Simplifying Real Estate Talk
From legal jargon to industry colloquialisms, don’t let the words get in the way. Here’s a collection of words made clear, so you can read between the lines of industry professionals from Realtor to Property Inspector.
Adjustable Rate Mortgage
Real estate loan in which the interest rate is periodically (usually every six months) adjusted up or down to reflect the current market rates. ARMs usually specify limits as to how high or low the interest rate can go, and how frequently the changes can be made. Such loans usually start with an attractively low rate of interest (the ‘teaser rate’) to attract borrowers. Also called a variable rate mortgage. See also adjustable mortgage loan.
The date agreed to by both parties for the allocation and adjustment of property taxes, interest, utilities, rents and other appropriate items. This date is usually the same as the possession date.
The paying off of debt with a fixed repayment schedule in regular installments over a period of time. Consumers are most likely to encounter amortization with a mortgage or car loan.
Appraiser’s opinion (not determination) of the current worth of a property based on factors such as area, location, improvements, and amenities. Generally, this value is arrived at by using one of three methods:
(1) Cost approach, (2) Income approach, or (3) Market comparison approach. Not to be confused with assessed value.
The value placed on real estate or personal property by government (or court appointed) assessors for determining ad valorem taxes, or to levy damages on the orders of a court. Assessed value is used rarely as a basis for appraisal value.
All costs and fees paid by a buyer in a real estate transaction, or by a borrower in mortgage loans. Expect these to be 2 to 5 percent of the purchase price of your home. Costs incurred may include loan origination fees, discount points, appraisal fees, title searches, title insurance, surveys, taxes, deed-recording fees and credit report charges. Prepaid costs are those that recur over time, such as property taxes and homeowners’ insurance.
Canada Mortgage and Housing Corporation. A Crown corporation which provides information services and mortgage loan insurance.
A fee paid to a real estate agent or broker for their services–sometimes a percentage of the sale price.
An offer in response to an original offer.
Debt-To-Income (DTI) Ratio:
The ratio of monthly debt payments to monthly gross income. Lenders use a housing DTI ratio (house payment divided by monthly income) and a total DTI ratio (total debt payments including the house payment divided by monthly income) to determine whether a borrower’s income qualifies him or her for a mortgage.
A legal document conveying ownership of property.
Money taken at the time of acceptance or upon final subject removal as a sign of good faith. This money is held in a real estate company’s trust account pending the completion of the purchase and is credited towards the purchase price.
The portion of the home’s purchase price the buyer pays in cash.
The difference between a home’s value and the mortgage amount owed on the home.
“Fiduciary” is a term that refers to a legal relationship that is confidential between two parties. This relationship gives one party the right to act and make important decisions for the other party. In the world of real estate, the real estate agent and his or her clients (buyers or sellers) participate in a fiduciary relationship.
When a real estate agent or broker acts in an agency capacity for a buyer or seller client in a transaction, the agent or broker functions under certain legally mandated duties called fiduciary duties, acting in the best interests of the client.
Fiduciary duties vary by state real estate statute, but one example common to all is “confidentiality” of the client’s information. In a fiduciary capacity, it is the duty of the real estate agent or broker to protect the clients’ privacy and keep all information confidential, unless required to divulge it by a court of law.
The monthly payment due on a mortgage loan, including payment of both principal and interest.
A fixed-rate mortgage is a mortgage loan that has a fixed interest rate for the entire term of the loan. Generally, lenders can offer either fixed, variable or adjustable-rate mortgage loans with fixed-rate monthly installment loans being one of the most popular mortgage product offerings.
A property placed on the market by a listing agent.
A listing agreement is a document in which a property owner (as principal) contracts with a real estate broker (as agent) to find a buyer for the owner’s property. The owner executes the listing agreement to give a real estate broker the authority to act as the owner’s agent in the sale of the owner’s property, for which the owner agrees to pay a commission.
The List-To-Sell ratio is the final sale price (what a buyer pays for the home) divided by the last list price expressed as a percentage. If it’s above 100%, the home sold for more than the list price. If it’s less than 100%, the home sold for less than the list price. Looking at sale-to-list percentages can help buyers and sellers get a sense of how to negotiate on pricing. To calculate the average sale-to-list for a group of homes, add up each home’s sale-to-list ratio, then take the average of the total.
A sum of borrowed money (principal) that is generally repaid with interest.
The highest price that a buyer would pay and the lowest price a seller would accept on a property. Market value may be different from the price a property could actually be sold for at a given time.
Multiple Listing Service. A listing service handled by the Real Estate Board that issues print and online listing information comprising details of properties for sale on MLS® in our market areas.
This term is often used when combined with mortgages, pre-qualification by an individual for a mortgage often determines the budget that a buyer has to spend when buying real estate. It is a very important factor for real estate salespeople to know about their clients.
A legal concept relating to ownership of property.
Are there any specific terms or concepts you’d like defined or have added to our glossary?
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