Amortization

Appraisal

Appreciation

Assessed Value

Broker

“A broker is an individual who has the prescribed qualifications to be registered as a broker under the Real Estate Business Brokers Act and who is employed by a brokerage to trade in real estate”.

Source; Real Estate Business Brokers Act, 2002.

Brokerage

“A brokerage is a corporation, partnership, sole proprietor, association or other organization or entity that, on behalf of others and for compensation or reward or the expectation of such, trades in real estate or holds himself, herself or itself out as such.

A brokerage shall ensure that every salesperson and broker that the brokerage employs is carrying out their duties in compliance with the Real Estate Business Brokers Act and the regulations”.

Source; Real Estate Business Brokers Act, 2002.

Capital Gains Tax

“The Canada Revenue Agency (CRA) charges capital gains on any asset or investment that you sell for a profit. When charged with capital gains, a percentage of the difference between the purchase and sale price adds to your income”.

Source; Advisorsavvy. Click here to Learn More.

*Note: it is important to consult your accountant when seeking clarification on taxation.

CMHC

“Canada Mortgage and Housing Corporation (CMHC) has been helping Canadians meet their housing needs for more than 70 years. As Canada’s authority on housing, we contribute to the stability of the housing market and financial system, provide support for Canadians in housing need, and offer unbiased housing research and advice to Canadian governments, consumers and the housing industry. Prudent risk management, strong corporate governance and transparency are cornerstones of our operations”.

Source; Canada Mortgage and Housing Corporation

Chattels & Fixtures

Chattels: Pick-Up-And-Go Pieces

Chattels are items that a seller can simply pick up and walk away with. Doing so generally involves no mess, no damage and no invasive procedures. Some more obvious examples include furniture, floor lamps and small, plug-in appliances. Chattels are typically excluded from a home purchase.

Fixtures: Immoveable Objects

Fixtures are items that have effectively become a permanent part of the property. They typically require tools and hardware to remove. While an armchair is considered a chattel, a bench that's been built into a wall would become a fixture. Other typical examples might include fencing, water heaters and electric light fixtures. *Fixtures are normally deemed to be included in the purchase price, unless the agreement of purchase and sale specifically excludes them.

Source; Mondaq.

Conditions

“A condition is a clause the buyer needs to waive or fulfill by an agreed time in order for the sale to be finalized, while a term is used to clarify what the buyer expects to be done or included with the property”.

Source; RECO. Click here to Learn More.

Closing Date

“The date when the sale of the property becomes final and the new owner takes possession of the home”.

Source; CMHC Homebuying Step by Step. Click here to Learn More.

Closing Costs

Commission

Comparables

Comparative Market Analysis (CMA)

“A comparative market analysis (CMA) is an estimate of a home's value based on recently sold, similar properties in the immediate area. Real estate agents and brokers create CMA reports to help sellers set listing prices for their homes and, less commonly, to help buyers make competitive offers”.

Source; Investopedia, Jean Folger. Click here to Learn More.

Counter Offer (Sign-back)

“An offer made by the seller of a home after rejecting an offer by a potential buyer. The counteroffer usually changes something from the original offer, such as the price or closing date”.

Source; CMHC Homebuying Step by Step. Click here to Learn More.

Curb Appeal

“Curb appeal is a term used to describe the general attractiveness of a house or other piece of property from the sidewalk to a prospective buyer. This term is often used by realtors trying to sell or evaluate a piece of property”.

Source; Investopedia, Katelyn Peters. Click here to Learn More.

Debt Service Ratio

Deed

“Property deeds are legal documents used in real estate that transfers ownership of real property from a grantor (seller) to a grantee (buyer). Real property is land or anything attached to the land, such as buildings or roads. For a deed to be legally operative, it must include the identification of the grantor and grantee and the adequate description of the property”.

Source; Investopedia, Jean Folger. Click here to Learn More.

Defects

“A patent defect is an obvious flaw that would be discovered by a reasonably prudent buyer without disrupting the property (i.e. a crack on the side of the home, a hole in the wall). It is a visually observable defect. A seller has no obligation to bring patent defects to the attention of a buyer but must not take steps to deliberately hide such defects. As such, a buyer assumes the risk of a defect which was visually observable. This means that it is the buyer’s responsibility to examine the property and discover patent defects.

A latent defect, on the other hand, is one that is hidden and not readily apparent to a buyer upon a reasonable inspection (i.e. a leaky foundation, covered electrical or plumbing). Being that latent defects are not visually observable during an ordinary inspection, a seller may not be aware of their existence. A seller cannot be held liable for an unknown latent defect or for a defect that developed after the closing of a transaction. However, if a seller is aware of a latent defect, the seller must disclose such a defect to the buyer”.

Source; Ontario Association of Home Inspectors. Click here to Learn More.

“A material defect is a specific issue with a system or component of a residential property that may have a significant, adverse impact on the value of the property, or that poses an unreasonable risk to people.  The fact that a system or component is near, at or beyond the end of its normal useful life is not, in itself, a material defect”.  

Source; International Association of Certified Home Inspectors.

Deposit

Disclosure

Learn more about disclosures from the Ontario Real Estate Association.

Down Payment

Easement

Encroachment

Encumbrance

Equity

“Home equity is the difference between the value of your home and how much you owe on your mortgage. For example, if your home is worth $250,000 and you owe $150,000 on your mortgage, you have $100,000 in home equity.

Your home equity goes up in two ways:

• as you pay down your mortgage

• if the value of your home increases

Be aware that you could lose your home if you’re unable to repay a home equity loan”.

Source; Financial Consumer Agency of Canada. Click here to Learn More.

Fair Market Value

“A home's fair market value is the price it would sell for in a perfectly logical world—one where both home buyer and seller are acting of their own free will (in other words, they aren't desperate to make a sale) and are reasonably aware of a home's good and bad points, and where the buyer could just as easily choose a different house that suits her needs better”.

Source; Realtor.com, Kimberly Dawn Neumann. Click here to Learn More.

Fee Simple

“In real estate, a fee simple estate is a form of freehold ownership. It grants a property owner exclusive rights on a property, which means that they own the land and property completely and without any limitations or conditions, aside from taxation, debt obligations and zoning or building restrictions. Fee simple is the highest form of ownership recognized by law and the most common type of land ownership in Canada”.

Source; Zolo. Click here to Learn More.

First Time Home Buyers Tax Credit

“When you buy land or an interest in land in Ontario, you pay land transfer tax. First-time homebuyers of an eligible home may be eligible for a refund of all or part of the tax”.

*Note; If you’re considering this complex benefit as a part of your budgeting, I highly suggest learning more with the link I’ve provided below.

Source; Ontario Ministry of Finance. Click here to Learn More.

FSBO

For Sale By Owner means the owner of a property is listing their property for sale without the use of a professional brokerage or agent. This means the seller, whether qualified to or not, assumes all responsibilities involved in the sale of property. Sellers of FSBO properties also have no obligation to follow the REALTOR® Code of Ethics.

Real Estate transactions are complex, involve large sums of money and can have major legal ramifications. I highly suggest using a professional REALTOR® when making any transaction in Real Estate.

If you’re unsure about using a REALTOR®, click here to Learn More.

Home Inspection

“A home inspection is an examination of the condition of a real estate property. It usually takes place in connection with the property's sale. A qualified home inspector assesses the condition of a property, including its heating and cooling systems, plumbing, electrical work, water, and sewage, as well as some fire and safety issues. In addition, the home inspector will look for evidence of insect, water, or fire damage or any other issue that may affect the value of the property”.

Source; Investopedia, James Chen. Click here to Learn More.

Also check out RECO’s advice for Choosing a Home Inspector.

Homeowners’ Insurance

“Home insurance protects you from having to pay out a huge amount at once, often at a very difficult and emotional time.

Although not mandated by law, insuring your house can give you peace of mind. With severe weather on the rise, confirming accurate replacement value and keeping a current home inventory are important steps. For high-value jewellery, furniture or art, separate endorsements are also available. Understand the limitations in your policy. Typically, additional living expenses are included if you are temporarily unable to live in your home due to an insured loss. Your Homeowners policy also generally provides your personal liability in case someone trips and falls on your property or in your home, or you damage a third party’s property or accidently  injure someone else”.

Source; Insurance Bureau of Canada. Click here to Learn More.

Irrevocable Period

“The Irrevocable clause states a date and time up to which time the offer is irrevocable. Before the time on the specified date, the party offering cannot revoke their offer. The Irrevocable clause usually states that when the time and the date passes the offer becomes null and void. In the standard OREA Agreement of Purchased and Sale, s. 1 is the irrevocable clause and it contains language that nullifies the offer if it is not accepted”.

Source; Merovitz Potechin LLP, Noah Potechin. Click here to Learn More.

Knob & Tube Wiring

““Knob and tube” is a generic term that describes a system of residential wiring installed between 1900 and the 1940s in both city and country homes across North America. It was leading-edge technology at the time, but is now regarded as too risky and dangerous to be insurable by some companies”.

Source; All Things Home, Steve Maxwell. Click here to Learn More.

Land Transfer Tax

“When you buy land or an interest in land in Ontario, you pay Ontario's land transfer tax. Land includes, but is not limited to, any buildings, buildings to be constructed, and fixtures (such as light fixtures, built‑in appliances and cabinetry). In addition, for certain transfers of land within the Greater Golden Horseshoe Region, a 15% Non‑Resident Speculation Tax (NRST) may apply.

When you [the buyer] acquire land or a beneficial interest in land, you pay land transfer tax to the province when the transaction closes”.

Source; Ontario Ministry of Finance. Click here to Learn More.

Listing Agreement

Multiple Listing Service® (MLS®)

“MLS® Systems are cooperative selling systems operated by real estate Boards and Associations in Canada. They are accessible to REALTOR® Members of those Boards and Associations who have agreed to represent your interests and share remuneration from the transaction with a cooperating REALTOR® Member. MLS® Systems contain detailed information and numerous search tools, all designed to match people with the properties that fit their exact requirements”.

Source; realtor.ca.

Market Conditions

Mortgage

“A mortgage is a type of loan often used to buy a home or other property. A mortgage allows the lender to take possession of the property if you don't repay the loan on time. The property is the security for the loan. Normally, a mortgage is a large loan and is paid off over many years.

When you get a mortgage loan, you are called the mortgagor. The lender is called the mortgagee.

Under a mortgage, you are responsible for making regular payments to the lender. The payments cover the interest on the loan plus part of the principal (the amount of the loan). Payments may also include property taxes, insurance and similar charges.

When you make a mortgage payment, the lender uses it first to cover the interest. Then anything left goes to the principal and in some cases to taxes and insurance. At the beginning, only a small amount goes to the principal, but gradually more of the payment goes to the principal until it is fully paid off. The part of the property that is paid for—both through the down payment and through your mortgage payments—is called your equity in the property”.

Source; Financial Consumer Agency of Canada.

This is an amazing resource that will answer all of your mortgage questions, I highly suggest you click here to Learn More.

Mortgage;

High-Ratio vs. Conventional

High-Ratio Mortgage

A high-ratio mortgage is when the borrower contributes less than 20 per cent of the purchase price in their down payment. The minimum down payment is five per cent on the first $500,000, 10 per cent on any amount over that. High-ratio mortgages are more risky for both the home buyer and the lender. As the mortgage will account for more than 80 per cent of the purchase price, the home buyer must obtain mortgage insurance. The insurance premiums are calculated based on the loan-to-value ratio of the mortgage: the lower the down payment, the higher the insurance costs will be.

Conventional Mortgage

A conventional mortgage is usually when a borrower can cover 20 per cent or more of a home’s purchase price with the down payment. This means the loan they are paying down is equivalent to 80 per cent or less of the value of the home. In this case, the borrower does not require mortgage insurance. However, a particular lender may request mortgage insurance, even if the home buyer is putting more than 20 per cent down (low ratio mortgage.)

Source; Financial Services Commission of Ontario. Click here to Learn More.

Mortgage Insurance

“Optional mortgage insurance products are life, illness and disability insurance products that can help make mortgage payments, or can help pay off the remainder owing on your mortgage, if you:

• lose your job

• become injured or disabled

• become critically ill

• die

Optional mortgage insurance is a type of credit and loan insurance that you are usually offered when you take out or renew a mortgage. You don’t need to purchase optional mortgage insurance to be approved for a mortgage.

There are important limits on the coverage that optional mortgage insurance products provide. Read your policy carefully and ask questions if there’s anything you don’t understand before purchasing these products.

These optional products are different from mortgage loan insurance that you are required to purchase if your down payment on your home is less than 20%”.

Source; Financial Consumer Agency of Canada. Click here to Learn More.

Mortgage Interest Rate

Fixed Interest Rate

A fixed rate mortgage means the interest rate will stay the same for the term of the mortgage agreement (one, three or five years) regardless of whether market rates go up or down. When the term finishes, borrowers can search again for different rates. Fixed rate mortgages are popular when rates are low but expected to rise in the near future.

Variable Interest Rate

With a variable rate mortgage, the interest rate will fluctuate over the course of the term based on market conditions. However, one popular misconception about variable rate mortgages, is that this means your payments will also vary. In fact your payments will remain the same for the term of the mortgage.

Source; Financial Services Commission of Ontario. Click here to Learn More.

Mortgage; Open v. Closed

Open Mortgage

An open mortgage allows a home buyer to prepay all or a portion of the mortgage without penalty. Fully open mortgages let borrowers pay additional amounts at any time during the life of the mortgage in addition to their regular payments. Interest rates are usually higher on fully open mortgages because the borrower can pay off the amount at any time. Because of this, fully opened mortgages are also harder to find.

Closed Mortgage

A closed mortgage does not allow for any prepayment by the home buyer without penalty. The only payments they can make are the scheduled ones outlined in the contract. Closed mortgages usually have lower interest rates because the borrower does not have the same flexibility as in an open mortgage.

Some lenders offer variations on the open or closed mortgage, such as allowing additional payments during a certain time of the year. Borrowers should review their mortgage terms so they know the allowances of their specific contract.

Source; Financial Services Commission of Ontario. Click here to Learn More.

Multiple Offers

“In certain market conditions, consumers may find that more than one buyer is interested in a property.

This is a competing offer situation and creates unique conditions in a real estate transaction. Both sellers and buyers need to consider how to respond when presented with a competing offer situation. Working closely with your real estate broker or salesperson will ensure that you understand the process.

In Ontario, the seller’s real estate broker or salesperson is required to disclose the number of competing offers to all buyers who have submitted a written offer. However, the terms and conditions of each offer are confidential to the seller and their broker or salesperson”.

Source; RECO. Click here to learn about Dealing with multiple offers.

Multiple Representation

“Multiple representation occurs when two parties are represented by the same brokerage. This could happen with each party having a different representative of the same brokerage, or a single representative could work with two or more parties.

Typically, multiple representation involves the buyer and seller of a property, but it can also happen with two or more buyers who are interested in the same property. It is sometimes referred to as “dual agency””.

Source; RECO. Click here to Learn More.

Offer

“An Agreement of Purchase and Sale is a written contract between the purchaser (buyer) and vendor (seller) for purchase and sale of a particular property. This agreement covers the specified cost of the property, provided that a number of conditions and terms – often laid out by the purchaser – are met.

Generally speaking, the agreement covers the essentials of the interactions, buyer and seller and the property itself. It will include basic information on both parties involved in the deal. It will also contain information on the fixtures included on the property if any. Finally, it will contain any and all important dates regarding the actual purchase and sale. This includes requisition, closing arrangement and completion dates. This agreement needs to be written and signed in order to be deemed legally valid. If any of the conditions are not meant, the agreement can fail.

This process begins when an offer is made by a potential buyer. This offer remains irrevocable for a certain amount of time. The amount of time is usually made clear in a clause that is written into the agreement”.

Source; Hummingbird Law. Click here to Learn More.

Pre-Approval

“A pre-approval is when a potential mortgage lender looks at your finances to find out the maximum amount they will lend you and what interest rate they will charge you.

With a pre-approval, you can:

• know the maximum amount of a mortgage you could qualify for

• estimate your mortgage payments

• lock in an interest rate for 60 to 120 days, depending on the lender

The pre-approval amount is the maximum you may get. It does not guarantee that you'll get a mortgage loan for that amount. The approved mortgage amount will depend on the value of your home and the amount of your down payment. It may be a good idea to also look at properties in a lower price range so that you don’t stretch your budget to its limit”.

Source; Financial Consumer Agency of Canada. Click here to Learn More.

Pre-Qualifying

Property Taxes

“Property tax is a levy based on the assessed value of property. Property tax has two components: a municipal portion and an education portion.

Property taxes are calculated using the Current Value Assessment of a property, as determined by the Municipal Property Assessment Corporation (MPAC), and multiplying it by the combined municipal and education tax rates for the applicable class of property”.

Source; Ontario Ministry of Finance. Click here to Learn More.

R-Value

REALTOR®

RECO

“The Real Estate Council of Ontario (RECO) enforces the rules that real estate salespeople, brokers, and brokerages must follow. We protect the public interest through a fair, safe and informed marketplace”.

Source; RECO. Click here to Learn More.

Refinancing

Service Agreement

Buyer Representation

When you are buying your home, a real estate broker or salesperson may ask you to sign a representation agreement. A representation agreement defines the nature of the relationship between you and the brokerage, including the broker or salesperson.

Representation agreements can be written, oral or implied. However, your broker or salesperson is required by law to reduce the agreement to writing and provide it to you for your signature. The agreement should be in writing in order to protect the interest of all parties.

Seller Representation

When you are selling your home, your broker or salesperson will ask you to sign a listing agreement. The listing agreement is the contract between you and the brokerage that permits them to market and sell your home. These agreements should be in writing in order to protect the interest of all parties.

An agreement must indicate the date it will take effect and the date it will expire. The agreement must describe the services that will be provided to you by the brokerage and provide information related to the amount of commission or other fees payable to the brokerage as well as how these amounts will be paid to the brokerage. Consumers should be aware that commissions and other remuneration are not set or fixed by RECO, government authorities, real estate associations or real estate boards.

Source; RECO. Click to learn more about Buyer and Seller Representation.

*Note; It is important to understand all of your options before signing any agreement. Click here to learn more about the Different Between Client vs Customer and why it is important to know when buying or selling a home.

Staging

“Home staging is arranging furniture and decor with the intent to showcase a home for sale. It could cost you nothing -- a simple cleaning and the removal of day-to-day living items can sometimes be all you need. But it can also involve some financial investment -- like painting, improving the landscaping and adding furniture and plants to give potential buyers an idea of what their new home would look like”.

Source; How Stuff Works, Tiffany Connors. Click here to Learn More.

*Note; “Staging is a service that may be provided by a third-party professional stager or by the brokerage itself, however who pays for it should be specified in your listing agreement. Your salesperson on behalf of their brokerage will be able to walk you through the services included in your listing agreement in detail”, click here to more learn from RECO about the cost of staging.

Statement of Adjustments

A Statement of Adjustments is a document prepared by a real estate lawyer during the closing period of a real estate transaction. It outlines costs credited to both the buyer and seller and concludes with a balance due upon closing. Some costs that may be included in a Statement of Adjustments are; prepaid property taxes, condominium fees, Ontario Land Transfer Tax, buyer deposit and so on.

Click here to learn more.

Title

“Title is a legal term meaning registered owner of real property. When your lawyer is preparing to transfer the title to your property, you will likely be asked who will actually own it. You may choose to list one name alone, fellow investors (a parent, for example) or, particularly in a marriage, both spouses. The issue of whose name is on the title is frequently important when one individual is putting up most or all the money for the purchase. Title can also be held by other than individuals, such as partnerships and corporations”.

Source; Legal Line. Click here to Learn More.

Title Insurance

“Title insurance is an insurance policy that protects residential or commercial property owners and their lenders against losses related to the property’s title or ownership.

Title insurance is not a requirement in Ontario. The decision on whether or not you should purchase title insurance should be discussed with your lawyer, title insurance company or insurance agent/broker, to fully understand what type of protection title insurance can provide you, and to determine if other options exist. Once you get all the facts, you can make an informed decision based on your specific situation and needs. It is important to keep in mind that title insurance does not replace legal advice when purchasing property”.

Source; Financial Services Commission of Ontario. Click here to Learn More.

Title Search

“A title search is an examination of public records to determine and confirm a property's legal ownership, and find out what claims or liens are on the property. A clean title is required for any real estate transaction to go through properly.

A title search is usually performed by a title company or an attorney, often on behalf of a prospective buyer who may be interested in making an offer on the property. The process may also be initiated by a lender or other entity that wants to verify ownership of the property, and determine what claims or judgments against the property may exist before approving a loan or other credit that uses that property as collateral”.

Source; Investopedia, James Chen. Click here to Learn More.

Zoning Regulations

“A zoning bylaw controls the use of land in your community. It states exactly:

• how land may be used

• where buildings and other structures can be located

• the types of buildings that are permitted and how they may be used

• the lot sizes and dimensions, parking requirements, building heights and setbacks from the street

An official plan sets out your municipality’s general policies for future land use. Zoning bylaws put the plan into effect and provide for its day-to-day administration. They contain specific requirements that are legally enforceable. Construction or new development that doesn’t comply with a zoning bylaw is not allowed, and the municipality will refuse to issue a building permit”.

Source; Ministry of Municipal Affairs and Housing. Click here to Learn More.