Real Estate Includes real property, leaseholds or a business either with or without the building, fixtures, stock-in-trade, goods or chattels in connection with the operation of the business.

Agency Relationship This is the fiduciary relationship resulting when one person (or brokerage firm) called the agent represents the interests of another person, called the principal, when dealing with others. In a real estate transaction, an agency relationship is formed between the brokerage firm (including all its licensees) and the principal.

Agreement of Purchase and Sale (Offer to Purchase) A contract by which one party agrees to sell and another agrees to purchase. A contract with no conditions attached is referred to as a firm offer. A contract with conditions is referred to as a conditional offer.

Amortization The gradual retirement of a debt by means of partial payments of the principal amount at regular intervals.

Appraisal The act or process of estimating the value of a particular property. Appraisal, if done for mortgage lending purposes, may not necessarily match the sale price of the property.

Approved Lender A lending institution (bank or trust company) authorized by the Government of Canada through CMHC to make loans under the terms of the National Housing Act. Only approved lenders can negotiate mortgages that require CMHC mortgage loan insurance.

Appurtenance Something which is outside the real property itself, but belongs to the land and is joined thereto. It adds to greater enjoyment of the land. Ex. A right-of-way is an appurtenance.

Assessed Value A valuation placed upon property by the Province, as a basis for municipal taxation. Assessed value may or may not have any relationship to market value.

Blended Payment A mortgage payment that includes principal and interest. The payment total remains the same, although the principal portion increases over time and the interest portion decreases.

Broker or Salesperson An intermediary between the buyer and the seller who is licensed to carry out real estate activities.

Building Codes Regulations established by local governments providing for structural requirements for building.

Building Line A line fixed at a certain distance from the front and/or sides of a lot, beyond which no building can project.

Building Permit A certificate that must be obtained from the municipality by the property owner/contractor before a building can be erected or repaired. The building must be inspected and passed by a municipal building inspector.

Canada Mortgage and Housing Corporation (CMHC) The federal CMHC is the Canadian Crown Corporation which administers the National Housing Act. CMHC services include providing housing information and assistance to consumers and insuring home purchase loans for lenders. For further inquiries, call 1-800-668-2642

Client A buyer or seller who forms an agency relationship with a real estate broker, usually through a realtor. Agents owe clients their primary allegiance, including good faith and full disclosure, competence, obedience and accounting. Also called a principal.

Closing Costs Costs, in addition to the purchase price of the home, such as legal fees, land transfer tax, adjustments, and disbursements that are payable on the closing date. On average, closing costs range from 1.5%-4% of a home’s selling price.

Closing Date The date specified in the Agreement of Purchase and Sale when the purchaser delivers the balance of money due and the seller delivers a deed and vacant possession for the property (unless otherwise agreed). Also referred to as Date of Completion, Possession Date, or closing. (except in Manitoba & Quebec). In B.C. the Possession Date is legally 1 to 3 days after the closing.

Collateral Mortgage A mortgage which secures a loan by way of promissory note. The money that is borrowed can be used to buy a property or for another purpose such as home renovation or a vacation.

Commission Remuneration A dollar amount paid to an agent on the successful sale or lease of property, usually as a percentage of the purchase amount. There are many different factors that determine a real estate commission. Real estate companies, areas, distance, type of market, motivation, and the price range of properties can all play factors in commission rates. Our research indicates total commissions vary usually between 4% and 8% of the purchase price. Your realtor will be able to explain your local area rates in greater detail.

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

Condition A condition in a contract, which calls for the happening of some event or performance of some act, within a stated period of time, before the agreement becomes firm and binding on all parties. A condition could be a house inspection, the sale of an existing house, or the arrangement of a mortgage.

Conditional Offer/Conditions of Sale An Offer to Purchase that is subject to specified conditions, such as ‘subject to home inspection’, ‘subject to financing’, or ‘subject to sale of buyer’s existing home’. There is usually a stipulated time limit within which the specified conditions must be met.

Covenant A clause in a legal document, which, in the case of a mortgage, gives the parties of the mortgage a right or an 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.

Conventional Mortgage Loan A mortgage loan up to a maximum of 75% of the lending value of the property. Mortgage loan insurance is not usually required for this type of mortgage.

Customer A third party in a legal transaction. Realtors owe customers the ethical duty to be honest, the legal duty not to misrepresent, and to exercise due care when answering inquiries or giving information.

Date of Completion The date specified in the agreement of purchase and sale, when the purchaser is to deliver the balance of money due and the vendor to deliver a duly executed deed and vacant possession of the property (unless otherwise agreed).

Deed An instrument in writing, suitably executed and delivered, that conveys title or an interest in real property.

Default Normally a failure to make mortgage payments (defaulting on the loan) which may give cause to the mortgage holder to take legal action to possess (foreclose) the mortgaged property.

Deposit Payment of money or other valuable consideration as pledge for fulfillment of contract.

Discharge of Mortgage A document signed by the lender and given to the borrower when a mortgage loan has been repaid in full.

Down Payment The portion of the house price the buyer pays from personal resources before securing a mortgage. It generally ranges from 5%-25% of the purchase price.

Dual Agency Occurs when the same agent has an agency relationship with more than one party to the same real estate transaction. The agent must advise the vendor and the purchaser of the dual aspect of representation and must provide full and timely disclosure to all parties of all pertinent information.

Easement A right acquired for access to, access over, or for use of another person’s land for a specific purpose, such as a driveway or public utilities.

Encroachment The unauthorized extension of boundaries of land, for example a fence line encroaching on a neighbor’s land.

Encumbrance Outstanding claim or lien recorded against property or any legal right to the use of the property by another person who is not the owner. Mortuaue.

Equity The difference between the price that a home is worth and the total debts, liens, mortgages etc. registered against it.

Ethics Rules of behavior made and accepted by business to provide fair and moral practice.

Exclusive Listing The giving of sole right to offer the described property for sale according to the terms of the agency agreement.

Fiduciary Duties The duties required by an agent (the brokerage firm and its representatives) acting for the principal in an agency relationship. They include loyalty, disclosure, confidentiality, diligence, accounting and obedience.

Fixtures Permanent improvements to property that may not be removed upon the sale of the property such as built-in cupboards, furnace, central air conditioning, pool, windows, etc. "If it is screwed in, it stays . . . if it hangs it goes".

Foreclosure A legal procedure in which the lender takes ownership of the property, normally when the borrower defaults on their mortgage loan.

Gross Debt Service Ratio (GDS Ratio ) This is the percentage of the borrower’s gross monthly income that can be used for monthly payments of principal, interest, taxes, heating costs and half of any condominium maintenance fees. Typically 30 to 33% of total income.

High Ratio Mortgage A mortgage loan in excess of 75% of the “lending” value of the property. This type of mortgage must be insured, usually through CMHC or UMAC, against payment default.

Holdback An amount of money withheld by the lender, often during the progress of construction of a house to ensure that construction is satisfactory at different stages. This can also refer to an amount of money held back by a buyer (through their lawyer) until the fulfillment of an obligation or promise is made by the seller.

Home Inspection Structural examination and inspection of a home by a qualified home inspector.

Interest The cost of borrowing money.

Interest Adjustment Date (IAD) A date from which interest on the mortgage advance is calculated for your regular payments. This date is usually one payment period before regular mortgage payments begin. Interest due from the date your mortgage is advanced to IAD is due on closing.

Interest Rate The percentage that is charged for the use of borrowed money.

Irrevocable Incapable of being recalled or revoked. Unchangeable, unalterable. EXAMPLE?

Lending Value In the eyes of the bank, either the purchase price or market value of a property, whichever is less.

Lien A legal right given to the creditor to keep or sell property as security for a debt.

Listing An oral or written agreement between a property owner and a broker authorizing the broker to offer the owner's real property for sale or lease.

Loan-to-Value Ratio The ratio of the loan to the lending value of a property, expressed as a percentage. For example, the loan-to-value ratio of a loan for $80,000 on a home that costs $100,000 is 80%.

Market Value The highest price, in terms of money that the property will bring to a willing seller if exposed for sale on the open market while allowing a reasonable time to find a willing purchaser buying with the knowledge of all the uses. Neither party may be acting under necessity, compulsion or peculiar and special circumstances.

Maturity Date The last day of the term of the mortgage agreement. On this day the mortgage loan must be either paid in full or the agreement (term) renewed.

Mortgage Security for a loan on the property that you own. It is your personal guarantee to repay the loan as well as a pledge of the property as security for the loan.

Mortgage Loan Insurance If you have a high-ratio mortgage (more than 75% of the purchase price), your lender will require mortgage loan insurance. This insurance premium will cost between 0.5% and 3.75% of the amount of the mortgage (additional charges may apply). The CMHC is an insurance provider.

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

Mortgagee The lender (bank) who provides the mortgage loan.

Mortgagor The borrower who pledges the property as security for the loan.

Multiple Listing Service An arrangement among brokers who are real estate board members, whereby each broker shares information regarding his listings with the other members, how may negotiate the transaction.

Net Worth Your total financial worth, calculated by subtracting your total liabilities from your total assets.

Offer to Purchase or Agreement of Purchase and Sale A written contract setting out the terms under which the buyer agrees to buy. When accepted by the seller, it forms a legally binding contract subject to the terms and conditions stated in the document.

Option A right given by the owner of property to another (for valuable consideration) to buy certain property within a limited time at an agreed price.

PIT Principal, interest, and taxes- payments which are due on a regular basis under the terms of mortgage agreements. Since these taxes change from year to year, this portion of the PIT amount will change accordingly.

PITH Principal, interest, taxes, and heating- costs used to calculate the Gross Debt Service Ratio (GDS).

Power of Sale The right of a mortgagee to force the sale of the property without judicial proceedings should default occur.

Prepayment Clause A clause inserted in a mortgage, which gives the mortgagor the privilege of paying the mortgage debt in advance of the maturity date, on stipulated terms.

Principal Amount In mortgage law, this term refers to the debt or amount outstanding, as distinguished from interest.

Real Estate Broker A real estate company.

Realtor A real estate representative who is a member of an organization of persons engaged in the business of buying and selling real estate, such as the Canadian Real Estate Association.

Refinance To pay off a mortgage or other registered encumbrance and arrange for a new mortgage, sometimes with a different lender.

Restrictive Covenant A limitation placed upon the use of property, contained in the deed.

Right-of-way The right to pass over another's land, more or less frequently, according to the nature of the easement.

Second Mortgage An additional mortgage on a property that already has a mortgage.

Special Assessment An assessment that is not customarily levied and which is made against only those specific parcels of property directly benefiting therefrom.

Statement of Adjustments A statement prepared by the solicitor for the vendor setting out, in balance sheet form, the credits to the purchaser (purchase price, prepaid taxes, prepaid insurance, etc.) and the credits to the purchaser (deposits, arrears in taxes prior to the date of closing, etc.), and the balance due on closing.

Survey The accurate mathematical measurement of land and buildings thereon, made with the aid of instruments. The resulting document, normally a sketch, illustrates property boundaries and measurements, specifies the location of buildings on property, and indicates any easements or encroachments.

Term The length of time during which a mortgagor pays a specific interest rate on the mortgage loan. The entire mortgage principal is usually not paid off at the end of this term because the amortization period is normally longer than the term.

Title The means of evidence by which the owner of land has lawful ownership thereof. A freehold title gives the holder full and exclusive ownership of land and buildings for an indefinite period if time. In condominium ownership, land and common elements (grounds) of buildings are owned collectively by all unit owners, while the residential units belong exclusively to the individual owners. A leasehold title gives the holder a right to use and occupy land and buildings for a defined period of time.

Total Debt Service Ratio (TDS) The percentage of gross monthly income required to cover all monthly payments for housing and all other debts, such as car payments and other personal loans.

Vendor A seller of real property.

Vendor Take Back Mortgage (VTB) Mortgage financing arranged between the seller and buyer of the property. The seller becomes the ‘bank’ or mortgagee and holds a first or second mortgage to the property.

Zoning By-law A By-law passed by a municipality prohibiting the use of land in certain areas for any purpose other than as set out in the By-law.