The world of real estate comes with its own vocabulary. In this fast-moving market, it’s easy for a first-time buyer or seller to feel overwhelmed. However, familiarity with common words and phrases used in real estate deals keeps you informed and confident. I’ve compiled a list of 20 commonly used real estate terms. This list helps guide you through the buying and selling process.
Mortgage and Real Estate Valuation Terms
Amortization Period Your amortization period is the time to repay your mortgage in full. A common period is 25 years. However, this number varies among lenders.
Appraisal Lenders use a property’s appraised value to determine mortgage size. Only the Appraisal Institute of Canada or the Canadian National Association of Real Estate Appraisers performs an appraisal. An estimate by anyone else is not an appraisal; it’s a market evaluation.
Appreciation Appreciation means your home’s value increases.
Depreciation Depreciation means your home’s value decreases.
Equity You calculate equity by subtracting your remaining mortgage from your property’s market value. Equity represents the money you would collect if you sold your home for a profit.
Mortgage Loan Insurance Mortgage loan insurance protects the lender. It activates if you cannot pay your mortgage. Canadians buying a home with less than a 20% down payment need mortgage loan insurance.
Term A term is a specific time period. It’s agreed upon in the mortgage contract. During this time, mortgage conditions cannot change. Conditions are renegotiated at the end of the term.
Understanding the Offer Process
Conditional Offer A conditional offer occurs when someone offers to buy a home. This offer depends on specific requirements. If a conditional offer is accepted, a time period begins. Typically this is one week to ten days, but the agreed time varies. During this time, the buyer fulfills requirements. They might finalize their mortgage or complete a home inspection.
Counter Offer A seller makes a counter offer to the buyer. This usually involves negotiating the price or closing date of the original offer.
Property Disclosure Statement A property disclosure statement, or PDS, is a comprehensive checklist. The seller provides this to potential buyers before an offer. The checklist gives buyers all relevant information about the property’s condition.
“Subject To” Clause When someone offers on a property, “subject to” clauses are common. These are conditions that must be met to solidify the offer. The buyer gets a specific time period, usually a week to ten days, for “subject removal.” During this time, the buyer inspects, finalizes financing, and performs due diligence to commit to the property purchase.
Title Title is the legal way to say you own a piece of property.
Vendor The vendor refers to the person(s) selling the property.
Navigating Closing Day Finances for Real Estate
Closing Closing is the final step before completing your property purchase. Your closing date marks the official transfer of ownership from seller to buyer.
Closing Costs Closing costs are various fees. You pay these fees when purchasing your home on the closing date. They typically equal three to four percent of the purchase price. These fees include legal fees, disbursements, property transfer tax, insurance, and other small charges.
Property Transfer Tax Property transfer tax is a fee you pay to the Government of BC. It changes the land title of the property from the seller to the buyer. This tax applies to buyers who previously owned property. However, some exemptions are made. You calculate property transfer tax at 1% of the first $200,000 of the purchase price. It’s 2% of the remainder up to $2 million. For amounts $3 million and higher, it’s 3%.
Statement of Adjustments Your lawyer provides the Statement of Adjustments. This document clearly states the amount you owe (as buyer) or the amount owed to you (as seller) on closing day. Similar to a bank statement, it lists debits (like your down payment) and credits (like the cost of purchase and any prepaid expenses). The total credits minus the total debits equals the amount owed on closing day.
Trust Ledger Statement The Trust Ledger Statement looks similar to the Statement of Adjustments. However, it provides a detailed record of your money’s movement on closing day. For buyers, it includes your loan total, down payment, transfer fees, legal fees, and fees owed to the seller. For sellers, it lists your outstanding mortgage, legal fees, Realtor fees, and the amount owed to you from the buyer.
Contact Me
Are you thinking about buying or selling your home in the Fraser Valley? I have over 17 years experience as a Realtor® to help guide you through this incredibly fast-moving market. If you have any questions or would like a complimentary home evaluation, feel free to contact me directly at 604 302 0177 or [email protected]. Let’s talk!