There's a lot of specific terms in real estate, and it can be overwhelming. That's why I've created an easy to use glossary page for you to use! Simply locate the first letter of the word you're looking for, and click on one of the bubbled letters. You'll be taken to that section of the "dictionary", and can look for the word as it appears in alphabetical order.
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
An acceleration clause is the provision included in a loan agreement that allows the lender to demand payment in full. The balance of the loan is accelerated and is due at the time the lender enforces this provision. The acceleration clause may be enforced if the borrower fails to make one or more mortgage payments. Ultimately, any occurrence that may increase the risk of the loan may initiate an acceleration of payments. Borrowers can prevent this from happening by paying the monthly payments in a prompt manner and on a consistent basis. The specific scenarios in which a borrower may face payment acceleration is described within the loan agreement. When borrowers are subjected to the acceleration clause, they may consider negotiating with the lender to come to an agreement on another method of repayment.
Acceptance is a seller's written statement that approves a buyer's offer. This ensures that the seller will be completing the home transaction with that specific buyer.
Access refers to the means that allow people to enter a piece of land or property. Basically, this refers to paved, dirt or gravel roads.
Accessibility deals with the extent of which a disabled person is provided to both enter and navigate within a home. In new housing construction, accessibility refers to basic features built into a home that specifically accommodates someone in a wheelchair. These include wide doorways and entryways clear of obstruction. Light switches, electrical outlets, fire extinguishers, and controls such as thermostats are placed at an appropriate height. Bathrooms and kitchens are often also designed for usage and management by those in wheelchairs. Bathroom walls are constructed to allow later installation of grab bars.
Acknowledgement refers to the legal term of a declaration that affirms a person acted on their own free will. Acknowledgement is often required for a deed and other papers. Since deeds are usually recorded, acknowledgement is an essential component, as it gives legal validity to a transaction. For example, when you are purchasing a home or getting a loan from the bank, your signature is required as an acknowledgement that your actions were voluntarily given.
Simply put, the actual age of a building refers to how long the dwelling has been standing. This would be the amount of years following the end of construction to the present day. This is relevant to know during the home buying and home selling process, since the price will accurately reflect the home's condition.
Add On Interest
The interest paid by the borrower on the principal for the life of the loan. The lender determines the amount of this interest at the beginning of the loan, and that is the amount due - in total - at the end of the lending period. The amount of interest calculated is higher than the nominal rate in most cases, since the borrower pays back a certain amount of principal with each payment they make.
An addendum is a change or an addition attached to a real estate contract. It indicates terms that weren't included in the original contract of purchase or sale. The addendum must be part of the original contract. Changes that occur after contracts have been signed are referred to as amendments. All parties must agree to the terms of the addendum before the contracts are considered complete. Quick example: a buyer requests that the refrigerator be included with the sale of the home. They've read through the contract, but nothing has been signed yet. This addendum, or this change, is added in to be agreed to by both parties. An addendum may also be used when the sale of the home is contingent on certain factors, such as verification of buyer financing.
Additional Principal Payment
An additional principal payment is the portion of a monthly payment that is above the minimum amount required, and is applied towards the principal of the loan. Borrowers can submit additional principal payments in order to decrease the loan balance at an accelerated rate, as well as to shorten the time that it takes to pay the loan off. If no additional principal payments are made, the loan will be paid off according to the original repayment schedule. It's a good idea for borrowers to ask their lender if there's any penalty for paying the loan off early.
Adjustable Rate Mortgage
An adjustable rate mortgage, ARM for short, is one option of a home loan. These mortgages have rates that are fixed for specific periods of time and change according to a specific schedule. Typical ARMs feature an initial interest rate that is fixed for a particular amount of time, followed by an adjustment period. For example, an interest rate that's fixed for three years on a 10-year loan. Most ARMs have a maximum cap which provides the consumer a guarantee that the rate will not increase over a specified amount over the life of the loan. Some ARMs also offer the option to convert to a fixed rate after a specific period of time. For someone who has an existing mortgage, an ARM may enable lowering on their monthly payment, and it's a good option for a consumer who does not plan to stay in their home for more than five years.
Adjusted Cost Basis
Adjusted cost basis is a cost valuation used in tax accounting. The historical cost of an asset undergoes various adjustments to arrive at an adjusted cost basis. The adjusted cost basis is needed to determine potential gains and losses resulting from the sale of a property in subsequent periods. Making sure that the adjusted cost basis is correct from the starting point is critical for recognizing future gains and losses, and minimizing potential tax liability arising from the sale of said property. Some of the adjustments used in adjusted cost basis valuation include adjustments for depreciation, capital improvements, assessments for local improvements, casualty losses minus home insurance reimbursement proceeds. Calculation of adjusted cost basis is complex if the property was received as a gift or as an inheritance.
How often interest rate adjustments happen in an adjustable rate mortgage, ARM. Most adjustment periods are one, three, or five years in length. However, some loans adjust at different intervals. Lenders will advertise ARMs with two numbers in front. For instance: 5/1 ARM. The first number indicates how long the initial interest rate will remain in effect - in this case, the beginning of year 5 of the mortgage. The second number indicates how often, after the first period, the interest rate can adjust - in this case, after that first adjustment, the adjustment period will be one year. Most lenders change interest rates based on a specific index, such as Treasury securities or the national average cost of funds index.
An administrator is a person who is given the power to distribute and manage the estate of a deceased person who left no will behind. Administrators are much like executors. The administrator is usually appointed by a probate court and is given a set of responsibilities to carry out. The administrator needs to check on the assets and liabilities of the deceased person and ensure that any outstanding financial obligations are met. Obtaining death certificates, setting up an estate, filing estate tax returns, selling assets to pay bills, filling legal documents and locating members of the immediate family of the deceased are all duties the administrator needs to fulfill before the property can be distributed.
An administrator's deed is the legal document that transfers the property of an intestate individual, a person who passes away without a will. The property is transferred to descendants or next-of-kin with the use of an administrator's deed.
Agency is the relationship between a real estate agent and a buyer or seller. This relationship is created when a written contract is drawn up between the two parties. Once the contract is complete, the real estate agent has the authority to act for the buyer or seller in matters related to real estate transactions. As part of the agency relationship, the real estate agent owes the buyer or seller a fiduciary duty to put their needs before his or her own personal interests.
An agent is an individual who is licensed to handle real estate transactions. Some people use the phrases real estate agent and Realtor interchangeably. This not not entirely correct. All Realtors are agents, but not all agents are Realtors. Realtors are a part of the National Association of Realtors, who pay a fee each year to remain members, adhere to a Code of Ethics and maintain that code through re-examination every four years.
A boundary that is chosen by the owners of adjacent land where the property line is in dispute, or where the true property line is not easily ascertained due to man-made or natural causes. Some agreements that may have been handshake agreements pertaining to fences, trees or other structures may no longer be to the liking of the new home owners. In these cases, property owners can put their agreements in writing to guard against future disagreements.
When a person purchases a home that has been recently built, they might ask for allowances. An allowance is an amount of money that the builder offers to the home buyer. This money is used by the buyer for things like carpet, furniture or anything else that they need to outfit the home. The amount of the allowance typically depends on the cost of the home. The allowance will be negotiated between the two parties. Not all new home sales include an allowance. Allowances are typically given in cash. In some cases, the allowance may be provided back to the buyer, after the buyer pays for the property through a mortgage.
An alternative mortgage is any mortgage that is not a traditional, fixed-rate mortgage. The alternative mortgage might be an adjustable-rate mortgage, or an interest-only mortgage. Some people even classify short-term and longer term mortgages as alternative. Alternative mortgages are generally riskier than the traditional fixed-rate mortgage because of the volatility that they create in uncertain economic times. When interest rates are constantly shifting, a homeowner's monthly payment can vary, depending upon where the rate falls that year. The advantage of alternative mortgages is that they can provide savings for people who are able to get them at the right time. Homeowners who get lucky can see their rates go down when they have the right alternative mortgage.
In a particular neighbourhood, there may be special perks that are only available to those residents. These perks are often used by builders or real estate agents to entice buyers. A comparable home that does not feature these extras certainly does not offer the same level of value. Amenities can be varied, depending on the community and the area. These can be included at no additional charge, or there could be a fee in order to be included. These extras can include things such as access to community parks, swimming pools, fitness centers and more.
Amortization is the schedule that is used to determine one's monthly payment for a loan. Mortgages are considered to be an amortized loan, since one makes a regular payment based on a schedule created when they are approved for the loan. You should be given an amortization schedule before you sign the documents to receive your loan. It'll tell you exactly how much of each payment will go towards the principal, and how much will go towards interest. This can help you determine how long your mortgage should be for. A 30-year mortgage will cost you more in interest than a 15 year mortgage will. Always ask your lender if there's any penalty for paying off your mortgage early. If not, do your best to pay ahead of that schedule!
Annual Percentage Rate
The annual percentage rate, APR for short, refers to the annual rate of interest that a borrower pays. This is a single percentage rate that represents the annual cost of the loan over the loan period. This annual rate can refer to the rate charged on a mortgage or on a credit card. Laws dictate that lenders must provide this information to the borrower before they sign loan documents. This allows the borrower to compare rates between lenders. There are multiple ways of calculating annual percentage rate. Commonly though, you can calculate this number by multiplying the periodic interest rate by the number of annual compounding periods. It must also include certain fees and charges not related to interest. The lender must provide this calculated rate three days before closing a loan.
An annuity is a payment of a fixed sum of money to a lender at set intervals, decided at the start of the annuity. Most annuities are paid off month to month. Every time a buyer agrees to pay a lender in monthly installments, the buyer is agreeing to an annuity. An example of this is a mortgage. At the start of the mortgage, the lender decides how much money they will lend the buyer, calculating the principal value of the loan and then any interest. Additional money needed for an escrow account may be added. The mortgage company then calculates the monthly payment the mortgage requires for the entire term. Most mortgages are front loaded - meaning that initial annuity payments pay off the interest owed before the payment will pay down the principal.
When you make the decision to buy a house, you'll complete an application. An application is the information that you submit to the bank that offers specific details about your income, family and any bills that you owe. You can submit an application at any time. A fee may be charged to you in order to pay for the administrative costs associated with doing a background check on the applicant. This fee is charged regardless of approval.
An appraisal is an opinion of the value of a property at a given point in time. This value is the market value of the property. The appraisal process is important in determining the value of a home because many factors change the value of a piece of property over time. The individual or company that conducts the appraisal will look at things like the area and value of other homes in the area where the property is located. If the area has recently seen new development or businesses come to the area, that could increase the value of the home. An appraiser will usually provide a written document detailing the appraisal. This document is then used for tax purposes or when calculating a mortgage loan. Borrowers usually pay for the appraisal report at the closing, and are entitled to a copy of the report. Since a home is the collateral for a mortgage loan, a lender will not offer a mortgage for more than the value of the property.
Appreciation is how much value your house gains over time. If a home is in a good neighborhood and is kept up to date, it will appreciate much better than a home in a bad part of town that has been neglected. However, these are not the only to factors that play a role in appreciation. There are many more, including but not limited to: the age of the neighbours, location, schools in the area, the size of the town and the size of the house.
Arbitration is a way to solve a dispute that relies on a third party for the decision. In an argument between two people, there are several ways to resolve the conflict. Going to court is one way that two people can solve their problem, but this is usually too expensive. Alternative dispute resolutions are a way to solve problems without taking up the court's time. Arbitration is one of the most popular alternative dispute resolution choices, and is a valid legal technique. In arbitration, both parties agree to accept the decision of the tribunal or arbiter. The arbitrator is an unbiased third party who has no self-interest in the matter.
A real-estate term referring to selling or renting a property in its current condition, without any guarantees. The buyer or tenant accepts the premises in that condition, without expecting any improvements to be made to the property. Some home buyers choose to purchase a property as-is in order to fix it up to their own specifications. As-is properties are commonly purchased as "fixer-uppers", bought by those who are flipping (remodeling) houses for profit.
The asking price on a property is the starting point in the negotiation. It's the first price that a seller puts out on a property, when they put the home on the market. Later in the negotiation process, the asking price will serve as the starting price point. The buyer will come back with an offer that is somewhat below the asking price, and the two parties will come to an agreement from there.
An assessment is an evaluation of your home for tax purposes. Assessments are typically done once a year, either at the beginning or the end of the year. Most homeowners will have an independent assessment done with the hopes that the value of their home will be lower. Lower home values result in lower property taxes.
Attorneys' fees refers to money paid to lawyers by one or both parties, in cases of litigation. In real estate, most transactions involve a contract that indicates who will pay attorneys' fees in case the transaction involves litigation. These types of fees can include the hourly fee charged by attorneys, or it may be a flat fee for drawing up certain documents. Court approved fees are those the court deems fair to cover expenses related to the case. In most real estate litigation, the contract stipulates that the losing party covers all attorneys' fees. This is designed to prevent frivolous lawsuits from hitting the court system. If the court deems an action frivolous, then the court often requires the losing party to pay all fees.
A back title letter is a document given by a title insurance company to an attorney representing a buyer or seller, that describes the history of the title. They are used legally to give the condition of a title, and the title is usually handled by a reliable examiner before a formal letter is released to the attorney. The attorney is expected to examine the title for whatever legal reasons are deemed necessary by the buyer or seller. Back title letters go back to a specific date, but can include the entire recorded history of the title.
A balanced market is when the number of homes for sale are equal to the number of buyers actively seeking homes. This type of market shows that demand is equal to supply, which translates to homes selling within an acceptable time period, as well as stable home prices. The atmosphere for both buyers and sellers is relaxed.
A balloon loan is a type of mortgage loan where the loan matures far earlier, such as in 5 or 10 years. Balloon loans often have a feature that allow the borrower to reinstate the loan at the end of the balloon period, though often at a higher interest rate. Consumers who are seeking financing should carefully consider the risks associated with a balloon loan, one being the inability to secure longer term financing, and another one being subjected to higher interest rates. Balloon loans may be ideal if you are considering selling your home, and wish to refinance to take advantage of lower interest rates. However, it's important to check the loan terms for pre-payment penalties that could be costly.
Betterment is a home improvement project that adds value to real estate. Betterments are usually contrasted with routine maintenance, since maintenance costs maintain a home's current value. Constructing an addition onto your home is one type of betterment. Building a new deck is another kind of betterment.
Unlike a unilateral contract (where only one party agrees to perform a service), a bilateral contract notes an agreement that requires both parties to perform an obligation. Example: a seller agrees to pay half of the cost to have a home's electrical wiring reconstructed, if the buyer agrees to pay the other half. When both parties pay their half of the expense, the job will be performed, and the contract fulfilled. Bilateral contracts are sometimes referred to as "Reciprocal Contracts," since both parties need to reciprocate in order to fulfill the agreement. A lease agreement can be viewed as a bilateral contract, since one party agrees to pay monthly rent, and the other party agrees to allow occupancy of the property.
Bill of Sale
A bill of sale is a real estate document that describes, in writing, the specifics of a transfer of property. This document provides legal evidence that the seller has transferred the rights of the property described in the bill of sale to the purchaser. A bill of sale is also called a purchase and sale agreement. A real estate transaction with assets worth substantial sums of money will often have a more complex bill of sale than a smaller and less valuable property. A typical bill of sale for a property will detail whether any appliances or fixtures are included in the sale, as well as information about the closing costs and building inspections.
A binder is an agreement between a home seller and buyer that grants the rights to purchase for a specified period of time. These rights are secured by the exchange of funds from buyer to seller, which could be lost if the buyer decides not to follow through with the purchase. These funds are known as earnest money. A binder may also be known as an offer, and doesn't have to be accepted by the seller. In order to protect their assets, those purchasing the home should ensure that the binder's terms include conditions for a refund of exchanged money, should the deal not progress. If the home purchase doesn't occur within the period specified in the binder, the agreement will expire. Certain conditions may be included in a written binder, including financing and property inspection contingencies.
A biweekly mortgage is one that requires the borrower to make payments every two weeks. This is different from a traditional mortgage, which requires that a borrower make a payment once per month. Many people go with a biweekly mortgage since it lines up with their payment schedule at work. Others have found that this is a good way to pay down the loan much more quickly. Though a biweekly mortgage does allow people to pay down their loans more quickly, these loans also provide more opportunities for a person to be late on the loan. This can bring about late fees and delinquency charges. A biweekly mortgage can be risky in this way. One must decide which option will be best for them.
Blanket Insurance Policy
A blanket insurance policy is one that allows holders to take advantage of larger limits than they might have under a single insurance policy. For example, if a property owner happens to have more than one item that is insured, they can take advantage of an overall insurance limit that applies to all of the properties. A person with two homes may have each of them insured for $1 million. Under a blanket insurance policy, the two properties would be insured for $2 million together. In this instance, if the property owner wants to file a claim of more than $1 million on one of the properties, they can make that claim. Under a normal policy where the two properties were insured separately, the property owner would be limited to just $1 million in coverage for each of the properties.
A blanket mortgage can be used for many different real estate projects. This can be quite effective when a real estate market is booming. A blanket loan reduces the expense and time involved in negotiating numerous smaller loan packages. It's a more flexible financing option for builders, developers and investors that buy large areas. Individual houses or condominiums can be sold under the parameters of a blanket mortgage. This blanket mortgage permits debtors to avoid the "due-on-sale" clause, which makes the entire loan payable when the property is sold. Multiple units can be covered with a blanket loan. Flexibility is increased with the blanket mortgage, so that investors have more latitude in handling sales. This is important in real estate that's considered high volatility. Developers can adjust to changing circumstances with a blanket mortgage.
Book value is the official value of a home or property. The amount is based on the original cost of the property plus any improvements that have been made, minus any depreciation. If it was an equation, it would look like this:
Book Value = Original Cost + Improvements - Depreciation.
As an example, let's say you bought your home in 1985 for $50,000. In recent years, you've completed renovations that improved multiple systems, and brought the aesthetic up to date. In the end, you put $40,000 into the house. As time goes by, the property no longer suits your needs. You decide to sell and talk to several real estate agents. As you are trying to develop the asking price, your Realtor tells you about the book value. You simply take your original purchase price, $50,000, and add the amount of improvements that you made, $40,000. No depreciation has occurred, since the real estate market has only improved since the '80s. This gives your home a book value of $90,000.
A home's boundary is defined as the border between two adjacent properties. It's the spot where one individual's yard ends, and another's begins. Unfortunately, boundaries aren't always clear cut. Sometimes, the local government will become involved if there's a boundary dispute; attempting to more clearly define the boundaries of the two properties. Sometimes a boundary is physical - a homeowner constructs a fence or a wall to clearly distinguish where their property ends and the neighbour's property begins. But most of the time, a boundary is a legal vehicle used to assess the home, and not a physical entity. Boundaries are often established by professional surveyors who use GPS systems to accurately identify the exact location of the boundary between two properties. These GPS coordinates are used to specify the size of a specific plot of land.
Breach of Contract
Breach of contract is when one party to a lease, written or oral contract fails to fulfill their duties without a valid legal excuse. In real estate, a buyer that signs a contract as part of the sale process for one home can be in breach of contract if they find and decide to purchase another property in that same time period. They may have to purchase the original property or pay some type of penalty for such behaviour.
Breach of Covenant
A breach of covenant is the failure to obey a legal arrangement. In each contract that is created, each party makes an implied covenant to the other that they will approach the arrangement honestly, and in good faith. It's also an unwritten agreement that one party will not interfere with the implied rights of the other party. In real estate, a breach of covenant of good faith arises when one party refuses to uphold their obligations within the contract. A breach of covenant can occur when a seller decides not to sell a home to a buyer, or if a seller backs out of a sales agreement before completing the purchase. In such cases, the wronged party may take steps to start litigation against the other.
Breach of Warranty
A breach of warranty happens when a seller can't pass a clear title to a buyer. When sellers put a property on the market, they're providing a guarantee that they possess a clear title to that property. When a buyer makes an offer on a given property, they assume the seller has the clear title, based on that guarantee. Title searches will determine whether or not the seller actually has a clear title to the property. If the title company finds a problem, the seller is in breach of warranty. Once the buyer knows about breach of warranty, they can walk away from the sale. In some cases, this breach doesn't have to stop the sale; the seller may need to take action to clear the title, and if that works, the buyer can still purchase the property.
A bridge loan is a mortgage loan that's used when a buyer is still seeking permanent financing for the purchase. A bridge loan can be used by a buyer who has not yet sold their last home, and needs a loan to pay the mortgage on both the old and new homes. This mortgage must be paid until the sale of the last home permits a permanent mortgage for the new home. Sometimes, it's used to prevent a home from being sold to another buyer before the first buyer can find a mortgage with agreeable terms. Normal closing costs generally apply to the bridge loan agreement. Bridge loans are almost always meant as a short-term financing solution. These loans can be financed as an interest-only loan in some cases. Some come with down payments and others are unsecured. Another name for the bridge loan is the swing loan.
A real estate broker is someone that oversees the transactions that occur during real estate purchases, like residential, commercial, and rural properties. An experienced and professional broker will know their local area like the back of their hand. They'll also have extensive knowledge about real estate laws. In many cases, the same broker can represent both parties involved. First-time home and real estate buyers should always obtain services from a broker, since this helps facilitate any transactions that take place, and assures a buyer that all purchasing procedures are being properly followed.
A firm/office that facilitates a transaction between a buyer and a seller for a commission or fee is called a brokerage. A real estate brokerage facilitates, or brokers, a real estate transaction by working with a buyer and seller to help determine the price of a piece of real property. Once the price is determined, the brokerage ensures that all legal documents are completed, necessary signatures are obtained and appropriate monies are collected. Commissions are paid when the transaction between the buyer and seller is concluded. Using a brokerage firm can save buyers and sellers time and valuable resources.
A building permit gives official permission from a local government entity to allow for new building construction, existing building renovation, or major repairs to an existing building. Property owners and contractors need a building permit for residential, commercial, or industrial properties. New building construction always requires a permit. The local government agency requires a written plan before issuing permits. After issuing the permit, the agency may need to perform periodic inspections to make sure the work meets local building code and submitted plans. At the end of the building project, the inspector must do a last inspection before an occupancy permit goes out. Most major renovations of an existing buildings also need permits. Updates of major systems, making additions, and/or structural changes are always on the list. Some repairs to existing buildings may need a permit in most jurisdictions. For example, if you want to construct a garage on your property in the city of Yorkton, you need a building permit to do so.
Bundle of Rights
The bundle of rights refers to the different interests and rights an owner has on their property. When individuals purchase a piece of property, they automatically receive certain rights to that property. Some rights granted to property owners include the rights of possession, control, exclusion, enjoyment and disposition. Possession indicates that the buyer is the owner of that property, control means the buyer commands how to use the property. Exclusion means that the buyer can keep people off the property, and enjoyment indicates the owner's right to use the property in any legal manner. Disposition means that the owner can sell the property at their will. The bundle of rights are not always the same for everyone; some real estate contracts have provisions that inhibit certain uses of the property, or require the owner to get permission to sell.
A bungalow is a detached house with one story and a partial second story or attic, built into a sloping roof. A bungalow generally has fewer square feet of living space than other homes. Per square foot, a bungalow is more expensive to build than an equivalent two-story home, since the bungalow needs a relatively larger foundation and roof. The larger foundation also requires a larger lot. A bungalow is well-suited for the elderly and individuals with impaired mobility. It's easily accessible for the resident because all of the living areas are on the same level. Since it is a smaller house, it is also generally easier to keep clean.
Buy Down Mortgage
A buy-down mortgage is a special type of home financing where the lender agrees to lower the interest rate for a few years, in exchange for payment. This type of mortgage might be structured in any number of ways. In cases where a seller is desperate, they might negotiate with the lender to provide regular payments in exchange for the lender lowering the interest rate on the buyer's loan. In other cases, the home buyer will arrange to make small, extra payments in order to purchase the rate decrease. The buy-down period will usually run anywhere from one to five years. Buy-down mortgages are most often used as an enticement by the home seller. In a competitive market, these arrangements give the seller an additional benefit; they can dangle cash savings in front of a buyer who might not be sure about the financial impact of the purchase.
A buyer's market occurs when the supply of homes on the market exceeds the number of home buyers. Supply is higher than demand. This translates to homes staying on the market for a longer period of time, as well as price drops on said homes. It may take sellers longer to sell their home in this type of market, with less negotiating leverage in terms of selling price. The atmosphere tends to be relaxed for buyers, and competitive for sellers.
Buyer's remorse is a phenomenon that happens shortly after a buyer makes a home purchase. It's an overwhelming feeling of regret in regard to the event. Buyers will finally see and feel that the purchase is a real, tangible thing. Though they want the home and made the decision to purchase the home, they can begin to feel as if they've made a mistake. This is a largely irrational emotion, since a large amount of consideration went into this large transaction and long process. It lasts for a short amount of time though, usually until the buyer realizes how well the home meets their needs.
Bylaws are created by the city/town/village/hamlet to govern activities in the community, to protect the value of properties, to provide basic securities and to keep peace. For example, Yorkton has a bylaw that states homeowners need to maintain their yard or outside appearance of their home. This type of bylaw isn't about aesthetic for the sake of aesthetics, but for the value of the neighborhood. The neighbouring homes will not lose value when they go up for sale, because it wouldn't be fair for the majority to take a hit when only one homeowner is the problem or has fallen on hard times. Bylaws may also state which areas of the community are "common areas", and therefore do not belong to any one specific homeowner. Examples of a common area in a planned community could be tennis courts, parks, tobogganing hills, etc. Most bylaws follow provincial guidelines, but may adapt based on the needs of the community.
A cancellation clause is the section of a real estate contract that describes circumstances in which each party may cancel the agreement, as well as other details regarding cancellation. For example, when a buyer makes an offer on a property, that agreement typically has a cancellation clause that allows the buyer to cancel the agreement within a certain number of days if the property inspection report comes back with negative results. Parties to an agreement need to submit a cancellation notice within the time frame stipulated in the cancellation clause in order to be compliant with the agreement terms. Before signing agreements, it's wise for parties to pay attention to that section of the contract, in order to find out what options they have if they decide to cancel.
A cap is the limit in which an interest rate or monthly payment can increase in a loan on an adjustable rate mortgage. Most adjustable rate mortgages (ARMs) have an initial interest rate and a set period where the interest rate will not change. After this period, the rate can change based off of indices used by the mortgage company. The cap is a tool used in the agreement between the lender and the buyer to ensure that the buyer's monthly payment will not balloon over a set amount. Most mortgage companies set a cap such that the lender can't increase the interest rate by more than five or six percent over the life of the loan.
Capital is just another way to refer to money. When you purchase a home, it's known as investing capital. Selling your home means that you are liquidating your capital. Asking for a capital infusion means that you are looking for a loan.
A capital expenditure is anything that you purchase that adds value to something. Furniture and equipment are the most common types of expenditures in homes. Most purchases will benefit the home for more than a year. A large expenditure that you can add to your home could be a garage or a swimming pool. Expenditures can be depreciated for up to 39 years; this is only for tax purposes. Some repairs to buildings can be considered capital expenditures if they improve the condition of the building, including asbestos removal or the installation of smoke alarms.
Used to describe a method of selling a home. A group of real estate agents are invited to tour a handful of different homes that are on the market. The purpose of this is to allow other agents to see the homes and suggest them to their own clients, who may not have even known about the houses. This can be incredibly helpful in places where the market is slow, since other real estate agents can have a trove of potential buyers. The more the real estate agent learns about the house, the more information they are able to offer to people who may be interested. A caravan is similar to an open house, except it usually features a series of homes versus a single property, and is for real estate agents only.
A cashier's cheque is written and funded by a bank or other financial institution, then signed by one of their representatives to be payable to a specified recipient. When purchasing a cashier's cheque, the customer pays the bank the full amount of the cheque, along with a small service charge. Unlike a personal cheque, using a cashier's cheque ensures that the purchaser's funds are available for payment to the recipient, as the cheque's amount is first secured in the issuing bank's own account before the bank signs it over to the recipient. In this way, they differ from certified cheques (which are also guaranteed by the issuing bank, but instead drawn from a portion of the customer's account that was reserved for the cheque amount).
A caveat is a formal notice that asks a court to intervene and suspend action until the party that filed the caveat can state their case. In real estate, a caveat often gives the person issuing the challenge control of a property upon its sale. A caveat does not force the sale of a piece of property, but it puts the person that issues it next in line for payment after the bank or mortgage company. Anyone who has a legal interest in a piece of property can lodge a caveat in the property. A caveat can prevent a homeowner from selling a piece of property to someone else if there's another third party that has an interest in the estate. The court will tell the homeowner that the home cannot be sold until the issuer of the caveat is allowed to state their concern.
Certificate of Title
The certificate of title is the piece of paper that states the property belongs to the owner. This document can help buyers know what the assets of the property are, and how much they are worth. The certificate is divided into sections; one section will list the physical aspects of the property. This can include the size of the buildings or the amount of land. It can also include the address. A certificate of title also gives information about the owner of the property. The registered name of the owner as well as other types of identifying information are listed. The information on the title will vary based on where the property is located. The last section on the certificate is the most important since it lists any claims or liens against the property.
Chain of Title
Chain of title is an official record of ownership linking the original owner of property to the most recent owner. Banks usually ask for a chain of title from the buyer's attorney to ensure that the property is free from any previous legal claims to title.
The change frequency refers to the adjustment schedule for an adjustable rate mortgage (ARM). It's different for different mortgages - some people have their rates adjusted every three months, though the most common change frequency is one year. A higher change frequency means that the loan is more volatile. This can make financial planning very difficult. A lower change frequency allows the borrower to plan into the future. However, it provides less ability for the borrower to take advantage of shifting rates.
Property that is clear from liens, encumbrances and judgements; belonging solely to the owner. Other terms for clear title are used interchangeably, such as "free and clear title." When a title is clear, no other party can make a legal claim for ownership of it.
For the home buyer, the real estate closing is the final step into home ownership. There are still many documents to sign, depending the type of mortgage. A cash purchase will require less documentation. The closing agent will explain each document prior to signing, and issue a copy to the buyer. The closing statement is explained in detail, so that no amount is unaccounted for. This is the day that all money is due and payable in a cashier's check, in most cases. For the seller, the closing is payday. There's not as many documents for the seller to sign. The closing agent explains the closing statement, and answers any questions. Generally, the closing agent will issue a cheque to the seller. In some cases, the seller may ask that the funds be wired or directly deposited into their bank account.
Banks and financial institutions charge fees for creating the mortgage loan. The closing costs generally amount to about 1 to 5 percent of the mortgage, but can vary widely between provinces and types of mortgages. These costs include fees for lawyers creating the paperwork, title insurance, assessment of the property, and even mundane services like shipping the paperwork. Sometimes, the closing costs can be rolled into the price of the mortgage loan. The financial institution must provide a list of the fees, and an estimate of their costs prior to the final sale.
Cloud on Title
Cloud on title is a phrase referring to an apparent encumbrance on real estate property. Common problems uncovered in a title search include liens, old mortgages with no record of pay-off, an improper previous deed and an unresolved levy by a government agency. The seller of the property must clear up the clouds on title before the sale can go through.
Collateral is a common term in the lending world, and it refers to a tangible item that a borrower pledges, in order to secure their financial obligations. In the case of a home purchase, collateral may be an existing home, money in the bank, or another type of property. The collateral is used by the lender to ensure that it is financially protected in the event that the borrower defaults.
Commission in real estate sales is the amount of money that a client pays a broker for their services. The amount is based on a percentage of the sale price of the home. There are several people who split the commission. A property that is listed by one agent may be sold by another. Therefore, at least two agents are involved in a sale. No matter how many agents are involved, the client only pays one commission, and the listing broker handles the split. Commission is negotiable in a listing contract; however, many brokers have a suggested percentage that they like to charge. At the time of the listing, a good faith estimate of costs will be given to the seller. The estimated commission will be listed at the agreed upon percentage, multiplied by the listing price. The actual commission will be adjusted according to the sale price.
Comparables are similar properties in the immediate area of the property in question. Real estate agents will obtain a list of comparables for several reasons. The first reason is to assist buyers during the negotiation process. By viewing what similar homes have sold for, buyers can submit an educated and reasonable offer to a seller. Secondly, viewing comparables can be helpful when determining the value of a property. Of course, a property appraisal is the primary mode of determining the value of a property, but comparables are easily obtainable, providing valuable insight to the value of the property. When choosing comparables, it is important to consider properties that distinctly resemble the home being considered, as well as what those homes actually sold for.
Comparative Market Analysis (CMA)
A comparative market analysis is a process in which individuals or agents research the sale prices of similarly situated homes sold in a given area, during a recent period of time. This analysis is designed to give sellers, buyers and agents a starting price range for homes when they are put on the market. The CMA looks to answer one important question: When compared to the other homes in this area, how much is this specific home worth? Though looking at the prices of recently sold homes is one part of the analysis, much more can go into the equation. Most buyers, sellers and agents who conduct CMAs are simply looking for a price range. It's not a process that is used to provide an exact, scientific starting point. It merely gets the ball rolling.
Contiguous lots are lots that are right beside one another.
A contingency is a condition that must be met for a contract to be valid and binding. In the case of a real estate offer, a contingency may include many things that could possibly happen to prevent the sale from closing. Some buyers will make their offer contingent upon the sale of their own home. In this case, the buyer could back out of the deal if their home never sold - meaning there would be no repercussions for backing out of the deal. Offers can be subject to certain closing dates. Buyers sometimes limit their offer to their ability to obtain a favourable mortgage rate. When property value is uncertain, a definite appraised value may be stipulated. Accepting an offer with a contingency clause can be a good way to obtain a sale. Make sure that both parties can live with the outcome should the contingency come into play.
A contract is an agreement between two competent parties that is legally binding. In real estate, everything must be in writing to protect all parties. The contract begins with a buyer making an offer on a property. The buyer views a property and decides to buy it. The agent will help the buyer construct an offer. The buyer decides the amount they are willing to offer. There are many things to consider in an offer. Who will pay for each closing item, repairs and other concerns? Each item needs to be spelled out in detail. Earnest money often accompanies an offer, to show that the buyer is serious about the purchase. The agent presents the offer to the seller, who has the option of accepting, rejecting or countering the offer. Any change in the offer results in no contract. There must be a meeting for a contract, so that everyone agrees on all of the items stated in the contract.
Contract of Sale
A contract of sale is the document that details the seller's agreement to deliver ownership of the home to the buyer, as well as the buyer's agreement to deliver payment for the home. The contract of sale is typically lengthy and provides an all-inclusive description of the sale. The title company that is being utilized, as well as the logistics of the final handover of funds and keys will also be described. This document describes the selling price, closing costs, contingencies to the sale and any other details that are specific to the transaction itself.
This is the legal name given to the ownership interest that a party has in a property, on the basis of some contract. The most common type of contractual lien is the mortgage or deed in trust. The important thing to remember about a contractual lien is that the property interest is given to another party voluntarily.
A conventional loan is a long-term loan that comes with a fixed interest rate. These loans usually carry a term of 15 or 30 years. Borrowers qualify for these loans based on their credit score and overall financial situation. There is little leeway or other loopholes that allow an unqualified borrower to get the loan. For example, there are no allowances made for a borrower who has a debt-to-income ratio above 40 percent. Down payment requirements must also be met to qualify. Generally, a down payment of at least 20 percent is required to get the loan. A loan underwriter will analyze your financial situation to determine if you would be likely to repay the loan under conventional terms. You may have to lower your debt level or increase savings to be approved.
Convertible Adjustable Rate Mortgage
A convertible adjustable-rate mortgage is a hybrid home loan, designed to give borrowers the best possible interest rate. Borrowers can take advantage of low initial interest rates with an adjustable-rate loan. Convertible adjustable-rate loans allow the option to switch to a fixed-rate loan within a predefined period of time, usually between the second and fifth year of the loan. Unlike a traditional loan, a convertible adjustable-rate mortgage can be converted to a fixed-rate mortgage without refinancing the loan. Borrowers who opt for a convertible adjustable-rate mortgage while rates are high can save a significant amount of money, if rates decrease during their conversion period. There are usually fees involved in convertible adjustable-rate mortgages, take care to note them. A service fee is typically charged to convert from an adjustable to a fixed-rate loan.
A conveyance is the legal term used to describe the transfer of property between two people. It's most often used when discussing the transfer of a title between the grantor, or seller, and the grantee, or buyer. During the conveyance process, it must be determined that the seller has the right to sell the property and that no other person has claim to the land or real estate that the grantor is trying to sell.
Corner influence is a phrase that describes the impact on the value of a home because of its position directly on a corner of the street. Corner lots may be more desirable because they are often larger, and only surrounded by one neighbour instead of the usual two neighbours. As such, these homes often see a higher listing price (demand is higher).
A counteroffer is a response to a prior offer made on a home for sale. If the buyer submits an offer for one amount, the seller can reply with a counteroffer for a different amount. Offers and counteroffers are typical in the negotiation phase of buying a home. Counteroffers don't always involve a single change; the buyer or seller can add other terms to the offer while keeping the selling price the same as the previous offer. For example, a seller's counteroffer may agree on the buyer's selling price, but they may ask that the buyer pay their own closing costs. Either party has the opportunity to submit a counteroffer after receiving an offer, and the negotiation ends when the final counteroffer is accepted by both parties.
When a person applies for a loan, the financier scrutinizes that person's credit rating. A credit rating is a score that has a basis on how a person pays their bills on time, as well as the person's employment status and residency. It provides an idea of how credit worthy a person is, and how well that person would be able to meet the credit obligation. A majority of the rating is based on how well a person has paid past obligations, on time, each month. A person who has paid their bills on time with few or no defaults has a good rating. People who have defaulted on loans, credit card bills, and other expenses often have lower ratings. The length of time a person has been employed by the same employer also tends to be factored into their rating.
A credit report is an official report that shows a person's credit history, including payments they have made on debts, including previous rent or mortgages, bills and utilities, credit cards, and loans.
A creditor is a person, bank or financial institution to whom money or a debt is owed. In a loan, there are primarily two parties that are involved in a transaction. The debtor and the creditor enter a contractual relationship during a home mortgage. The debtor is the person who borrows the money, while the creditor is the financial institution or bank that provides the funds.
Defects are often discovered during the home-purchasing process. These can include rooms that need painting, doors that are in need of repair, or an unkempt yard. These are known as curable defects, and are used for negotiating selling prices since they can be easily repaired by the buyer or seller of the home. More serious defects such as a high-crime neighborhood, poor schools or noisy neighbours are regarded as non-curable. When purchasing a home with curable defects, it's a good idea to have them listed in a purchase and sale agreement, and designate the responsible party in this agreement. Typically, a curable defect will reduce the overall value of the home, based on the severity of the defect and who will ultimately be responsible for the repair. Property that's in poor repair typically will sell for far less than a home that has been properly maintained.
Curb Appeal is a term that describes the first impression a potential buyer gets when looking at the home from the outside for the first time. A home with great curb appeal is more likely to get visits than a home that looks drab and boring from the outside. If a house is showing signs of wear and tear, or the yard has weeds everywhere, it's going to create a negative first impression that could likely stick with the potential buyer. This negativity can greatly affect the buyer's opinion on the inside of the home, regardless of how well-kept it is, or how well it meets the buyer's lifestyle needs.
Days on Market is a common real estate terms, referring to the number of days that have passed since a seller listed their property. Sellers are more concerned about this when the market is a buyer's market. The longer that a property sits on the market in this climate, the more unlikely it is that the seller is going to get their asking price on the property. With this in mind, many sellers will set a point at some number of days on the market when they consider re-evaluating the asking price. The number of days on the market required to sell a property depends upon a number of factors. Most homes will be on the market for at least 90 days. Once a property has been on the market for 180 days, though, sellers and agents typically get very anxious. In the end, if you have the right buyer, days on market doesn't really matter.
A deed for your property proves that you are the legal owner of that property. When you sell your building, the deed to that building will be transferred to the new owner. There are a few variations of a deed that property owners should be aware of. Administrator's deeds are what an estate uses to transfer property on behalf of the owner. This could be necessary if the previous owner has passed away, or cannot be located. Make sure you have a copy of any deed you acquire at all times. It will help you if there's ever a dispute over the ownership of a property.
Lenders require that borrowers make payments on time each month, or as agreed upon when the money was loaned. Those who don't make their payments on time, or who abandon their financial obligation are said to be in default on their account. Being in default is a serious financial circumstance that has legal repercussions. People who aren't able or willing to make payments on a loan often have their wages garnished and their assets seized as a way of paying the money they owe. In serious circumstances, people face fines or imprisonment for not making regular payments. If you are ever in fear that you will default on a loan, contact your lender and see if it's possible to work out a new payment agreement. You can also ask for a forbearance of payments.
When purchasing a property, the buyer sometimes gives money to the seller when they are executing a purchase contract. This is called a deposit, also known as earnest money. This money is a way for the buyer to communicate to the seller that they are serious about the purchase, and are willing to negotiate on the contract. If the seller backs out of the deal, the buyer typically keeps the deposit, unless the contract states otherwise. The amount of the deposit can vary from contract to contract. It can be as little as one dollar, up to a considerable percentage of the total purchase price. Commonly however, the amount is between 1% and 3% of the purchase price. Once the contract is agreed on by both parties, the deposit will be applied to the buyer's closing costs of the loan.
Depreciation is the decline in the total value of a piece of property. Note that depreciation can only occur to the building itself, and not the property the building is located on.
Dimension plans are the printed layout of a home. They're less detailed than blue prints, but give the dimensions of the home and each room. These types of plans are shown to people who are looking to buy a home. These plans are made available to potential buyers before they schedule a time to look at a home. They may also be given to potential buyers during an open house, so that they have something to refer back to. Dimension plans are also used when looking at building a house. The contractor will put several plans in front of the owner, based on their budget. When one of the plans is chosen, detailed blue prints for that layout will be used to build the home.
A disclosure statement is a document provided by the seller of a property. It details negative aspects of the property. Leaks in the ceiling, plumbing issues, insect infestations, and even problem neighbours can and should be included in a disclosure statement. Any repair or remodeling work done by the seller should also be disclosed, including any applicable permits required for the work. Disclosure statements provide a potential buyer with information relevant to the buyer's decision to go ahead with purchasing. Failure to disclose pertinent information about serious issues can result in a judgement for punitive damages against the seller in an action known as "allegations of failure to disclose." The disclosure document provided by the seller is a legally binding document and is admissible in court.
The down payment is the amount of cash that a buyer has on hand to pay to the seller at the time of closing. The down payment can range from 3% to 25% of the purchase price, depending on the type of loan that the buyer will be obtaining. Generally, more favourable rates and terms to finance the remainder of the purchase price can be obtained with a larger down payment. Traditionally, the source of the down payment came out the buyer's savings. Other sources of a down payment may be a gift from parents, a mortgage on another property, or the sale of an existing home. The down payment represents the amount of the personal equity that the buyer invests in the purchase of the real estate.
Dual agency is a situation in which a real estate agent represents both the seller and buyer in a real estate transaction. This can happen for a couple of reasons. Sometimes, a buyer isn't choosy on which Realtor they'd like to have, so they go with the listing agent of the house that's being sold. Other times, clients of a Realtor happen to like a home which that same Realtor is selling for another client.
If a buyer wishes to make an offer on a property, both the buyer and seller need to consent to the dual representation before the agent can enter this dual agency. This consent form outlines how the duties and responsibilities of the agent changes under the terms of the dual representation. There is some controversy regarding dual agency, a.k.a. double ending. There's a belief held among some people that representing both the buyer and the seller is bad practice, since the Realtor cannot fully represent one party. In other words, their services diminish under this agency. There's also a negative view regarding payment that can be associated with the first point. Normally, payment is divided between the buyer's agent and the seller's agent. Some people believe that the allure of full commission from a sale attracts agents to enter in as many dual agency transactions as much as possible. While it's understandable to see things from this point of view, it's important to remember that there is more skill, stress and work involved for a Realtor - not less. Agents are also aware of this money-hungry stigma, and will often suggest to uncomfortable parties that another Realtor on the same team can represent them, thus negating a dual agency.
Due On Sale Clause
This clause is a section of a mortgage that states the balance of the loan must be paid if the home is sold. This may seem obvious, but the due-on-sale clause is customary language in home loan agreements. This clause precisely states that the borrower must pay the mortgage balance off before the seller is entitled to any proceeds of a sale. During the home selling process, there are processes in place that are meant to discover lien holders of the property for sale, such as title searches. It would be difficult for the proceeds of a home sale to directly flow to the seller if the home is currently financed. The lender who is financing the property for the new buyer performs the appropriate research in order to determine who is entitled to payment.
Early occupancy is a term that is used to describe when a seller allows the buyer to move into that home before the actual sale is closed. This type of arrangement can be a positive selling method for a seller who needs to make a quick sale, but it can also have its drawbacks. This situation can also be beneficial to the buyer if they are facing a deadline on a current lease or rental agreement that would require them to move before the home purchase is complete. However, neither party should enter into this situation without a formal contract that protects the interests of all parties involved. It also ensures that the buyer is committed to making the purchase of the home.
This is money that a potential buyer puts down to show that they are serious about making an offer on a home. This money, which is usually no more than two percent of the asking price, is meant to show the seller that the buyer is earnest about their offer. If the sale falls through, the seller normally will return the cheque to the buyer. However, there are cases in which all or part of the earnest money could be kept, in order to cover any cancellation fees which may incur. For this reason, it's important that the buyer makes sure they understand the legal restrictions which may occur, particularly if the cancellation occurs late in the transaction.
An easement is a legal agreement to give a certain part of a property to a third party for a specified purpose. Often, an easement can be given by a landowner to someone that needs to install a public service, like a sewer or power line. The third party doesn't own the property, they are simply given the legal right to use the property for the specified purpose. A private easement gives one specific party the right to use the land, while a public easement will open up an area to be used by the general public.
An encroachment in real estate refers to a fence, building, or other structure that extends into the property of another owner. Some communities enforce building setbacks on any construction within their jurisdiction. A setback requires a certain distance of clearance between the property line and a structure. If a structure is built within the distance of the building setback, it's considered an encroachment as well.
Example: a wood fence is built on one side of a property line. Typically, fences are intended to divide the property between two owners along the common property line. However, the fence can be built too far to one side or too far to the other side. This means that one property owner has access and use to more land than what they legally own, while the other owner cannot access all of their property. In this example, a survey should be conducted to conclusively show, in writing, that the fence is indeed a physical structure that separates the properties. Encroachments should be noted on the survey prepared for the transfer of property.
An encumbrance is a financial claim or lien on a property that complicates the titling process. Generally, encumbrances are a right or financial interest in a piece of property that diminishes its value. Encumbrances don't interfere with the passage of title from one person to another, but there is a value diminishment. A variety of different encumbrances exist, and they can be financial or non-financial. Financial encumbrances may be a lien for work that was performed on a property and never paid. Non-financial encumbrances are best understood through example. So let's say you have a great acreage that's in an excellent location. You purchase the property, but you have to agree on an encumbrance. Since the neighbour next to you has no access to the local road, your property is encumbered to allow them access. Simply put, your neighbour now has full rights to drive across your property whenever he or she wants.
Equal Credit Opportunity Act
The Equal Credit Opportunity Act of 1974 states that it's illegal for any credit provider or lender to act in a discriminatory manner on the basis of a person's age, sex, marital status, religion, race or country of origin. It also prevents lenders from discriminating against those applicants who receive benefits from any government assistance program. As long as the applicant for credit has the ability to follow through with a loan contract, they must not be singled out due to any of the preceding reasons.
Errors And Omissions Insurance
Those who are buying a newly built home may want to consider adding an errors and omissions rider to their insurance policy. Errors and omissions insurance is designed to cover the loss a homeowner faces whenever the builder has made errors during construction that result in additional repairs in order to correct. It can also cover flaws in the building's design that was made by an architect during the planning phase. Errors and omissions insurance might be needed whenever a home fails to pass a building inspection due to flaws in the construction. Homes that do comply with local building codes often require a great deal of renovation before they can be liveable. An errors and omissions policy would pay for the cost of these repairs so that the homeowner wouldn't have to bear the cost of reconstruction.
Escrow is a service provided by a third party to hold funds until the buyer's broker and the seller's broker have fulfilled each portion of their contract. Escrow companies may be hired by either the buyer's broker or the seller's broker. The most common arrangement is that the seller's broker will make the decision to choose an escrow company. When all monies collected during the commission of a real estate sale have been completed, the escrow company will issue the house keys to the new buyer. The escrow company acts as a figurative watch dog over the contract to ensure all contract elements have been completed, all banks have been paid, and protection is given to both buyer and seller until the completion of the transaction. Escrow fees are added to the buyer's real estate purchase agreement and will be collected by the escrow service company at the start of the escrow involvement with the sale.
In real estate, an estate is the total amount of all of the real property and personal property that a person owned upon death. Real property refers to all land and permanent items on the land, including trees, minerals and structures. Personal property are items such as furniture, money and vehicles. The future of an individual's estate upon the person's death is typically determined by a will. A person can detail what should happen to the real and personal properties upon their death. Often, a person leaves their real and personal properties to a spouse, children or other family member. A person can also leave parts of, or the entirety of their estate to a charity. The charity can then sell the property or use it however it wishes, based on the individual's wishes detailed in the will.
Examination of Title
All smart buyers will perform some examination of the title on a property, before going through with the purchase. This is necessary because the title can sometimes be questionable; a person might have a legal claim to the title that has been unresolved in the past. More importantly, there may be some lien against the title that will come up on inspection. The examination of the title is done in order to establish a clear understanding of the chain of ownership. Many buyers will contract a title company to handle this examination, in conjunction with title insurance. A buyer will take out this insurance in case there is some undiscovered problem with the title of the company. If something does happen that impacts the buyer's right to the title, the insurance will cover any costs that might follow.
A fixed-rate mortgage is the most popular home loan type. The interest on a fixed-rate mortgage remains the same for the life of the loan. Typically, a fixed-rate mortgage has a term of 15 or 30 years. However, longer terms are sometimes available in areas with high property values. Shorter term loans help borrowers build equity faster, while longer term loans make monthly payments more affordable. Interest rates are usually lower for 15 year fixed-rate mortgages than 30 year or longer loans. Since fixed-rate mortgages aren't affected by fluctuations in the market, borrowers have a stable monthly payment. Unlike balloon mortgages, fixed-rate mortgages are paid in full at the end of their term. While interest rates are usually slightly higher for new fixed-rate mortgages, over time, they become less expensive than adjustment-rate home loans.
For Sale By Owner (FSBO)
This is a type of real estate transaction where the owner of the property lists it for themselves. They act without an agent. Most people do this so that they don't have to pay the real estate agent commissions when the sale finally goes through. There are certain advantages and disadvantages to this approach. Many FSBO situations occur when the value of the house is so low that the seller does not want to lose any more of the value. In these transactions, the seller has to be careful to list the home at the right price. Too often, for sale by owner listings end up overshooting or undercutting the market. This can scare away buyers, or lead to a situation where the seller gets a tremendously bad deal. This type of deal can be easier to pull off in some instances, however. These instances vary greatly, due to individual circumstances.
A forbearance is an agreement between a homeowner and their lender to delay foreclosure proceedings. The lender gives the homeowner a specific amount of time to catch up on the delinquent mortgage payments. Technically, the original monthly mortgage payment is still due each month to the lender, but the lender will also accept the lower forbearance amount for the specified amount of time. At the conclusion of this period, the homeowner's regular mortgage payment will again be required. Forbearance is a tool used by the lender to work with the homeowner; taking control of the negative situation so that neither party has to deal with the hassle of the foreclosure process. It's a temporary solution, and if the homeowner still can't meet the forbearance payment, then foreclosure is inevitable.
Foreclosure is a legal process taken by a lender to terminate the owner's right to a property. This process generally occurs when the borrower stops making payments on their loan. The bank or creditor will take over the property and sell it to satisfy the mortgage and any legal costs that have occurred.
Fully Amortized Adjustable Rate Mortgage
A fully amortized adjustable-rate mortgage is a type of mortgage that is where the principal amount and the interest will be fully paid within a specified time period. Full amortization refers to the necessary amount of time to fully pay the mortgage. This just means that a 30 year mortgage will be paid in 30 years for example, unless the borrower elects to pay in full before the mortgage expires. Interest rates of adjustable-rate mortgages will change over time, changing the amount of the monthly payment. This is necessary to keep the amortization schedule on track. While the interest rate and payment may fluctuate, the amount paid to the principal remains the same. The difference between a fully amortized adjustable-rate mortgage and a variable-rate mortgage is that in the variable-rate mortgage, the length of amortization may change, while the monthly payment remains the same.
In real estate, a gift is a sum of money received from a family member or other source, that goes towards the purchase of a home. The gift is given in cash and not stocks, bonds or other forms that cannot be accessed immediately. The lender usually requires a letter from the gift giver, stating that this money doesn't need to be repaid. Repayment of a gift could affect the borrower's ability to repay their mortgage, so the financing company wants to be sure the buyer is able to repay their loan. Real estate gifts are sometimes given to newlyweds as a wedding present to purchase their first home. A gift can also be given by an older family member or friend, so that the couple doesn't have to wait for their inheritance in order to purchase a home.
Graduated Payment Mortgage
A graduated payment mortgage (GPM) starts with an initial low monthly payment, to help low-income homeowners. This payment amount increases over time. This is a beneficial way to help sub-prime mortgage seekers and young people with home ownership. The problem with a GPM is that its success depends upon future earnings potential. Each year, the monthly payments increase by a pre-set percentage. In good economic times, young people can advance their careers and increase their salary. These higher paycheques enable homeowners to keep up with the mortgage payment increases. This is an example of a negative amortization loan. The overall expense of a GPM is higher than conventional mortgages. A variety of repayment period schedules are available. This is a more attractive loan during times of economic growth, when employment numbers and salaries are increasing. However, it is more risky during economic downturns.
Growing Equity Mortgage
A growing-equity mortgage is a type of mortgage that offers a gradual increase in the monthly payment. The difference between the original monthly payment amount and the increased payment is applied directly towards the principal balance. As the name states, the equity grows on this type of mortgage since the proceeds from the increased payment amount helps to pay down the principal balance quickly. The schedule for increased payments vary on growing-equity mortgages. Borrowers can inquire with the lender to find out the specific length of time in between increased payment amounts. Additionally, a growing-equity mortgage is a fixed rate mortgage, so borrowers don't need to factor in the possibility of a higher interest rate throughout the life of the loan. This type of loan is ideal for consumers who wish to pay off the mortgage sooner than the typical 30-year term.
Half-baths, or half bathrooms, include a toilet and a sink. Unlike full baths, they don't have a bathtub or a shower. Half-baths are typically small, sometimes with just enough room for the sink and the toilet. They are also referred to as guest bathrooms.
Hazard insurance is a specific section of a homeowner's insurance policy that covers damage to a home in the event of wind, fire, vandalism, smoke or other disasters. It's required by all mortgage lenders to secure a home loan to ensure that their assets are protected. Physical or structural damage to a property is covered under hazard insurance. In the majority of cases, hazard insurance is factored into a homeowner's monthly mortgage payment, and premiums are placed into the home's escrow account. Buyers can shop around and choose the provider of their hazard insurance, but certain coverage terms must always be met to satisfy the mortgage lender. In areas where structural damage is more likely, such as earthquake or tornado zones, additional hazard insurance may be required.
Home Equity Conversion Mortgage
A home equity conversion mortgage is also known as a reverse annuity mortgage or most commonly, a reverse mortgage. This mortgage is typically used by older owners who have little or no income, but a large amount of equity. In this case, the lender pays the homeowner instead of the homeowner paying the lender. The lender has a choice to pay the homeowner in one lump some, but this type of mortgage is usually paid monthly. The lender makes regular payments to the homeowner, while a corresponding lien builds against the home. These types of loans are usually used by those who are retired, and the loan repayment obligation is usually deferred until the property is sold or the owner leaves.
Prior to the purchase of a home, a thorough review of the entire house is completed. This covers all the areas of the house, such as the roof, mechanical and heating systems, construction, etc. The inspection is carried out by a licensed professional, and a detailed report is compiled for the seller and the potential buyer. A printed document ,as well as online files, are provided. Once the inspection is completed, the homeowner can use report as a tool to help finalize their decision. If there are concerns with the home, the buyer might use the inspection as a means to get improvement done, or have the price adjusted. This review of the home is critical and needs to be attended by the home buyer. Otherwise, the buyer might find unexpected surprises with the new home.
Homeowners' insurance protects homeowners from any act of damage to their property that could depreciate the value of the home. For example, a common hazard that this insurance will cover is damage to a home due to an Act of God (storms, fires, etc). The homeowners' insurance will cover the repair or replacement of the property that was damaged. Homeowners' insurance can also cover items that are contained within the home at the time of damage. For example, if a person's computer is damaged in a house fire, the homeowner can file a claim to get the computer replaced with a new one of similar value.
Income property is any property where the owner isn't living in it, and making money from it. The most common way this happens is when a homeowner has a second property. Instead of selling the first property, they turn it into a rental property. People who aren't listed on the deed live in the home and pay a set amount of money each month to live there. Of course, not all is profit for the homeowner/landloard. There could be liens against the income property and other expenses that bite away at the actual profit amount.
Certain properties sometimes possess defects that cannot reasonably be cured. These are known as an incurable defects. This means that either fixing the problem is beyond the homeowner's control, or that the cost involved with curing the defect is prohibitive; the expense associated with doing so would be greater than the value of the actual property. An incurable defect often occurs whenever a piece of land is located in an area that has less-than-desirable surroundings. For example, homes that are located close to airports are subject to high levels of noise, yet the fact that the airport is in close proximity to these properties can't be changed.
An insurance binder is a legal document that provides the details for a temporary insurance arrangement. For example, if the owner of a property becomes involved in a sales contract with a buyer, they would require the buyer to provide proof of insurance. For the buyer to receive a binder, they must provide all information about a property to their insurance company. At this point, the insurance company has the necessary information to determine the levels of insurance that the buyer would need to satisfy the sale of the property. When the buyer pays the down payment, they are issued an insurance binder with an expiration date. The buyer has then satisfied proof of insurance, so the sale may continue. Although the transaction continues, the binder is only temporary. The buyer must obtain a permanent policy before the expiration date.
Interest is a fee that a borrower pays to a lender for the use of assets. Usually, the asset that is borrowed is cash. The amount of interest varies and is usually referred to as the Annual Percentage Rate (APR). Interest is ordinarily paid as a percentage of the principal over a certain period of time. The amount of interest that is charged affects the total cost that a borrower pays for the use of money. For mortgages, the interest rate affects the monthly payment.
There's an easy way to see how much interest actually costs the borrower. The Rule of 72 is often used in economics, and shows how fast interest compounds. Interest rate / 72 = Amount of time that it takes for the original principal to double.
Joint liability, in a home loan, implies that there are two or more people who are obligated to fulfill the terms of the home loan. If a husband and wife sign the loan agreement, they are jointly responsible for repayment of the loan. Or, if two family members gather their resources and invest in a home, both individuals are jointly responsible if they both signed the home loan contract. In the event that one person is not meeting his or her fair share of the monthly payments, the other person on the loan is still liable for the entire debt. In other words, both parties will be held jointly responsible for the entire amount of the loan and for the duration of the agreement, unless one party is officially removed from the agreement under separate circumstances.
A junior mortgage is any mortgage subordinate to the primary mortgage. This mainly refers to a second mortgage, but can also refer to a third or fourth mortgage, or a home equity line of credit. When someone purchases a home, they may not be able to make a 20 percent down payment. They may take out a junior mortgage to make up the difference. Some take junior mortgages to consolidate bills into a single payment instead of multiple. The main difference between the primary and junior mortgage is the order of payment that happens when the property owner sells. The primary mortgage is always paid first. If there are enough funds after the first mortgage, any junior mortgage is paid. If there are not enough funds after paying the first mortgage, the property seller is obligated to pay the difference on the junior mortgages.
A kit home contains manufactured, pre-cut components that are put together on site by the contractor. This type of home is a permanent structure set on a solid foundation. The kit home involves a company cutting all materials for the project, numbering them, and sending them to the construction site. On site, the construction manager uses provided plans to put the home together. This is different from a modular home because the manufacturer doesn't create modular units. Instead, they send only the pre-cut materials with plans. This house option was quite popular in the first half of the 20th century (think of those Sears catalog houses). Today, kit home companies are no longer active in Canada.
A latent defect is a potential problem that may be invisible at the time a buyer purchases a home. This is the most important reason that a buyer should have a thorough inspection of the property done prior to purchasing. It's advisable for the buyer to use a professional home inspection company to avoid any problems after the sale. In order to protect themselves from any latent defect such as termite damage, the buyers should insist on including a clause in the sales contract prior to purchase. This protects the buyer from any defect not disclosed by the seller, and allows for recovery of damages. The buyer can only expect to recover damages if the seller knowingly misrepresents the property condition, blocks an inspection or lies about problems. If a buyer suspects problems but goes ahead and completes the transaction anyway, the seller won't be held accountable.
This is the general term that describes any party that provides a loan for a person who buys a home, like a bank or other financial institution. In most cases, this will be the primary mortgage provider. Some people can have more than one lender, though. The lender plays an important role in the facilitation of the process. Since most buyers don't have the ability to purchase a home without the help of financing, the lender essentially controls the money for the purchase. If the lender does not give the green light on the buyer, the entire process will not get off of the ground.
Letter of Intent
Before buying a home, one of the things that may be required in order to obtain financing is a letter of intent. This is a document that states the buyer's intent to purchase a property. It's used to justify a real estate contract, and often accompanies the deposit of earnest money. A letter of intent can be handwritten or typed. It may also be a form letter with blanks that can be filled in with specific information. Some of the information a letter of intent normally includes is the name of the buyer(s), address of said property, legal description of the property, amount of sale, and the date. The letter is normally signed by the buyer(s), seller(s) and real estate agent.
Level of Control on a Listing Agreement
The level of control on a listing agreement is the form used when specifying the level of control the Realtor has over a listing. This agreement outlines what an agent can and cannot do with a listing. It also protects the real estate agent's interest in the sale. The form outlines if the agent can hold an auction to sell the property. If it allows an auction, it provides terms for the sale. Other details can include whether it's a sole agency or an open listing, how long the real estate agent has the listing, commission levels, and whether the real estate agent can reassign the listing to another agent while it's active.
Leverage, in real estate, is a technique that allows an individual to control a valuable asset with far less money than the underlying value of the asset. It's most often used by real estate investors who buy and sell houses for a living. For instance, you could buy a house with all cash and have zero leverage, or you can buy a house with 10 percent down and have quite a bit of leverage. Leverage increases your potential for a greater return on your investment (ROI), but it also magnifies risk. The amount of money you put down is considered your investment. If you put $5,000 down on a $100,000 home and sell it for a $5,000 profit, you will realize a 100 percent return on your investment. The reciprocal is also true. If the house goes down in value and you sell for a $5,000 loss, you have suffered a 100 percent loss on your investment.
A party can be held responsible if a service is not provided. In real estate, all parties involved in a sale must purchase liability insurance to protect themselves from the risk of a bad deal. There are many reasons that a real estate sale can fail, even after an agreement has been signed. These include a buyer's bankruptcy, an act of God damaging the property, an agent perpetrating fraud, or a seller's malfeasance.
A lien is a financial claim by one person or company, against the property of another person. Liens are commonly used in both the automotive and real estate sectors, and are often used by lenders to secure their property. As an example, consider the purchase of a new home at $100,000. You are approved by a lender for a mortgage that covers this purchase price. There's a small hitch, though. The lender needs to secure the loan. In order to do this, the lender files a lien against the property. The lien is filed in the local courthouse, where the property is owned. This then creates a financial encumbrance. Before you sell your home (at whatever point down the road), you must first satisfy the lien.
When you want to sell your home, you need to create a listing. A real estate agent can help with listing your home. Before you create the listing though, you need to write down everything that's included in the home when it does sell. If there's any land or furniture that will be sold with the home for example, that should be added. If you choose to list your home with a real estate agent, the agent will receive a percentage of the sale of the home.
The loan term is the technical term that refers to the amount of time that a person has to pay off their mortgage. This is the total amount of time that the mortgage will last, if the borrower makes all scheduled payments. For instance, a person with a 25 year mortgage would have a 25 year term. The most common loan terms for mortgages are 15, 25 and 30 years. Longer terms mean that, overall, you will pay more money in interest. Shorter terms require more money to be paid each month, but that money goes towards the balance of the loan (paying less in interest).
Low Ball Offer
A low-ball offer is a term used to describe an offer that is substantially lower then the property value. Sellers encounter low-ball offers when the property has been on the market for an extended period of time. Buyers perceive sellers as anxious to sell the home, so they make an extraordinarily low offer. Although low-ball offers are typically displeasing to sellers, it sometimes stimulates productive negotiations - resulting in an acceptable offer. First-time home buyers frequently present low-ball offers simply because they haven't seen enough homes to become familiar with comparable homes selling prices. This is why going through comparable homes (comps) with your Realtor is so important!
Low Down Payment Loan
To purchase a home, lenders require a minimum down payment to ensure that the buyer has an incentive to continue paying for the house. Traditionally, a down payment of 20 percent is required to purchase a home. However, some lenders only require that you put as little as 3.5 percent down to purchase the home. There are some risks to only putting a small amount down when you close on a home. Lenders will require that you purchase mortgage insurance to lower the risk of you defaulting on such a large loan. This can actually make your monthly payment higher than you want it to be. The good news is that these loans are generally insured by the government, and only require a minimal credit score, as well as proof of income for borrowers to qualify.
The median price (average price) refers to when half the properties in a statistical set are priced above, and half are priced below the price of a specific property. It's a useful number to know when using real estate statistics for analysis, especially when compared to the average value, also known as the mean. When the mean (value) is higher than the median (price), it indicates that there are more properties of higher value in the data set. If the mean (value) is lower than the median (price), it indicates the opposite - that there are more lower value properties than higher value properties.
Before people enter into a legally binding agreement with another party, they may want certain differences and questions addressed before they sign the contract. When two parties can't reach an agreement that suits both of them, they may choose mediation. Mediation is a process where a neutral, third party helps the two parties reach an agreement, and settle their differences before a contract is signed. Different entities can serve as mediaries in disputes. Usually they are lawyers, or someone who works in a legal capacity. Other times, it can be a real estate agent, a social worker, or another professional who understands the legalities of the contract, yet has no favour toward either party. Sometimes people are ordered by a judge to seek mediation for their differences. This order happens frequently when people disagree on whether or not a property should be sold, or when people want to divide assets.
Modification is simply a revision of the terms of a loan contract. The modification can include changes to the length of the loan, the annual percentage rate, principle balance, security and/or collateral requirements. A loan modification can be initiated by the borrower or lender, and become binding only when the new terms have been mutually agreed upon in writing. Home loan modifications are a valuable resource for homeowners going through financial hardships, as well as for the mortgage lender. For homeowners, modifications are beneficial when facing lowered income. For lenders, modifications like lowered payments are preferable to proceeding with a lengthy foreclosure process.
A mortgages is the specific name for loans that borrowers use to secure financing for homes. There are several different types of mortgages that a borrower can choose from. The interest rate for a mortgage is generally quite low compared to other loans, since they are secured loans. Borrowers can have their homes taken from them if the mortgage is not paid in a timely manner. Mortgage types include a fixed-rate mortgage, variable-rate mortgage and interest-only mortgage. Interest-only loans allow a borrower to pay only the interest for the first three to five years of the loan. FHA loans are available for those who may otherwise have trouble qualifying for a mortgage. These are government backed loans that don't require down payments or the payment of closing costs before closing. These costs are rolled into the loan.
Mortgage Acceleration Clause
A mortgage acceleration clause is an important provision within a mortgage contract. It provides the lender with the ability to demand all of the remaining loan payments if the borrower happens to default on the loan. In effect, this is the part of the contract that gives the lender the right to foreclose on a property when the borrower fails to make his payments on time. The mortgage acceleration clause is an essential part of every single mortgage signed in Canada. The clause is typically written as a privilege of the lender. This means that the loan is not automatically accelerated when the borrower fails to make payments. The bank ultimately has discretion in how they choose to use the clause. Though they technically could choose not to accelerate the loan, most lenders will exercise this right whenever they are legally able to do so.
Housing lenders want to be assured that they will receive their money for the money that they loaned to customers, even if these customers suffer financial difficulties. Since people can't guarantee that they will not lose their jobs, be injured while working, or suffer an unexpected illness that could prevent them from making mortgage payments, homebuyers are often required to buy mortgage insurance when they buy a home. This coverage ensures that people's payments will continue to be made on time, even if they cannot afford to pay their mortgage. This insurance can be used when people become injured or ill, as well as when they lose their primary jobs. This insurance guarantees that the lender will still receive their money, and not have to worry about the customer defaulting on his or her obligation. Mortgage insurance is also required when people pay less than 20% down on their loans.
Multiple Listing Service (MLS)
The Multiple Listing Service, or MLS, is a database that contains all the real estate listings in a specific area. The only listings not included in this database are those that are for sale by owner (FSBO). This database allows real estate agents and home buyers to see all properties available, regardless of which Realtor or agency they happen to be listed through. It also gives them search capabilities that narrow down the list of potential properties to those which meet the buyer's criteria. The MLS system allows both buyers and sellers ease of access when it comes to the real estate market. Realtors are made to work together in order to accommodate buyers and sellers. This puts power back in the hands of the people who use the system, not the people who run the system.
A non-assumption clause prevents a borrower from transferring an existing mortgage to another person without obtaining approval from the lender. This is similar to a sublease clause in an apartment rental agreement, where a tenant cannot move out and hand over the financial responsibility to a new tenant without first having that tenant approved by the property manager. The non-assumption clause is described in the loan agreement, and buyers should read carefully if they foresee a transfer occurring in the future. If a borrower is interested in transferring a mortgage to another borrower, they should contact the lender and discuss the circumstances. The proposed borrower will need to complete the lender's required paperwork. If there is a non-assumption clause in a contract, this does not necessarily mean a transfer cannot take place, it just means that the lender needs to approve it first.
Non-Recurring Closing Costs
The phrase non-recurring closing costs refers to the buying expenses that a buyer has to deal with only one time. These might include expenses like an appraisal, credit points, the home inspection cost, title insurance, and even an extensive credit report. In order to close on a home, all of these different items have to be addressed in time. Though one might need a home inspection at a later date, these costs will generally only be encountered once by a prospective home buyer. Buyers should factor in non-recurring closing costs when they are forming a budget for their home purchase. Though these things are often overlooked, they are very important costs that any buyer will have to front if they want to go through with a purchase.
An offer to purchase is a commitment by a buyer to enter into a contract of sale for a property. The offer is often accompanied by earnest money. It demonstrates to the seller that the buyer is seriously interested in purchasing the property, and is willing to secure that interest with a deposit. Acceptance of the offer by the seller does not create a contract between the two parties. An offer to purchase real estate includes not only the price the buyer is willing to pay, but details on how they intend to finance the home, down payment amount and closing costs. A copy of the accepted offer must first be sent to the buyer who made the offer. The offer to purchase is the first step buyers take towards securing a contract for a property.
An open house refers to the set period of time that a Realtor opens the house for sale to the public for viewing. Normally, interested people need to make an appointment to view the house, but all visitors are encouraged to come to an open house. This provides a casual atmosphere, and increases the quantity of viewers in a short period of time. This marketing tool is useful for increasing the visibility of the house on the market, but needs to be used in conjunction with other tools to locate serious potential buyers.
An oral agreement is a contract that is not in writing. It's a working agreement between two parties on the terms that they want to eventually agree to in writing. Since each province requires real estate agreements to be in writing, oral agreements are typically not enforceable or binding. Though the parties might believe that they have agreed to a contract, one side or the other can usually break the deal without any ramifications. Oral agreements are typically made in the days before a contract is put on paper.
A parcel is a piece of land, mainly used to describe rural properties. A parcel or land lot is legally considered an immovable piece of property. It's possible for a piece of land to be separated into different parcels, with each parcel having a different owner. Most parcels of land are subject to real estate tax just like the home or business that sits on the property. A parcel has defined, specific boundaries that will distinguish one parcel of land from the other parcels next to it.
Personal property refers to any property within the home that is movable. This includes appliances, such as refrigerators and washing machines. It can also refer to furniture that decorates the home, or art that hangs on the walls. The personal property distinction is important. It's contrasted with real property, which refers to the land that the home sits on, as well as the home itself. Certain fixtures in the home are considered a part of the real property, and not a part of one's personal property. For instance, anything attached to the home like the lighting fixtures, doors and windows would be considered real property. Sometimes, personal property is not covered under home insurance policies, and usually not included with the real property in any sale. This is why the distinction is so important in the context of real estate sales.
Possession is a word that refers to the time when a buyer officially signs the requisite papers and receives their new home's keys. At this time, the buyer is said to legally take possession of the property.
The pre-approval letter is an unofficial letter from the mortgage lender that lets agents and sellers know the amount of money a buyer can borrow in order to buy a house. Many sellers will require that a buyer show this pre-approval letter before that seller will accept any offer. This provides a layer of protection for sellers, as they can avoid doing business with buyers with poor finances. The pre-approval letter doesn't constitute an official mortgage approval from the lender. The buyer will still have to go through the entire loan process before they can actually get the money.
Prequalification describes the process in which a lender evaluates a borrower's capacity for repaying a mortgage. During this process, borrowers will be asked to provide certain documentation such as pay stubs, bank statements, income tax returns and other important financial documents that will shed light on their ability or inability to pay. Once the borrower has been pre-qualified, the lender gives the borrower a prequalification letter that they can show their real estate agent. The real estate agent will then have an idea of the borrower's budget, and can find homes for sale in the right price range. The prequalification process is a preliminary assessment, and borrowers may be asked for more detailed information regarding their financial position when a sales contract is submitted. The prequalification confirms to the borrower that the lender is willing to finance their home purchase.
The property line outlines the boundaries of a property. The property line typically defines the land among adjacent private landowners, or between a landowner and government-owned land. At times, disputes arise between owners regarding the boundaries between two parcels. This happens most often when temporary or movable markers are used to establish the boundaries of a parcel of land. In this event, the services of a professional surveyor can research the land records, locate any monuments marking off the boundaries, or establish and place structures when they are missing or damaged. Once this is done, a new survey is created. This is a document that outlines the measurements of the property lines, and notes the number and type of markers found and placed on the property.
Real estate is subject to taxation by the local government. Assessments are done on the property at the time of purchase, and periodically thereafter in order to ensure that the property is valued correctly by the taxing authority. Taxes are calculated based on a number of factors that can include the type of structure, the specific location of the property; the value of the property; and any renovations performed since the last assessment. In most cases, property taxes will amount to about 1.5 percent of the property's assessed value. In most places, property owners reserve the right to dispute assessment results for their property in the event that they believe the assessed amount to be incorrect. Generally, property tax is collected by the locale in which the property is located. It's a good idea to investigate all taxing authorities prior to purchasing a property.
Proration, which comes from the Latin word "pro-rata", is the act of splitting something proportionally. In real estate, the term proration is most commonly used when determining how property tax should be paid between buyer and seller. For instance, if the closing for a house is to occur on October 1st, it would be common for the seller to be responsible for 9/12ths of the property tax and the buyer to be responsible for 3/12ths. The payment of property tax between buyer and seller using proration is typically settled at closing, which is usually expressed as a credit to the seller, especially if they have already paid the property taxes for the full year. In the context of the purchase of investment real estate, proration can also refer to proportionally splitting rents that are due between the buyer and seller of the property.
When both parties have agreed to a purchase price and other details of the real estate sale, both parties must sign a purchase agreement. This document states the exact price of the property, the amount of earnest money that will be put down on the property, and any financial contingencies that the buyer requires. These contingencies often make the final sale contingent on the buyer receiving their mortgage. Other contingencies that may be included are a positive home inspection, appropriate repairs to the home, and certain environmental requirements to ensure safety. The agreement will also detail any home warranties that apply to the structure for damages and workmanship. The closing date and any escrow information is also included. If a lease period proceeds the sale of the property, the lease price, time period and lease terms are included as well.
A quit-claim deed transfers the ownership of a piece of property from the seller to the buyer. If ownership is transferred with a quit-claim deed, the buyer receives no warranties and accepts the property subject to any liens, taxes, assessments, covenants or encumbrances that might affect the title. When a seller signs a quit-claim deed, they can only transfer the interest they hold. For example, if a husband and wife own a home jointly and the husband signs a quit-claim deed transferring his interest in the property to their daughter, then the daughter now owns the home, along with her mother. If the mother also signs a quit-claim deed conveying her interest in the property to the daughter, then the daughter would be the sole owner of the home. Quit-claim deeds are typically used between family members, or where ownership of a property is clearly defined.
This is a specific type of fixed-rate mortgage that allows the borrower a one-time chance to reduce the interest rate early in the loan period, without having to incur refinancing expenses. This type of mortgage protects the borrower in the event that interests rates fall lower than the initial rate. There is a fee associated with this option, and the lender has the true cost of the option somewhere else in the loan package. For example, let's say a borrower had a 6 percent fixed-rate on a 30 year loan. Five years into the loan, assuming rates had dropped, the borrower could exercise the rate reduction option to get the rate dropped to 5.8 percent without the need to refinance. The remainder of the loan would be 5.8 percent fixed-rate for the following 25 years. Although the borrower paid for this option, there is a possibility that the reduced rate could save money over time.
Real Estate is a common term used to describe any given piece of land, along with anything that is permanently attached to that land; buildings, housing, natural resources, and other permanent structures like fences. For example, a house with a pool, shed, along with the plot of land that they reside upon, would be considered real estate. A natural resource existing on that property such as oil, gold, or agricultural crops would also be considered part of that real estate. On the other hand, furniture and items inside the home or shed would not be considered real estate since they are movable, also known as personal property. Real Estate is also used to describe the business of buying and selling land and property, including all of the facets of that business, such as appraising, renovating, constructing, managing, investing in, or leasing.
Real Estate Agent
Real Estate Agents are licensed by the province they work in to assist with the buying or selling of a home. Most real estate agents work for a real estate company, and are paid through commission. They serve as a broker between the buyer and the seller. For sellers, real estate agents are an invaluable tool when it comes to deciding how much the home should be priced for. They can provide information on how much other homes in the area are selling for and can price the home competitively to sell. Most agents have professional sales training and can provide a much better presentation on a home than the homeowner would. For buyers, agents can help narrow down choices and provide information on a home's background and the surrounding community. See Realtor.
There are two types of property: personal property and real property. Real property is commonly called real estate. It refers to land and buildings, along with anything affixed to the land. Personal property is everything else, things that are moveable. To illustrate the difference, consider a mobile home. A mobile home is delivered to a plot of land on wheels. The land is real property; the mobile home is personal property. There is a chance that the mobile home can change its designation by becoming immobile. By removing the wheels and securing it permanently to the land on a foundation, it's then immobile; considered real property. Some mortgage companies and banks will issue a mortgage on mobile homes if they have permanent skirting of bricks or block laid on a foundation. Furniture, fixtures and equipment within that mobile home are still considered personal property.
A Realtor is a real estate agent who is a member of The National Association of Realtors (NAR). Only members are permitted to refer to themselves as Realtors. The benefit of working with a Realtor is that they adhere to a strict code of ethics and acceptable practices. This is not the case with real estate agents. Realtors can also be brokers and other real estate professionals. One of the benefits for consumers who choose to work with a Realtor is their access to the multiple listing service (MLS), which provides information about properties listed by multiple real estate companies. A real estate agent who is not a broker may or may not have access to the MLS system.
To better understand the difference, think about knights in medieval kingdoms. Knights were a special group of soldiers among a king's army, who heeded the ethics of their binding code of Chivalry. All knights were soldiers, but not all soldiers in the king's army were knights. This is a simple example.
This term is used to describe the cancellation of a contract by the people involved in the contract, or by a court of law. There are various reasons why a court of law may order the recission of a contract. However, the specific reasons would vary based on the specific facts involved, as well as the laws that are applicable in their particular jurisdiction. For example, a party may choose to rescind a contract if the other party failed to disclose certain details that were vital to the contract subject matter. Sometimes, contracts can be rescinded amicably by the parties themselves. In other cases, parties need their attorneys and possibly a court of law. Ideally, contracts will provide language specific to the recission process, and parties will know what to expect in the event they find themselves needing to rescind.
Reconveyance is what happens when a borrower pays off the loan for a piece of property that it owes to a bank or mortgage company. The bank then transfers complete ownership of the property to the homeowner. This is a very common situation, since most homeowners today don't pay off a seller outright, but instead have a financial institution pay the seller (and then enter into a monthly payment agreement with this institution that becomes the trustee of the property). The financial institution is often listed as the trustee of the property at the time of sale. Reconveyance is basically the opposite of foreclosure. Reconveyance means that the buyer met all of the terms of the loan in full. The mortgage payment is essentially canceled, and the bank then reconveys the title and records to the home buyer, who is now a home owner.
Refinancing is the process of paying off an existing mortgage loan using a new loan. In most cases, property owners will refinance current loans when interest rates drop and they are able to realize a significant reduction in either their payment amount, or the loan term. Many property owners refinance in order to receive a cash payment at the time of closing. This extra cash can be used for renovations, or to assist with the purchase of another property. This is known as cash-out refinancing. Refinancing loans are also common for individuals who purchased a property with an adjustable rate loan. Locking in an ideal rate can be a huge cost saver for these property owners. Loans are based on the value of the property, the owner's equity in the property, and current interest rates at the time of application.
In today's economic climate, there's an increase of homes and buildings on the market that need significant repairs and improvements. Rehabilitation mortgages provide the additional funds that borrowers need to rehabilitate, or renovate, homes and buildings in order to get them on the market. Rehabilitation mortgages may be for more than the original asking price, because of the additional expenses that will go into repairing the property. Borrowers should not be discouraged when they see a property that requires extensive repairs, since these types of innovative mortgages can provide supplemental funds for such repairs and improvements. Ideally, borrowers will get estimates of the total cost of repairs before applying for the mortgage. Lenders want an all-inclusive estimate that includes the cost of rehabilitation and property value as well. If borrowers find a rehabilitation home that interests them, they should simply inquire with a lender to determine what programs are available.
Repossession is a financial term that is used to refer to a financial institution that takes back property that was pledged as collateral. Rental contracts are also subject to repossession, and when a person gets evicted from their home, their landlord repossesses the property. Repossession often refers to homeowners who are in foreclosure because their monthly payments are in arrears. For example, someone finds their dream home and decides to purchase it. For a long time, everything is going great, and then suddenly, they lose their job. Since they can no longer afford the monthly mortgage payments, the lender files foreclosure papers, and that person has to leave the home. When they leave and the lender takes back the property, this is repossession. The term can also be applied to any property that is used as collateral to secure a loan or financial obligation.
The resale value is a term for the value of a property at some point in the future. Several factors can influence the resale value of a home, including the condition of the neighborhood, nearby amenities, potential expansion in the vicinity, quality of schools as well as the overall economy and housing market. Sellers have realized diminished resale value on their homes when the neighborhood has experienced an influx of foreclosed homes, or if homes have sold for below market value. When buying a home, one should consider its resale value. Buying a newly constructed home located in a new housing development may increase the chances of a higher resale value. This is because homes will continue to be built around the property, and subsequent sales prices may go up.
When the terms of an original loan have been negotiated and changed, the revised loan is considered a restructured loan. If a borrower is experiencing financial difficulties, they may work with the lender to restructure the loan. In this case, the new terms may extend the repayment period and lower the monthly payment amount. Typically, a restructured loan allows borrowers to avoid default. It is also referred to as a rescheduled loan. In today's economy, when many home owners are facing foreclosure, restructured loans are becoming popular. During the negotiation process, the parties agree on a new monthly payment amount that reasonably fits within the borrower's current budget, and the new terms reflect the change. In some instances, borrowers may be offered an interest rate that is lower than the rate on the original loan. Most lenders prefer that borrowers come to them if they are in fear of defaulting on their loan, since restructuring a loan is easier than going through a foreclosure process.
A reverse mortgage is a loan, but it's only available to homeowners that are over a certain age, and that have a specific amount of equity in their homes. While the typical loan requires monthly payments, the reverse mortgage does not. The reverse mortgage is never paid back until the homeowner moves, sells, or passes away. If the borrow moves into some sort of retirement community, plans are then put in place to pay the loan back through the equity in the home. The money that is given from the reverse mortgage can be used for anything the borrow desires. It can be a good way to make their retirement years go by a little easier, or they can use it to enjoy a lot of vacations. Either way, the borrow is eligible to spend the money on whatever they desire, without having to worry about paying it back out of their own pockets.
A sales contract is the document that both the buyer and seller sign in order to officially bind the purchase offer. The sales contract includes pertinent info, such as the cost of the home, the down payment amount, any concessions offered, applicable waiting periods and other critical terms. Buyers typically have a sales contract evaluated by their attorney in order to determine if other terms need to be inserted to protect the buyer. Often, sales contracts are revised several times before the official closing date because the buyer and seller may have compromised on certain items (such as repairs to be made to the home or the amount of closing costs that will be paid by the seller). A sales contract is a vital piece of the home buying experience, and both parties typically review it thoroughly before signing it.
A seller's market occurs when the number of home buyers exceeds the supply of homes on the market. Demand is higher than supply. This translates to homes selling quickly, since buyers want to get their home before another potential buyer places an offer on the same home. It may lead to bidding wars, and increased house prices. Sellers tend to have more negotiating leverage when it comes to selling price. The atmosphere tends to be relaxed for sellers, and competitive for buyers.
A settlement statement is a document that outlines who paid what to whom in a real estate transaction. This statement documents all monies involved in the transaction, so that both seller and buyer have this information written down in one place. Some of the information provided on a settlement statement include the contract price of the property, mortgage settlements, taxes paid, real estate agent fees, title company fees, closing costs, and any other costs or fees involved. The statement usually outlines how these charges affect the buyer and the seller. The closing agent usually provides the proper form for the transaction.
Step Rate Mortgage
A step-rate mortgage is a type of adjustable-rate mortgage loan that allows for an increase in the interest rate after given time periods, during the specified length of the loan. For example, a two-step mortgage loan would involve initiating the loan at one interest rate, and then adjusting that interest rate at some pre-defined time to a rate consistent with the current market. The initial interest rate might be four percent, and after two years, the lender and borrow agree that the interest rate will change to the market rate, which could be much higher. Banks will offer step-rate mortgage loans if they believe interest rates will increase in the future. Borrowers typically take on a step-rate mortgage loan only if they believe they will be able to refinance their loan before their rate increases.
A survey is a legal document prepared by a licensed surveyor that defines the exact boundary, size and features of a plot of land. It can be used to determine the exact dimensions of the land that's being transferred from one party to another. A survey drawing will show property corners, adjacent tracts, easements or any other encumbrances, existing physical features such as buildings or fences, and the exact area of the tract. When preparing a survey, the surveyor will visit the site to find property corners and other physical features. They will take precise measurements of the location of everything to be shown on the drawing. Additionally, they will visit the courthouse or receive a title report that shows all easements and other legal instruments that affect the tract. Once the information is gathered, they prepare the drawing that clearly shows all of the information, so that the buyer and seller can clearly review what is being transferred.
Sweat equity refers to anything done to a property that doesn't necessarily have a cash value attached to it. For example, repairing the faucet may be thought of as sweat equity, because a working faucet is something that won't impact the value of a home. Although, a non working faucet is a negative aspect of the home, and a pain the butt to deal with. Keeping the lawn properly taken care of may also be a type of sweat equity. You don't really mow the lawn or get rid of weeds simply to increase your property value, although an unkempt lawn decreases your curb appeal. That type of work is generally done for your own happiness and comfort as a home owner. Unclogging a drain is another instance of sweat equity. No one wants to live in a house where the pipes consistently back up because of the clog. It is also not something that a homeowner or potential buyer would want to deal with.
A tax lien is an encumbrance placed against a property for unpaid property taxes. The transaction of selling a property cannot be completed until the tax lien is paid in full by the seller. The same tax lien also applies to property acquired during the entire life of the tax lien. If borrowers owe back property taxes, they are at risk of eventual mortgage foreclosure if the tax lien isn't satisfied within a set period of time, determined by the taxing agency. This gives the taxing authority the right to sell the home at an auction to an investor who is willing to pay off the tax lien, interest and penalties. This means that the investor is able to purchase the home without having to pay off the mortgage due on the house. This translates to an investor purchasing a home at a mere fraction of its actual value.
A teaser rate is a low interest rate that's offered as a way to attract borrowers. This rate is usually a short-term rate that eventually increases to a higher interest rate, and is applicable for the remainder of the loan. Credit card companies utilize the same strategy when they offer attractive, low introductory interest rates in order for consumers to apply for a credit card. This can be seen negatively by people, underhanded and misleading. However, those with these credit cards can take advantage of these offers. Before the introductory interest rate expires, many consumers simply transfer the outstanding credit card balance to a lower rate card. Similarly, borrowers with teaser rate loans can refinance before the higher interest rate takes effect. Borrowers can benefit by obtaining these teaser rate loans. They can save money, and build valuable payment history during the teaser rate phase of the loan. This can help those who have lower credit scores to improve, and be on better terms with their lender.
The 72 Hour Clause
Also called a release clause, the 72-hour clause is written into sales contracts by the seller. With a 72-hour clause in the contract, a seller is able to keep the home on the market and accept backup offers on the property. When buyers enter into a contract to purchase a home that is contingent on them selling their current home, the 72-hour clause can force the buyer to purchase the house within a short period of time, or allow the seller to choose another buyer. If the seller receives an offer that is better than the initial offer, he can activate the 72-hour clause to force the buyer to purchase the house or forfeit the contract. The time period in the release clause can be negotiated, but advanced notice is always required before the seller can cancel the deal.
A title is a document that proves legal ownership of a piece of real property. When buyers sign a contract to purchase real property, they are given an "equitable title." This gives them the right to obtain full ownership of the property. The home builder, developer, seller or other party still retains legal title, which is actual property ownership. Once all the terms of the seller's contract have been met, the legal title transfers to the buyer in the closing. The highest form of title is called "paramount title." This gives the owner in a fee-simple, which is the highest form of ownership of land and its immovable structures, the right to quiet title. Quieting title is generally a legal proceeding to settle with missing heirs, tenants, lien holders and other people in a title-dispute lawsuit for real property. Each province has different requirements and procedures for quieting title.
Trade equity is the money that's given when a buyer sells an existing property in order to finance the down payment on the purchase of a newer property. Trade equity can also be applied to the sale of other property to help finance the down payment, or greatly reduce the purchase price of a new property. Trade equity is most advantageous when a person or company wishes to buy a newer, larger property, but is unable to do so without first liquidating the property they own. Trade equity helps benefit both the buyer and seller since the existing property is usually let go for less than the buyer originally paid. This move allows the buyer to properly finance the purchase of a larger or more expensive property without the burden of maintaining an unwanted property that isn't selling.
Transfer of Ownership
A transfer of ownership indicates any means by which a property's ownership rights are handed off to another individual. These rights include the title to the home, as well as any specific restrictions on the title and any liens on the property. The reasons for a transfer of ownership can vary. An individual may inherit, purchase, or be gifted a particular property, for example. Any easements, or allowances by a neighbour, such as the right for the neighbour to drive across the property to get to their home, may or may not remain in effect depending on the type of easement initially granted. Transferring ownership also usually requires a deed to be used to transfer the title.
Two Step Mortgage
A two-step mortgage is a type of mortgage that offers two different interest rates. For the beginning years of the loan, the rate is fixed. At a pre-determined date, the rate changes to an adjustable rate. This adjustable rate remains in effect for the remainder of the loan. Some borrowers like the two-step mortgage because the initial short-term rate is low. However, be aware that there's a possibility that the second rate is higher than expected. The second interest rate is adjustable, and is based on the market at that time. The buyer is unable to determine what that rate may be at the time of signing. However, borrowers may be offered other alternatives when the time comes for the adjustable rate to apply, which may just include a reasonable, fixed rate.
When you apply for a loan, the process of reviewing your application is known as underwriting. An underwriter is responsible for reviewing the borrower's application, in addition to any supplemental information provided. This is to determine their credit-worthiness and ability to fulfill the responsibilities associated with the loan. Mortgage underwriting also takes into consideration the property in question. A lender will generally not offer a mortgage for a significant amount above what they believe a property is worth, since the loan is secured by the property in the event of default. Underwriting is used in many different industries, including mortgage financing, insurance and investing. The principle of underwriting is the same for every industry. Your application is reviewed to determine whether or not you meet the criteria.
An unrecorded deed is any official deed transferring tangible property without being recorded in local records. Even if a deed is not recorded at the proper offices, it's still a legal deed, if executed by the property owner. Unrecorded deeds do pose legal questions, though. Judgements against the property may be held against the old owner since the formal deed was not recorded. Anyone who receives an unrecorded deed should hire an attorney to verify if the sale was legal. Contesting it legally can clear up any legal questions. Insurance companies will generally not cover property that has not been properly recorded. That means the property owner may pay premiums for years, but when it comes time to make a claim, if the insurance company finds the property is not recorded, they can refuse to cover the claim.
The term value or price can mean a couple of things in real estate. First, it signifies the amount a buyer will pay for a piece of property. Second, it can indicate net income or cash returned, divided by a capitalization rate. When someone makes an offer on a piece of property, they set a price, or rather, place a value on the property. This amount can differ from the asking price and from the market value, and it reflects what the buyer considers a fair price (value). That can be based on any set of reasons determined by the buyer. When valuing an investment property, one way to calculate a fair price is to take the expected amount of income from the property and divide it by the expected capitalization rate. This calculation will provide a value for the investment property.
Variable Interest Rate
Mortgage interest rates are either fixed or variable. Variable interest rates fluctuate based on several external factors, while fixed rates stay the same for the life of the loan, regardless of external factors. A variable interest rate can increase or decrease multiple times throughout the life of the loan. Factors that may effect variable interest rates include a change in the rate in which banks are paid for certificates of deposits, as well as Treasury bills. Other factors include worldwide economic conditions. For example, with the temporary closure of businesses and services worldwide in 2020 due to the COVID-19 pandemic, variable mortgage interest rates fluctuated to reflect that impact. If a borrower chooses a variable interest rate loan, they may save money when rates are low. However, there is always a risk of a sudden increase in interest rates, which may cost the borrower money in the end.
Variable Rate Mortgage
A variable rate mortgage is one with an interest rate that is not automatically set in stone. While a traditional mortgage will have a defined rate over the entire term of the loan, the variable rate mortgage is indexed to an external indicator. For instance, it might be indexed to the rate paid by the federal government on Treasury bills, or it might be indexed to any number of bank rates. When those rates go up or down, the rate on a person's mortgage will go up or down respectively. A variable rate mortgage is more of a financial gamble than a traditional mortgage. It can be a good investment for people who believe that interest rates are going down in the coming years. Many people are critical of these loans because they make it difficult for homeowners to budget or complete financial plans for the future.
A voluntary lien is a property interest that a homeowner gives to a lender on a voluntary basis. When a homeowner takes out a mortgage loan, they will give their lender a secured interest in the property. This comes in the form of a mortgage agreement or a deed in trust agreement. The voluntary lien gives the lender the ability to foreclose on the property if the homeowner doesn't live up to the obligations in the mortgage. A voluntary lien should be compared to an involuntary lien in order to fully understand its importance. An involuntary lien is similar to a mechanic's lien, where the homeowner gives up an interest in their property without consent. For instance, if the homeowner fails to pay the people who worked on their home, those people might file a mechanic's lien to claim a property interest in the individual's home.
A walk-through is the general term for the final walk through a home that a buyer performs before finalizing the deal to purchase the home. The purpose of the final walk-through is to allow the buyer one last look at the home before they close the deal to buy it, making sure it's in suitable condition, with any repairs performed that were agreed upon. It's also a chance to make sure nothing new has gone wrong with the home since the last time the buyer visited. Some things that a buyer may check when performing their final walk-through are the lights to see if they work, plumbing to make sure it's not clogged, appliances for functionality, doors and windows for proper functioning, heat and air conditioning to make sure that's in working order and finally, ensuring all debris is removed.
A wild deed is a signed and sealed legal document granting a specific right. It's recorded, but not connected, to the chain of title of a property. This could lead to serious problems if someone challenges the chain of title. The descriptor "wild" is affixed to this deed because it may be difficult to find. A grantor or grantee index search for this deed might not be apparent, and if a previous sale was not recorded, it could confound a later deed transfer. A subsequent purchase wasn't given constructive notice under a wild deed. There could be difficulties in enforcing a wild deed if it's sold to multiple buyers.
Wraparound mortgages are done by allowing the person who is selling a home to provide a mortgage to the person buying the home. These loans are commonly used when the first mortgage on the home is an assumable loan. However, in some cases, they may be used on non-assumable loans with the original lender's permission. The total wraparound mortgage amount is the full amount of the existing loan, plus the new amount that's borrowed. One payment is made by the borrower to the seller, and then the seller makes the payment on the original loan. Typically, the interest rate is higher than the interest rate that's on the existing mortgage. For sellers, the higher yield on the mortgage makes this an attractive option when selling their home. When the primary mortgage is a non-assumable loan, the lender must agree to this scheme, or there is a risk they will require the loan to be paid in full.
If a person is unable to write their name, they may write an X on any legal document or contract. This X will specify that the signer is aware of what they are entering into. A witness will then sign their name underneath to verify that the contract was not forged or signed without permission. The X is a universally recognized signature for anyone who is unable to write their name (also known as making your mark). If you were to challenge the contract in court, you would not be able to point to the fact that an X is on the contract as opposed to your name. Some common reasons why someone couldn't write would include a lack of education or the lack of a physical ability to handwrite. People who lack motor skills would be also be unable to write their full name.
A yield rate is the amount calculated from dividing the yearly net income (YNI) from a property, by its market value (MV). Yrate = YNI / MV.
This number is expressed as a percentage. Let's say that a house has a market value of $350,000, and the yearly net income obtained from this property is $80,000. The yield rate is calculated through dividing $80,000 by $350,000. To express as a percentage, multiply by one hundred. The yield rate is 22.86 percent in this case. Imagine a particularly large piece of property that includes several different houses, condos and apartments. The market value is the total assessed value of the properties combined. The yearly net income would be all of the rent that is paid toward the owner of the properties throughout the course of one year. This standard applies to commercial properties as well.
Zoning is type of regulation put on land in order to determine and dictate what can be done with the land. There are many types of land zones, like agricultural, residential, commercial, open space, and industrial. Knowing what types of zones lie around your house is important when selling a house. A house surrounded by residential and open space zones is much more likely to be valuable than a house surrounded by an industrial zone. Nobody wants to live next to a chemical plant. Zoning is even more than this! A type of zone can be broken into multiple types to further protect the value of a property, and limit how it's used. For instance, it can be used to prevent a 20 story condominium from being built in the middle of a suburban neighborhood.