Understanding Real Estate Terminology

When you decide to buy a home, you will probably discover a whole new language used to described the property, financing, legalities and people involved in a home purchase. However, it is not as complex as you'd first think - most phrases refer to ideas and things with which you may already be familiar. Here, for your convenience, is a list of the more common terms used in real estate. People and Things Broker: The real estate professional licensed by the province of Manitoba to facilitate the sale or rental of a property. Buyer's Market: A residential real estate market in which the number of properties for sale significantly exceeds the number of buyers. Chattels: Removable personal items that are not normally included in the sale of a home, but may be added to the purchase price to make the property more attractive. (Examples include microwave ovens, portable dishwashers and laundry appliances.) Easement: A legal right to use or cross (right of way) another person's land for limited purposes. A common example is a utility company's right to run wires or lay pipe across a property. Encroachment: An intrusion onto an adjoining property. A neighbour's fence, storage shed or overhanging roof line that partially (or fully) intrudes onto your property are encroachments. Fixtures: Permanent improvements to a property that are normally included with the purchase unless specifically excluded in an Offer to Purchase. Wall-to-wall carpeting and installed appliances are often considered fixtures. Listing Broker: The real estate practitioner who is appointed, by way of a listing agreement signed by a property owner, to offer a property for sale. Multiple Listing Service (MLS®): A system for relaying information to REALTORS about properties for sale. REALTOR: A trademarked name describing real estate professionals who are members of a local real estate board and/or a provincial real estate association and the Canadian Real Estate Association. Selling Broker: The broker who finds the buyer for a property. Survey: A professionally prepared document that provides accurate details about a property's location, boundaries, size and legal description, as well as any improvements to the property. Vendor: The seller in a real estate transaction. Zoning Regulations: Strict guidelines set and enforced by municipal governments regulating how a property may or may not be used. Financial Terms Amortization: The number of years it takes to repay the entire amount of a mortgage. Appraisal: An estimate of a property's market value. It is used by lenders in determining the amount of the mortgage. Appreciation: The increase of a property's value over time. Capital Gain: The increase between the purchase price and selling price. Debt Service Ratio: The percentage of a borrower's gross income that can be used for housing costs, including mortgage payments and taxes. Deposit: The monies paid by the buyers at the time an offer is submitted on the purchase of a property (normally not exceeding 10 per cent of the purchase price). Down Payment: The difference between a property's purchase price and the amount financed. Equity: The difference between the price for which a property can be sold and the mortgage(s) on the property. Equity represents the owner's "stake" in a property. Land Transfer Tax: Payment to the provincial government for transferring property from the seller to the buyer, normally paid by the purchaser. Principal: The mortgage amount initially borrowed, or the portion still owing on the mortgage. Contractual and Legal Items Blended Mortgage Payments: Equal or regular mortgage payments, consisting of both a principal and an interest component. Closed Mortgage: A mortgage that cannot be prepaid, renegotiated or refinanced during its term without significant financial penalties. Conventional Mortgage: A first mortgage issued for up to 75 per cent of the property's appraised value or purchase price, whichever is lower. Counter-offer: One party's alteration of the terms of the other party's offer during negotiations of a real estate purchase between buyer and seller. First Mortgage: The first security registered on a property. Additional mortgages are "secondary" to the first mortgage. Lien: Any legal claim registered against a property, filed to ensure payment of a debt. Listing Agreement: The contract between the listing broker and owner, authorizing the listing broker to facilitate the sale or lease of a property. Mortgage: A contract between a borrower and lender. The borrower pledges a property as security to guarantee repayment of the mortgage debt. Mortgage Term: The length of time a lender will loan mortgage funds to a borrower. Open Mortgage: A mortgage that can be prepaid or renegotiated at any time and in any amount without penalty. Second Mortgage: A second financing arrangement, in addition to the first mortgage, also secured by the property (usually at a higher rate and for a shorter term than the first mortgage). Title: The legal evidence of ownership of the property. Transfer of Land: A Land Titles document that conveys (transfers) ownership or "title" of a property to the buyer. Multiple Listing Service, MLS® and REALTOR are registered trademarks of the Canadian Real Estate Association. REALTOR identifies a real estate practitioner who is a member of the Association.