Jargon

Do you speak Real Estate? Check out our good-to-know guide to decoding Real Estate jargon and understand the terms you need to know when Buying or Selling!

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This is the document which outlines the offer for the property at hand, identifying the commitments made by the Buyers, Sellers and Agents involved.  Once an agreement is reached, the confirmation of acceptance is signed.  That mess of initials, circles and John Hancock’s will result in your conditional or firm offer.

An estimate of a property’s market value, used by lenders in determining their level of comfort with the amount of financing requested for a property.  Frequently this is a rubber stamp process and the appraisal done by the Mortgage Provider often comes back the same as your Purchase Price.  However, lenders can be wary if you have paid drastically above the listing price.  If they feel you do not have enough equity in the property closing on the home could be a problem.   See Financing Condition for additional information on this subject.

The increase of a property’s value over time.

The value of your property determined by MPAC (Municipal Property Assessment Corporation).  This assessed value is multiplied by your local municipality’s tax rate and the education tax rate to determine your property taxes on an annual basis.

Total Sales Volume divided by the Number of Sales = Average Sale Price.  The Average Sales Price is an important metric used to gauge market conditions.  However, other metrics like Sales to Inventory Ratio, and the Mean can often be more representative.    The average is often skewed if the number of sales used to calculate the average is small.   So take some of the sensational headlines you read such as “Leslieville Home Prices up 20%” with a grain of salt.

Is a product offered to borrowers when the closing date of the home they purchase is before the closing date of the home they are selling.  Lenders typically expect a gap of no more than 30 days between your buy and sell dates.

A bully offer occurs when a Buyer ignores the fact that the Seller has set a pre-determined offer date for the property, and they offer on the property prior to the requested date.  For a bully offer to be successful, they often have to be a firm offer well above the list price.

A real estate brokerage representing a Buyer must do what is best for the Buyer.  A written contract, called a Buyer Representation Agreement, creates an agency relationship between the buyer and the brokerage, and establishes Buyer Representation.  Buyer Representation must be for a set period of time, an identified location and can be for one or multiple types of properties.

Is the annual net operating income (NOI) divided by the properties cost/value.  This rate is used to help investors determine the value of a property based on rental income and whether the property will produce the desired income.  For example if you are looking for a 4% Cap Rate and you are hoping to spend $700,000 you need to ensure the property is capable of earning a $28,000 NOI.   Which means you need to be able to generate $28,000 in rent a year, net of expenses.

Are the additional items not nailed or screwed down to the property that should be included in the purchase.  The most common example is an appliance.  It’s also a fun word to say.

These are onetime expenses in addition to the purchase price for buying and or selling a property.  For Example, Land Transfer Taxes and Legal Fees.

Mortgages that represent more than 80% of the home’s value (less than 20% of a down payment) are required to have CMHC insurance.   This insurance is a one time mortgageable expense.  For further information and rates, visit their website, www.cmhc-schl.gc.ca/en.  This is a fee often paid by First Time Buyers, Buyers that are very close to having a 20% down payment may want to beg, borrow, or steal to avoid paying this extra cost.

These apartments are similar to condos with a few key differences.  With co-ops, you purchase shares of a private corporation that owns and manages the building. You also receive a leasehold occupancy interest in a specific unit and the exclusive right to use it. You do not receive a deed; you receive shares in the corporation.  Co-ownership Apartments tend to be much more affordable then condos for a number of reasons.  It is a niche market so financing can be a bit trickier; you typically need to have 20%-30% for a down payment and you will likely pay a higher mortgage rate for these properties.  Co-ownership apartments are typically older buildings and are converted from rental apartments.  If you have the sizeable down payment required, these properties have great investment potential since many are located in sought after Toronto neighbourhoods and are typically priced well below a comparable condos.

A fee paid to an agent for providing a service, often paid as a percentage of the total amount of the purchase price.  Both the Listing and Buying Agent’s commission is typically paid by the Seller and negotiated between the Seller and Listing Agent.

Related Posts: Do I Really Need A Real Estate Agent to Sell My Home?

The areas of a condominium development owned in common/shared by the unit owners.  For example, a gym, parking garage, or courtyard.  A portion of your Maintenance Fees  go to maintaining the common elements for a building, so be sure to consider whether you will make use of a building’s amenities before purchasing

This is a comparison of properties with similar features and proximity to the property in question.  This a method of valuation used to determine market value when buying or selling a property.

This is the date that the transaction is scheduled to be completed, and for title to be transferred from the Seller to the Buyer.  Typically, you take or give possession by no later than 6:00 pm on the date of closing and the keys for the property are couriered from the Seller’s lawyer to the Buyer’s lawyer once the Seller’s lawyer has received payment for the property.  If this is your primary residence, consider giving yourself a couple days overlap to ensure the transition is a smooth one.  If selling your home, this will likely require bridge financing which can be arranged through your mortgage provider.

An offer which contains a provision that must be met prior to becoming a firm and binding deal.  Examples include conditional on obtaining financing for the property, conditional on a home inspection, conditional on review of the status certificate and condominium documentation.  Conditional offers frequently provide Buyers the opportunity to do their last bit of due diligence before finalizing their commitment.

Shared ownership in property. Owners have title (ownership) to individual units and a proportionate share in the common elements.

The Confirmation of Cooperation is a Form that should be submitted with an Agreement of Purchase and Sale and is specific to an identified property.  The Confirmation of Cooperation is used to identify agency relationship and confirm who and how the Buyer and Seller are being represented.  It also outlines how commission is being paid.

One party’s written response to the other party’s offer, this can sometimes be referred to as a “sign-back”.

The Buyer includes a deposit in the Offer to give it authenticity and to show their sincerity to the Seller and commitment to the purchase. The deposit is considered part of the purchase price and is ultimately adjusted as a credit to the Buyer on closing.  Your lawyer will generally apply your deposit to any closing costs and put the remainder towards your down payment for the property.  A strong deposit is around 5% of the purchase price of the property.  A deposit is provided when an offer is submitted or within 24 hours of the offer being accepted.  It is most frequently held in a Trust account by the Listing Brokerage.

This identifies, literally, how many days a property has been on the market.  This can sometimes be deceptive as properties may be re-listed to generate new interest.  Days On Market is a useful measurement in determining market conditions.

The portion of the purchase price that the buyer pays in cash and does not finance with a mortgage.  The minimum down payment for properties under $1 Million these days is 5% and 10% if above $1 Million dollars as long as it is your principal residence.

A legal right to use or cross 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.

 

An intrusion onto an adjoining property.  Examples of encroachments could be a neighbour’s fence, shed or garage which intrudes onto your property.

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.  Your mortgage payment will include an interest and principle portion.  The principle amount is used to pay down the balance of your mortgage thereby building equity in addition to appreciation.  The interest portion goes to your mortgage provider.

A financing condition is included for the benefit of the Buyer.  If worded correctly it provides an identified time period for the Buyer to confirm with the bank that they will be able to secure the desired financing for the property at the desired interest rate.  Unlike a Pre Approval, a Financing Condition gives a Mortgage Provider the opportunity to confirm financing specific to the property at hand, and ensure your purchase price matches their appraised value for the property.  Submitting an offer without a financing condition can be a big risk, but can sometimes be necessary in a competitive situation.  Be sure to speak with your agent and mortgage provider on ways to minimize the risks you are taking when submitting an offer without a financing condition.

A firm offer is one that contains no stipulations, allowing the Buyer or Seller to get out of the agreement provided everyone follows the identified terms.

Fixtures are items attached to the property; all fixtures are assumed to be included with the property unless otherwise stated.   Fixtures that the Seller wishes to exclude from the transaction should be identified in the Agreement of Purchase and Sale.  Recently, flat screen television brackets have caused a lot of conflict between Buyers and Sellers.  A television bracket attached to the wall is considered a fixture, however the TV itself would likely be considered a chattel if removable.  It’s best to identify how these items are being dealt with when the offer is drafted.

In short, this is found in both Buyer Representation Agreements and Listing Agreements.  It essentially means that if an agent introduces a person to a property during the term of representation, that agent is still entitled to be paid commission for the identified (holdover) period of time, after the agreement’s expiration should the buyer choose to purchase that same property or a seller choose to sell their property.

This is a condition included in the APS for the benefit of the Buyer.  This condition allows Buyers to examine the property thoroughly and test its mechanical systems.  Home Inspections typically take around 3 hours to do and cost around $500.

The duration that a person making an Offer or Counter Offer gives the other party to accept their Offer.  The Offer must be accepted and communicated before the expiry of the irrevocable period to make an APS binding.  If acceptance of the offer is not communicated during the irrevocable period the Offer is no longer valid because the commitment to the offer has expired.

When you purchase a property in Ontario, you are required to pay Ontario’s land transfer tax.  Transfers of land located within the City of Toronto are also subject to Toronto’s municipal land transfer tax.  The total tax paid is based on the price of the property.  First time home buyers may be eligible for a credit, to learn more, please visit http://www.fin.gov.on.ca/en/refund/newhome/index.html.  To calculate the amount of land transfer tax you will pay on a prospective purchase, click here (http://www.torontorealestateboard.com/buying/ltt_calculator/ltt_calculator.htm).

Number of properties currently on the market.  High inventory levels in concentrated areas can make favourable purchasing conditions for Buyers; on the other hand, Sellers should postpone listing until inventory levels matching their properties criteria are lower in their neighbourhood.

A monthly fee paid by condominium owners for maintaining the development’s common areas.

Is the anticipated amount for which a property should sell for, based on a particular date of valuation.  A successful marketing strategy combined with listing during a hot market can help Sellers achieve sale prices above market value.  Whether buying or selling, this should be a frequent topic of discussion with your Broker.

The middle sales value for an identified period of time and area.  The median tends to be more reliable than taking the average, because the average can be easily skewed by properties with outlying sales prices.

Literally means more than one offer on a property at one time.  Most frequently this occurs when the Seller has chosen to hold back on offers until a set offer date.  However, it can often occur when a well priced property comes on the market which generates a lot of interest.

For more information on Multiple Offers click one of the links below or check out some of the related terms:

F**k There’s Multiple Offers

Related Terms – Bully Offer, Offer Night

Occasionally a real estate brokerage will represent both the Buyer and the Seller in a transaction. The Buyer and Seller must consent to this arrangement in writing.  Under this multiple representation arrangement, the brokerage must do what is best for both the buyer and the seller.  Since the brokerage’s loyalty is divided between the Buyer and the Seller who have conflicting interests, it is absolutely essential that a multiple representation agreement be properly documented.

An area (driveway like) between 2 properties that is partially owned and maintained by each of the property owners.  Typically, mutual drives are seen in more urban areas where lot width doesn’t accommodate a full driveway.  These driveways can be kept clear to access parking to the rear of the house or often neighbours work out a shared parking arrangement, ie. alternate between neighbours every 3 months, use for visitor parking only, etc.  If both neighbours are not in agreement, then the driveway should be kept clear.

This refers to who is living in the property, ie.Tenanted, Vacant, or Owner Occupied.  Tenanted properties are often difficult to show and frequently require at least 24 hours notice.

Fees paid by Buyers of new developments for the interim period between when a Buyer takes possession and moves into a property, but before the property has been registered.  They are designed to cover the costs for maintenance fees, interest on the unpaid balance of the purchase price and a contribution for property tax.

Is a date established by the Seller for which they are hoping to attract multiple offers.  Offer nights are most frequently set for a week after the property was listed.    This is a common strategy used by Sellers to attract multiple offers on a property and create an auction like scenario.

This is referring to the actual date you will take ownership of the property from the time you come to an agreement.  A quick possession could be a sign of someone who needs to sell.

If you will be getting a mortgage on your purchase then getting pre approval should be done before you start searching for properties.  A lender will look at your finances and determine the amount of mortgage you can afford.   Your pre approval should be a written confirmation for a fixed interest rate.  Note this will not be a guarantee of being approved for the mortgage loan, because it is not specific to any property.   Getting a pre approval is advantageous because the lender is committing to the rate even if interest rates rise during the commitment period, and you are not committing to them so you will still have access to rate decreases.  Lenders will usually provide a rate commitment for 3-6 months.

Property Taxes are an ongoing expense charged by the municipality where your home is located.   Property Taxes are determined by multiplying the municipality’s tax rate (determined annually) by the property’s MPAC Assessment value (determined on a 4 year cycle).

Want to know more click on some links below:

Are-you-paying-too-much-property-tax?

Property Tax Rates in Toronto, the GTA, Canada, and beyond…

City of Toronto Property Tax Calculator

 

This is when a Seller is selling interest in a property which has not been registered yet, therefore the property still needs to be sold with permission from the builder.  Purchasing on assignment can potentially be a good way to get a better price on property.  However, it requires a larger investment up front because you are likely going to require a higher down payment, and you will probably have to pay occupancy fees and cover the cost of the builder’s levies.

This is a visit that is done by the Buyer after a conditional agreement is in place, but prior to the closing date.  Purchasers visits should be written in to the Agreement of Purchase and Sale as part of the Schedule A.  Depending on the state of the property, and the amount of time between closing, typically 2 purchasers visit should be sufficient.  Including purchasers visits in the Agreement of Purchase and Sale is important to ensure that the Buyers can access the property with appraisers, contractors, or just to go and take measurements.  It is recommended that one visit be used within a few days of closing to check on the status of the property and ensure the property will be delivered as agreed upon.

The portion of a condominium maintenance fee that is set aside to cover major repairs and replacement costs.  Condominium corporations are required to conduct reserve fund studies to ensure the reserve fund meets the anticipated expenses.  The reserve fund is something you should be paying close attention to when purchasing a condo.  An underfunded reserve fund will likely lead to an increase in maintenance fees or a Special Assessment.

Measures the balance between demand and supply.  It is calculated by dividing the number of sales for a given period by the number of new listings that have come available for sale.

Total of all home sales for an identified area and time period.

When a real estate brokerage represents a Seller, it is committing to do what is best for the Seller of a property, while providing fair and honest service including disclosure of pertinent information about the property.  A written contract, called a listing agreement, creates an agency relationship between the Seller and the brokerage and establishes Seller Representation.

This term applies to owners of condominiums.   A special assessment is done when the condominium corporation needs additional funds to pay for necessary repairs to the condominium.  A special assessment is done when the reserve fund is inadequate to meet the repair requirements and the board of directors does not feel a raise in maintenance fees is the best solution.

The status certificate and condominium documents contain important information on the condominium corporation, its bylaws, and financial health.  Things like financial statements, the state of the reserve fund, planned maintenance fee increases and whether or not your Great Dane will be permitted in the building.  Including an offer conditional on your lawyer’s review of the status certificate is critical for condominiums.  If you are not satisfied after reviewing these documents, you will be able to get out of the deal without penalty.

Title is the lawful ownership of a property.  Title Search is something a Buyer’s lawyer will do prior to closing, ensuring that the Buyer is going to obtain good title and that there are no outstanding work orders.  The Buyer is entitled to good title, but must accept the title subject to any easements for the supply of telephone services, electricity, gas, sewers, water, television cable facilities and other related services.  Furthermore, the Buyer has to accept the title subject to any restrictive covenants as long as they are complied with. Finally, if there are any municipal agreements, zoning bylaws or utility or service contracts, the Buyer must assume them.

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