Real Estate Terms
Abstract of Title - A complete historical summary of the public records relating to the legal ownership of a particular property from the time of the first transfer to the present.
Agreement of Sale - Also known as a contract of purchase, purchase agreement, or sales agreement according to location or jurisdiction. A contract in which a seller and buyer agree to transact under certain terms spelled out in writing and signed by both parties.
Amortization - The process of reducing the principal debt through a schedule of fixed payments at regular intervals of time, with an interest rate specified in a loan document.
Appraisal - A professional appraiser’s estimate of the market value of a property based on local market data and the recent sale prices of similar properties.
Assessed Value - The value placed on a home by municipal assessors for the purposes of determining property taxes.
Closing - The final steps in the transfer of property ownership. On the Closing Date, as specified by the sales agreement, the buyer inspects and signs all the documents relating to the transaction and the final disbursements are paid. Also referred to as the Settlement.
Closing Costs - The costs to complete a real estate transaction in addition to the price of the home may include: taxes, Title insurance, appraisal fees, and legal fees.
Closing Date - This is usually the date that the legal ownership of the property transfers from the seller to the buyer.
Conditions or “Subjects” - Items that are usually put in place to protect a party’s interests upon selling or buying the property and refer to things that must occur or be in place before the sale closes. Some of these conditions could be “subject to financing approval”, “subject to the strata council allowing pets”, “subject to the buyer’s hoUse selling”, subject to an approved home inspection”, etc
Contingency - A clause in the purchase contract that describes certain conditions that must be met and agreed upon by both buyer and seller before the contract is binding.
Counter-Offer - An offer, made in response to a previous offer, that rejects all or part of it while enabling negotiations to continue towards a mutually acceptable sales contract.
Conventional Mortgage - One that is not insured or guaranteed by the federal government.
Debt-to-Income Ratio - A ratio that measures total debt burden. It is calculated by dividing gross monthly debt repayments, including mortgages by gross monthly income.
Deposit - A deposit is provided from the buyer to the seller as a token of the buyer’s assurance and intention to buy the property involved. The deposit is applied against the purchase price of the home once the sale has closed. Your agent can assist you in a proposing a certain and approximate amount for the deposit.
Equity - The value of the property, less the loan balance, and any outstanding liens or other debts against the property.
Easements - Legal rights of access to use of a property by individuals or groups for specific purposes. Easements may affect property values and are sometimes part of the deed.
Fixed-Rate Mortgage - A type of mortgage loan where the interest rate does not change during the entire term of the loan. The rate is locked in at time of closing.
Home Inspection - Professional inspection of a home, paid for by the buyer, to evaluate the quality and safety of its plumbing, heating, wiring, appliances, roof, foundation, etc.
Homeowner’s Insurance - A policy that protects you and the lender from fire or flood, a liability such as a visitor injury or damage to your personal property.
Inclusions and Exclusions - These are specifications within the offer that detail the items to be included or excluded from the purchase of the property. Typical inclusions are appliances, window coverings, fixtures and decorative pieces.
Lien - A claim or charge on property for payment of a debt. With a mortgage, the lender has the right to take the title to your property if you don’t make the mortgage payments.
Market Value - The amount a willing buyer would pay a willing seller for a home. An appraised value is an estimate of the current fair market value.
Possession and Adjustment Dates- When the buyer takes possession as specified in the contract of purchase sale and adjustments are made for prepaid taxes, maintenance fees, etc. They are usually the same date. Possession Date - The date, as specified by the sales agreement, that the buyer can move into the property Generally, it occurs within a couple days of the Closing Date.
Pre-Approval Letter - A letter from a mortgage lender indicating that a buyer qualifies for a mortgage of a specific amount. It also shows a home seller that you’re a serious buyer.
Principal - The amount of money borrowed from a lender to buy a home or the amount of the loan that has not yet been repaid. Does not include the interest paid to borrow.
Purchase Offer - A detailed, written document which makes an offer to purchase a property, and which may be amended several times in the process of negotiations. When signed by all parties involved in the sale, the purchase offer becomes a legally-binding sales agreement.
Purchase Price - The amount that the buyer is offering to pay for the property, usually dependent on market conditions and may differ from the seller’s current asking price. There is no “normal” amount or percentage that a price will differ from its asking price, as the final price will be determined by many factors, including the seller’s motivation and how close the asking price is too actual “market value”.
Terms - An offer includes certain “Terms”, which specifies the total price offered and how the financing will be arranged such as if you will arrange your own with a financial institution or mortgage broker or if you wish to take over the seller’s mortgage
Title - The right to, and the ownership of, property. A Title or Deed is sometimes used as proof of ownership of land. The Clear title refers to a title that has no legal defects.
Title Search - A historical review of all legal documents relating to ownership of a property to determine if there have been any flaws in prior transfers of ownership or if there are any claims or encumbrances on the title to the property.
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