Agency: Buyer's Agency, Sellers Agency or Dual Agency

Buyer's Agency is when an agent (salesperson or broker) represents the buyers' interest in a real estate transaction. The agent has fiduciary duty to the buyer. Seller's Agency is when an agent (salesperson or broker) represents the seller's' interest in a real estate transaction. The agent has fiduciary duty to the seller. Dual agency is when an agent (salesperson or broker) represents the buyer and the seller in a real estate sale. In this case, the agent must represent both parties' interests and may not disclose confidential information to either party. The end goal of a dual agent is to satisfy both the buyer and the seller in the transaction.

Appraised Value versus Assessed Value versus Market Value

The appraised value of a property is its worth as determined after a thorough evaluation by a licensed appraiser. The assessed value of a property is the value of the property as determined by the local government. The market value of a property is the value of a property based on the recent sales of comparable homes in that specific neighbourhood. This is based on what buyers are willing to pay at that particular time in the marketplace.

Assignment of agreement of purchase and sale

An assignment is a sales transaction where the original buyer of a property (the "assignor") allows another buyer (the "assignee") to take his or her place and complete the purchase with the original seller. The original buyer "assigns" the contract to a new buyer before taking ownership of the property.

Breach of Contract

A real estate contract is a document that outlines the terms and conditions of the real estate transaction. When either party partaking in this real estate transaction fails to adhere to any of the contract's terms, it is considered as a breach of contract.

Break-Even point

Is the point at which total costs and total revenue are equal. This is normally determined in order to indicate when an investment will start generating a positive return.

Broker of Record

A broker of record is a licensed real estate broker who is responsible for running the brokerage and managing all sales people working for that brokerage.

Capitalization Rate

The capitalization rate or "cap rate" is the rate of return on the real estate investment property. It enables an investor to determine the potential return on their investment. The capitalization rate is calculated by dividing the Net Operating Income (NOI) by the current market value or even the actual purchase price of a property.

Cash flow analysis

Cash flow analysis means scrutinizing actual income and expenditures. This enables the buyer in a real estate transaction to get a clear picture of their actual available budget to purchase real estate and manage the costs associated with closing on a home and even maintaining the home after purchase.

Chattels

Chattels refers to articles of personal property that are tangible and movable. For example: appliances.

Closing Costs

Closing costs are costs or expenses associated with obtaining or selling real estate. It includes expenses such as land transfer taxes, title transfer costs, lawyer's fees, document preparation fees, inspections and surveys, homeowners insurance, etc.

Closing date

The closing date is the date in which the transaction becomes complete and ownership of the home is transferred from the seller to the buyer. This date is set by mutual agreement between the buyer and the seller during negotiations.

CMHC vs conventional mortgage

CMHC is a high ratio mortgage (less than 20% down payment) that is insured by the government. A conventional mortgage is for a loan no more than 80% of the purchase price (20%+ down payment).

Compound interest

Most Canadian banks have compound interest on fixed mortgages. Compound interest applies when interest is calculated on the principal and previous interest charges. It is important to understand the terms of your loan as compound interest loans means higher payments at the beginning of your loan term.

Conditional offer/conditional period

A conditional offer sets out terms that need to be met within a specified time period, prior to achieving a firm deal. Such conditions may include: financing, home inspection, review of status certificate, sale of buyer's home, etc. If the specified conditions are not met within the time set forth, the contract is terminated.

Condominium property versus freehold property

Condominium properties may include high rise property, townhomes, semi-detached or detached properties that have common areas or management fees. In such cases, the real estate ownership for the common properties is shared between the owners of the individual units in that community or association. Common areas including lobbies, corridors, parking spaces, elevators and stairs, and recreational areas. Condominiums are normally run by a management company. Freehold property is any real estate that is free of the hold of any entity besides the owner i.e. the owner can use the land in any way within the regulations set by local governance.

Construction loan

A construction loan is a short term loan made to a builder or individual for the duration of constructing their home and bearing the up-front costs of construction. Once the construction phase is complete, permanent financing is secured.

Down Payment vs Deposit

A down payment is funds put forward by a buyer at the time of purchasing real estate. The difference between the down payment and actual purchase price is funded most commonly through a mortgage. A deposit is the amount given by the buyer to the seller as a confirmation of their intent to purchase the property. This amount is held in trust until closing and is then used as a portion of the down payment.

Easement

Easement is legal permission given to a person other than the property owner for access to the property. Generally, easements are outlined on title or land surveys. For example: a utility company could be given an easement to access equipment on someone's land.

Fixed mortgage versus variable mortgage

A fixed rate mortgage is one where the interest rate and monthly payment amounts are fixed for the entire duration of the loan. A variable rate mortgage is where the interest rate fluctuates based on the prime lending rate, for the duration of the loan. These mortgages can be open or closed for a specified term. Variable rate mortgages can be converted to fixed rate mortgages through a refinance process.

Fixtures

Fixtures are items that are attached in a permanent manner within a property, and become part of the sale of the home. For example: light fixtures or built-in cabinetry.

Investment property

A property that is purchased by a buyer and is used for purposes other than a primary residence or primary place of business. This type of property is used to generate income through leasing or selling in the future for an appreciated value. This could also include any type of commercial property that is meant for future return.

Irrevocable period

The time that is set out in which the party giving the offer cannot take it back. This is the same time in which the party receiving the offer has the chance to respond.

Maintenance fees

Maintenance fees are costs paid by property owners to upkeep property or more specifically common areas in a condominium or community. These fees are usually determined by an association of the homeowners and are payable monthly.

Mortgage Amortization

A mortgage amortization schedule shows the details of a loan's repayment over the duration of the loan. With each payment made, the amortization shows the allocation of the payment towards interest and the principal as well as interest incurred. Most mortgages are based on a 25 year amortization period.

Mortgage broker

A mortgage broker is an individual or agency who acts on behalf of a buyer to help them procure financing via suitable bankers and lenders.

Mortgage privileges

It is important to read the fine print within your mortgage terms to make sure it has the privileges you expect. Banks set forth certain privileges that can be beneficial to a client. For example: prepayment - where you can make additional payments towards your principal to pay down your mortgage, porting - moving a mortgage to another property before the end of your term, without incurring any penalties, etc.

Offer/counter offer

An offer is generally a written bid for a property made by a buyer which includes the financial remuneration and other considerations regarding the property. The seller then has the option to accept this offer or make changes to the offer. This is called a counter-offer and negates the original offer made by the buyer.

Status certificate (includes reserve fund review)

A status certificate is a document provided by the condominium management company that includes all governing rules and regulations, as well as all financials of the corporation (including reserve funds, pending lawsuits, special assessments, maintenance fee increases, etc.) This document also shows if all maintenance fees have been paid up to date for the unit of interest.

Title insurance

Title insurance is an insurance policy that is generally purchased at the time of closing. This safeguards the buyer from any liens or claims against the title.

Title search

This is process by which a lawyer researches and checks all property records available to ensure that the title is clear of liens and encumbrances.

Vendor take back mortgage

A vendor take back mortgage is a mortgage given by the seller to the buyer. This would be useful when a buyer does not qualify through traditional lenders, or requires additional loans (such as a second mortgage).

Contact a real estate agent that knows the ins and outs of real estate. The Politis Brienza Team ensures that you are top priority when buying or selling your property. Call us today to schedule a consultation with a team member.