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Real Estate Terms Defined

TERMDEFINITION
AppraisalA process that determines the market value of a property.
Appraised ValueAn estimated value of a property that is completed by a certified appraiser for mortgage financing.
Approved LenderA lending institution authorized by the Government of Canada to make loans under the terms of the National Housing Act. Only Approved Lenders can negotiate mortgages that require mortgage insurance.
AssumptionA legal document signed by a homebuyer that requires the buyer to assume responsibility for the obligations of a mortgage by the builder or original owner.
Balanced MarketExists when demand for property equals the supply of available property. Sellers usually accept reasonable offers and houses generally sell in sufficient time periods. Prices remains stable and there are usually a good number of homes to choose from.
Buyer's MarketOccurs when there are higher numbers ofhomes to choose from than therea are buyers looking for homes. Prices of homes tend to be lower and they remain available for sale longer. Buyers usually have more leverage in negotiating a purchase.
Closing CostsIn addition to the purchase price of a property, costs such as legal fees, transfer fees, and disbursements, are payable on the closing date. Closing costs typically range from 2-4% of a property's selling price.
Closing DateThe date on which the sale of a property becomes final.
Commitment Letter/Mortgage ApprovalWritten notification from the mortgage lender to the borrower that approves the advancement of a specified amount of mortgage funds under specified conditions.
Conditional Offer/Conditions of SaleAn Offer to Purchase that is subject to specified conditions. For example, the arranging of a mortgage. There is usually a stipulated time limit within which the specified conditions must be met.
ConveyancingThe transfer of ownership of any property or real estate from one person to another.
DeedA legal document that is signed by both the seller and the buyer transferring ownership. This document is registered as evidence of ownership.
DepositA sum of money placed in trust by the buyer when an Offer to Purchase is made. The real estate agent or lawyer holds the sum until the sale is closed and then it is paid to the seller.
Down PaymentThe portion of the house price the buyer must pay up front from personal resources, before securing a mortgage. It generally ranges from 5-25% of the purchase price.
EasementA right acquired for access to or over, or for the use of, another person's land for a specific purpose such as a driveway or for public utilities.
EncumbranceA registered claim for debt against a property such as a mortgage.
EquityThe difference between the price a home could be sold for and the total debts registered against the home. Equity usually increases as the outstanding principal of the mortgage is reduced through regular payments. Market values and improvements to the property also affect equity.
ForeclosureA legal procedure where the lender gets ownership of the property when the borrower defaults on the mortgage loan.
Lending ValueThe purchase price or appraised value of a property, whichever is less.
LienA claim against a property for money owing. A lien may be filed by suppliers or subcontractors who have provided labour or materials and have not been paid.
MortgageSecurity for a loan to purchase property. It is the buyer's personal guarantee to repay the loan and acts as a pledge of the property as security for the loan.
Offer to PurchaseA written contract setting out the terms under which the buyers agrees to buy. If accepted by the seller, it forms a legally binding contract subject to the terms and conditions stated in the document.
Option AgreementA document stipulation that, in exchange for a deposit, a specified individual is to be given the first chance to buy a property at or within a specified period of time. An option holder who does not buy at or withing the specified period loses the deposit and the agreement is cancelled.
Pre-Approved MortgageWhen a lender approves the buyer for a specified amount, based on how much money the lender is prepared to lend the buyer. This allows buyers to shop for homes that they already know they can obtain financing for.
Property Purchase or Land Transfer TaxA toll paid to the provincial and/or municipal government(s) to transfer property from the seller to the buyer.
REALTOR®A trademark name for a real estate representative who is a member of a professional body licensed to buy and sell real estate, for example, the Canadian Real Estate Association. Real estate representatives are also referred to as real estate agents.
Seller's MarketOccurs when there are more buyers looking for homes than there are homes for sale. There is a smaller inventory of homes available for sale and many buyers looking for a home to purchase. House prices generally increase and homes sell quickly.
Strata or Condominium FeeA payment made by all owners of condominiums or townhouses within a complex. The payment is allocated to such expenses as maintenance, repairs, and management costs.
SurveyA document that illustrates the property boundaries and measurements. It also specifies the location of buildings on the property and indicates any easements or encroachments.
Title - Freehold or LeasholdIndicates legal possession. A freehold title gives the holder ownership of land and buildings for an indefinite period of time. A leasehold title gives the holder a right to use and occupy land and buildings for a defined period of time. In a leasehold arrangement, ownership of the land, and sometimes the buildings, remains with the landlord.
Vendor Take-Back MortgageMortgage financing arranged between the seller of the property and the buyer. Often this type of loadn is a second mortgage which the seller is willing to arrange at below market rates to allow the buyer to purchase the home. Most of these arrangements are not renewable or transferable to the next owner of the home.
Zoning BylawsMunicipal or regional laws that specify or restrict land use.

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