The world of real estate comes with its own vocabulary, and in this fast-moving market it’s easy to become overwhelmed as a first-time buyer or seller. It’s important to become familiar with common words and phrases used in real estate deals so you can stay informed and confident in your decisions. I’ve compiled a list of 20 commonly used real estate terms to help guide you through the buying and selling process.
Your amortization period is the time it takes to repay your mortgage in full. A common amortization period is 25 years, though this number will vary among lenders.
The appraised value of a property is used by lenders to determine how large of a mortgage you need. An appraisal may only be performed by the Appraisal Institute of Canada or the Canadian National Association of Real Estate Appraisers. An estimate performed by anyone else is not an appraisal, but a market evaluation.
Appreciation refers to your home’s increase in value.
Closing is the last step before finalizing the purchase of your property. Your closing date is when ownership officially transfers from the seller to the buyer.
Closing costs refer to the various fees associated with purchasing your home that must be paid on the closing date. Closing costs are usually equal to three to four percent of the purchase price. These fees include legal fees and disbursements, property transfer tax, insurance, and other small fees that accrue.
A conditional offer is when an offer is placed on a home subject to certain requirements being filled. If a conditional offer is accepted, a time period is agreed upon (typically one week to ten days, though the time agreed will vary) wherein the buyer can fulfill all of the requirements, like finalizing their mortgage or completing a home inspection.
A counter offer is made by the seller to the buyer, usually negotiating the price or closing date of the original offer.
A deed is legal documentation of ownership of a property.
Depreciation refers to your home’s decrease in value.
Equity can be calculated by subtracting how much you still owe on your mortgage from the market value of your property. Equity is how much money you would collect iqf you were to sell your home for a profit.
A foreclosure occurs when the mortgage holder is unable to continue repaying their loan, forcing the mortgage lender to take legal action to sell or take possession of the property.
Mortgage Loan Insurance
Mortgage loan insurance protects the lender in the event you are unable to pay your mortgage. Canadians who purchase a home with a downpayment of less than 20% will require mortgage loan insurance.
Property Disclosure Statement
A property disclosure statement, or PDS, is a comprehensive checklist the seller provides the potential buyer prior to making an offer. The checklist provides the buyer all relevant information about the condition of the property.
Property Transfer Tax
Property transfer tax is a fee paid to the Government of BC to change the land title of the property from the seller to the buyer. Property transfer tax applies to buyers who previously owned property, though some exemptions are made. Property transfer tax is calculated at 1% of the first $200,000 of the purchase price, 2% of the remainder up to $2 million, and 3% on amounts $3 million and higher.
Statement of Adjustments
The Statement of Adjustments is a document provided by your lawyer that clearly states the amount you owe (buyer) or the amount owed to you (seller) on closing day. Similar to a bank statement, the Statement of Adjustments will state the debits (down payment) and credits (cost of purchase and any prepaid expenses). The total credits minus the total debits is what is owed on closing day.
“Subject To” Clause
When an offer is made on a property, there are often “subject to” clauses, which are a list of conditions that must be fulfilled in order to solidify the offer. The buyer is given a length of time, usually a week to ten days, for “subject removal”, when the buyer can perform an inspection, finalize financing, and do their due diligence to commit to buying the property.
A term is the time period agreed upon in the mortgage contract when the conditions of the mortgage cannot change. Conditions are renegotiated at the end of the term.
Trust Ledger Statement
The Trust Ledger Statement visually resembles the Statement of Adjustments, but it provides a detailed record of your money’s movement on closing day. For buyers, the Trust Ledger Statement will include your loan total, down payment, and any transfer fees, legal fees, and fees owed to the seller. For sellers, the Trust Ledger Statement will include your outstanding mortgage, legal fees, realtor fees, and the amount owed to you from the buyer.
Title is the legal way of saying you own a piece of property.
The vendor refers to the person(s) selling the property.
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!