

RESERVE FUND CONTRIBUTION -- The portion of a condominium fee that is utilized to go towards covering major repair and replacement costs.

RESERVE FUND PLAN -- After receiving and reviewing the Reserve Fund Report, the Condominium Board must approve a Reserve Fund Plan to create and manage a Reserve Fund if one has not been established already. A Condominium Corporation has two years from when the condominium is completed to establish the Reserve Fund. The Reserve Fund Plan sets forth the amount of funding needed for creating and maintaining the Fund. It also details the Reserve Fund contribution amounts needed from each unit owner, a timetable for collecting the funds, and the manner in which the funds are to be collected — either by adding to regular Condo Fees or through a Special Assessment or both. The Condominium Corporation must provide the unit owners with a copy of the approved Reserve Fund Plan before collecting monies for the Reserve Fund.

RESERVE FUND REPORT -- A written report prepared for the Condominium Corporation Board by the person undertaking the Reserve Fund Study. The Report covers the qualifications of the person conducting the Study, the independent nature of the Report, the findings of the Reserve Fund Study, and makes recommendations for creating a Reserve Fund Plan or for amending an existing Reserve Fund Plan.

RESERVE FUND STUDY -- A study conducted on behalf of the Condominium Corporation Board to identify the depreciating common property that will need to be repaired or replaced over the next 25 years. The study determines when such work will need to take place, and at what cost, and sets out the amounts of funds that need to be set aside monthly in order to meet all such costs over the 25 year time frame. The first study must be conducted within two years of a condominium plan being registered. Subsequent studies must be done every five years after that.

RESTRICTION -- A notice which is registered on title which limits the manner in which the property may be used. For instance, a development restriction for the purpose of uniformity.

SECOND MORTGAGE -- A second financing arrangement, in addition to the first mortgage, also secured by the property. Second mortgages are usually issued at a higher interest rate and for a shorter term than the first mortgage, and are registered on title, after the interests of the first mortgage holder.

SELLERS BROKERAGE AGREEMENT -- An agreement between the listing brokerage and an owner, authorizing a REALTOR® to facilitate the sale or lease of a property.

SPECIAL ASSESSMENT -- If significant or urgent repair or replacement expenses for the common property need to be funded and sufficient sums are not in the Reserve Fund, the Condominium Corporation Board must levy a Special Assessment so that all the unit owners contribute their fair share of the funds needed to deal with the situation.

SERVICE AGREEMENT -- An agreement that establishes a relationship between a brokerage and a person which identifies the responsibilities of each party. The agreement includes the services to be performed by the brokerage, and the commission or remuneration payable, if any.

SOLE AGENCY -- a relationship in which a brokerage or industry member acts as the agent of only one party in a trade.

SPECIAL RESOLUTION -- Important condominium decisions such as enacting or amending bylaws, or selling or leasing common property require that a Special Resolution be adopted by a majority vote of the unit owners at a properly convened General Meeting. A majority constitutes not less than 75% of all unit owners entitled to vote and the votes must also represent at least 75% of the total unit factors.

TAKE-BACK MORTGAGE -- See Vendor-Take-Back Mortgage

TERM -- See Mortgage Term

TITLE -- The legal evidence of ownership of a property.

TITLE SEARCH -- Documentary evidence of the ownership containing all registered interests or restrictions on a property.

TOTAL DEBT SERVICE RATIO -- Used in calculating the maximum mortgage qualification amount. Formula - GDS = (PIT + CONDO FEE or HEAT) / gross annual household income. The result may not exceed 40%. May vary from institution to institution.

TRANSACTION BROKERAGE -- A relationship in which a brokerage or industry member provides facilitation services to the buyer and the seller in the same trade.

TRANSACTION BROKERAGE AGREEMENT -- A written service agreement between a brokerage and the buyer and the seller in a trade which sets out the terms and conditions under which the brokerage will provide facilitation services to the seller and the buyer in the same trade.

TRANSACTION FACILITATOR -- An industry member who has been engaged under a transaction Brokerage Agreement to provide facilitation services to the buyer and the seller in the same trade.

UNIT -- Term used to describe the individual home or apartment held by the owner within a condominium development.

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 large 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.

WEEKLY PAYMENTS -- Mortgage payments made weekly or 52 times per year.

ZONING REGULATIONS -- Strict guidelines set and enforced by municipal governments regulating how a property may or may not be used.