If you are buying or selling a home, there may be many terms that are unfamiliar to you. You may feel bombarded with words that seem foreign or are being used in a different context. To understand the “lingo,” here are many of the most common real estate terms that may be helpful to you as you take part in a real estate transaction.
Offer to purchase/Agreement of Purchase and Sale: A written contract that sets out the terms and conditions under which a buyer agrees to buy a home. If the offer is accepted by the seller, it becomes a legally binding agreement.
Counteroffer: An offer made by the seller of a home after rejecting an offer by a potential buyer. The counteroffer usually changes something from the original offer, such as the price or closing date.
Conditional offer: An offer to purchase a home that includes one or more conditions (for example, a condition that the buyer is able to get a mortgage or have a home inspection) that must be met before the sale can be officially completed.
Closing date: The date when the sale of the property becomes final and the buyer takes possession of the home.
Closing costs: The legal fees, transfer fees, disbursements and other costs that must be paid when buying a home. These are in addition to the down payment (and the GST, PST and HST if applicable). Closing costs are due on the day the buyer officially takes ownership of the home.
Deposit: Money that a buyer places in trust to show they are serious when they make an offer to purchase a home. The deposit is held by the real estate agent or lawyer (or notary in Quebec) until the sale is complete.
Down payment: The portion of the home’s purchase price that is not financed by a mortgage loan. The buyer must pay the down payment from their own funds (or other eligible sources) before securing a mortgage.
Land transfer tax: A tax charged by many provinces and municipalities (usually a percentage of the purchase price) that the buyer must pay upon closing. There is a rebate available for qualifying First Time Home Buyers.
Survey: A document that shows the legal boundaries and measurements of a property, specifies the location of any buildings and states whether anyone else has the right to cross over the property for a specific purpose.
Status Certificate (or “estoppel certificate”): A certificate that outlines the financial and legal status of a condominium corporation.
Deed/Transfer: A legal document that transfers ownership of a home from the seller to the buyer.
Home inspection: A thorough examination and assessment of a home’s state and condition by a qualified professional. The examination includes the home’s structural, mechanical and electrical systems.
Easement: A legal interest in a property owned by another person or company for a specific limited purpose. For example, a public utility company may have an easement that lets them pass through a property.
Title insurance: Insurance against losses or damages that could occur because of anything that affects the title to a property (for example, a defect in the title or any liens, encumbrances or servitudes registered against the legal title to a home).
Condominium (or “strata”): A type of homeownership where people own the unit they live in and share ownership of all common areas with the other owners. Common areas can include parking facilities, hallways, elevators, lobbies, gyms, swimming pools and the grounds or landscaping.
Duplex: A building that contains two separate and complete single-family homes located either adjacent to each other or one on top of the other.
Row house (or “townhouse”): A row house is one of several similar single-family homes that are joined side by side and share common walls.
Semi-detached home: A home that is attached to another home on one side.
Single detached home: A free-standing home (that is, not attached to any other homes on either side) intended to be occupied by a single family.
Canada Mortgage and Housing Corporation (CMHC): As Canada’s authority on housing, CMHC contributes to the stability of the housing market and financial system, provides support for Canadians in housing need and offers objective housing research and information to Canadian governments, consumers and the housing industry.
Commitment letter (or “mortgage approval”): A written notification from a lender to a borrower that says a mortgage loan of a specific amount is approved under specific terms and conditions.
Mortgage: A loan given by a lender to a buyer to help with the purchase of a home or property. The mortgage loan is usually repaid in regular payments that generally include both the principal and interest.
Mortgage loan insurance: Insurance that protects a lender against default on a mortgage. Mortgage loan insurance is provided by CMHC or a private company and is usually required for any mortgage where the down payment is less than 20% of the purchase price or lending value of a home. Mortgage loan insurance helps Canadians purchase homes earlier and at interest rates that are comparable to buyers with a larger down payment.
Security: Also called “collateral.” Property that is pledged to guarantee a loan or other obligation that can be claimed by the lender if a loan isn’t repaid. With a mortgage, the home being purchased is used as security for the loan.
Now that you’re familiar with these terms, you may feel more confident when communicating with realtors, lenders and lawyers. At Mann Lawyers, we pride ourselves in hands-on management of the transaction from the outset, to prevent and head-off problems that might arise before, at, or after closing. We also make sure that you are well-informed, with all the information. Please feel free to contact our team of real estate lawyers for assistance.
This blog post was written by Diana Tebby, a member of the Real Estate and Wills and Estates teams. She can be reached at 613-369-0384 or at firstname.lastname@example.org.