GLOSSARY OF REAL ESTATE TERMS

ADJUSTMENT DATE

The day on which all calculations of interest, tax adjustments and utility bill adjustments (if applicable) are made to either the buyer or seller. This is usually (but not always) the same as the possession date.

AMORTIZATION

The time it takes to repay the entire amount of a mortgage.

APPRAISED VALUE

An estimate of a property’s market value used by lenders to determine the amount of a mortgage.

ASSESSED VALUE

The value of a property, set by BC Assessment, and used by the local municipality to calculate property tax.

BUY-DOWN

When the seller reduces the interest rate on a mortgage by paying the difference between the reduced rate and the market value directly to the lender or buyer.

CLOSING

Completion of the real estate transaction; the property’s deed is transferred from the seller to the buyer.

CLOSING COSTS

Additional expenses to the purchase of a property.

CONVEYANCE

The process of transferring the seller’s title to the buyer, usually undertaken by a conveyancing lawyer (or notary) acting for the buyer.

COUNTER OFFER

The offer made from the seller to the buyer altering one or several terms and/or conditions to the original offer.

DEBT SERVICE RATIO

The percentage of a borrower’s income that can be used for housing costs. Gross Debt Service (GDS) ratio is the amount that a lender will permit a borrower to use from his/her gross income in order to qualify for a loan for housing costs, including mortgage payment and taxes (and strata fees when applicable). Total Debt Service (TDS) ratio is the maximum percentage of a borrower’s income that a lender will consider for all debt repayment (other loans and credit cards, etc.) including a mortgage.

DEED

The legal document conveying ownership of a property.

EASEMENT

The legal right-of-way to use or cross another’s property; a common example being a utility company’s right to run wires or pipe across a property which they do not own.

EQUITY

The difference between the price for which a property can be sold and the mortgage(s) on the property; equity is the owner’s stake in the property.

FORECLOSURE

The legal process by which the lender takes possession and ownership of a property when the borrower fails to meet the mortgage obligations.

LIEN

The legal claim against a property filed to ensure payment of debt.

MORTGAGE

The contract between a borrower and a lender; the borrower pledges the property as security to guarantee repayment of the mortgage debt.

MORTGAGE INSURANCE

Government-backed or private-backed insurance protecting the lender against the borrower’s default on high-ratio (and other types of) mortgages.

MORTGAGE - BLENDED

Equal or regular mortgage payments with both a principal and an interest component.

MORTGAGE - CONVENTIONAL

A first mortgage issued for up to 80% of the property’s appraised value or purchase price, whichever is lower.

MORTGAGE - HIGH RATIO

A mortgage that exceeds 80% of the loan-to-value ratio; must be insured by either the Canada Mortgage and Housing Corporation (CMHC) or by a private insurer to protect the lender against default by the borrower, who has less equity invested in the property.

MORTGAGE - OPEN

A mortgage that can be prepaid or renegotiated without penalty.

MORTGAGE - VARIABLE RATE

A mortgage for which payments are fixed but whose interest rate changes in relation to fluctuating market interest rates; if mortgage rates go up, a larger portion of the payment goes to interest; if rates go down, a larger portion of the payment is applied to the principal.

MORTGAGE - VENDOR TAKE-BACK

When the seller offers to lend the buyer funds in order to help facilitate the purchase of the property.

PRINCIPAL

The mortgage amount initially borrowed or the portion still owing on the mortgage; the money used to pay down the balance of the loan.

PROPERTY DISCLOSURE STATEMENT

A document completed by the seller that serves as a checklist for buyers and enables them to address concerns about the property’s condition. Submission of the form is required before any listing is placed on the Victoria Real Estate Board’s Multiple Listing Service® (MLS®) system.

PROPERTY TAXES

Location and the value of the property as determined by BC Assessment affect this levy. Local government determines the rate of taxation. Property taxes are payable on an annual basis.

PROPERTY TRANSFER TAX

Payment to the provincial government for transferring the property from the seller to the buyer. Certain exemptions are available for first-time buyers.

REALTORS®

Real estate professionals licensed by the Real Estate Council of BC who are members of the Victoria Real Estate Board and the British Columbia and Canadian Real Estate Associations.

STATEMENTS OF ADJUSTMENTS

Closing statements in a transaction which set out the sources of funds making up the purchase price, adjustments to and from the purchase price, the final amount required from the purchase and the amount due to the seller. Lawyers prepare statements for the seller and buyer.

STATE OF TITLE CERTIFICATE

A copy of the title which lists charges against a property -- e.g. liens, mortgages, rights-of-way, etc.

STRATA COMMON PROPERTY OR COMMON ELEMENTS

The portions of a strata development owned in common (shared) by the unit owners, e.g. pool exercise room, lobby, etc. A strata fee is charged to every unit owner for the use of the common property.

“SUBJECT-TO” CLAUSE

A statement of a condition to be fulfilled before the contract will become firm and binding; must include a specific deadline for removal.

TITLE

The legal evidence of ownership of a property.

TITLE SEARCH

An examination of the ownership documents ensuring there are no liens or other encumbrances on the property and no questions regarding the seller’s ownership claim.

UTILITY TAXES

A tax on public service businesses; may include the supply of water, sewage, garbage disposal and natural gas.

WORKING WITH A REALTOR® BROCHURE

A brochure given to prospective buyers and sellers that explains the different kinds of agency relationships that may be entered into with a Realtor.

ZONING REGULATIONS

Guidelines set and enforced by municipal governments regulating how a property may or may not be used.