Real Estate Terms


Ever wonder what some real estate agents are talking about when they mention “Bridge Financing”,  “Real Property” or “Estoppel Certificate”?

Here are some terms you may hear in the midst of buying or selling your next home and think “what does that mean?”.

There are many more so do not hesitate to ask your agent if you are not sure of the meaning.

Agreement of Purchase and Sale: A written document in which the purchaser agrees to buy certain real estate and the seller agrees to sell under stated terms and conditions. This is the offer-to-purchase document that makes up the core of a real estate transaction. It itemizes the property being sold, when it is to be sold, at what price, and the terms and conditions to the sale and purchase of the property.

Amortization: How many years it will take to pay back your mortgage. For example, a mortgage with an amortization period of 25 years means it will take 25 years to pay down.

Appraised Value/Appraisal: A professional estimate of the value of a home or property. The appraisal is performed by a certified appraiser on behalf of a lender (such as a bank) to ensure that the value of the property matches or exceeds the funds being loaned.

Bridge Financing: A temporary loan to facilitate the purchase of a new home before the sale of another home. Literally, it “bridges” the financial gap between purchase and sale. For example, if you’d like to take possession of your new home a few days before the closing date of your old home for whatever reason, you’ll need bridge financing.

Building Location Survey or Real Property Report: A professional plan that plots the location of a house and structure on a lot. It is required by most lenders, and is useful in detecting physical defects and understanding lot lines, lot size and shape.

Closing Date: The date that is fixed for taking possession of a property and/or completing the transfer of title documents and balance of the down payment.

Conditions: These are the circumstances or requirements that must be met for a transaction to take place according to the Agreement of Purchase and Sale. For example, a buyer may insert a condition in the agreement that states that the offer is conditional upon the buyer securing financing.

Conditional Sale: A sale in which a buyer or seller is not bound by the agreement until all conditions are met.

Condominium: A form of property ownership wherein the owner has exclusive title to a unit within a project or building, in addition to a share of ownership in the common elements of the building or property. Common elements may include land, clubhouses, garbage removal and upkeep services, road maintenance, swimming pools, and so on. Condominium fees are paid by each unit owner, in addition the mortgage payment, in order to maintain the common elements.

Covenant(s): A covenant is an agreement, pledge or condition or restrictions that may be included as part of an agreement and registered on title to the real property. For example, a builder may include a covenant that states that storage sheds cannot exceed a dimension of 10 feet by 12 feet.

Disbursement: A payment made or disbursed by a professional like a lawyer. For example, a bank disbursement to pay for a mortgage. It may also include photocopies, courier charges and the like.

Easement / Right of Way: Access granted to persons other than the owner on a property. For example, a utility company may have a right of way onto your property in order to maintain its power lines, or sometimes a neighbour may be able to use your driveway to access their rear yard parking area.

Estoppel Certificate: Is a document often used in due diligence in Real estate and mortgage activities. It is a document often completed, but at least signed, by a tenant used in his or her landlord’s proposed transaction with a third party. A mortgage lender intending to collateralize a tenant-occupied property or a purchaser intending to purchase such a property will often want to verify certain representations made by the landlord.

An estoppel certificate provides confirmation by the tenant of the terms of the rental agreement, such as the amount of rent, the amount of security deposit and the expiration of the agreement. Further, the estoppel certificate may give the opportunity to the tenant to explain if she may have any claims against the landlord, which may affect a buyer’s or lender’s decision to complete the proposed transaction.

Some lease agreements require the tenant to complete such a certificate or to waive his responses by allowing the landlord to complete the estoppel certificate under certain circumstances.

Fee Simple: An estate in which the owner has unrestricted power to dispose of the property as he wishes, including by will or inheritance. It’s the greatest interest a person can have in real estate.

Gross Debt Service Ratio (GDS): The percentage of a borrower’s gross income that can be used for housing costs, including mortgage payments and taxes (condominium fees when applicable).

Home Inspection: A technical inspection of a property by a certified home inspector to assess the state of the property and the building structure, and advise you of existing or anticipated problems with the property that may affect your purchase decision.

Insurance Binder: A legal document that confirms your insurance policy, policy number, and the lender. You’ll need to obtain proof of insurance for the property prior to closing.

Joint Tenancy: An equal undivided ownership of property by two or more persons. Upon the death of any owner, the survivors take the decedents’ interest in the property.

Land Transfer Tax: A tax imposed by the government and paid by the purchaser of a property on closing. The land transfer tax applies whenever a property is transferred from one owner to another. It is based on the selling price of the house. Check with your province or state if a Land Transfer Tax applies.

Lien: A legal hold or claim in property as security for a debt or charge.

Mortgage (Open or Closed): A financial loan wherein the property is used as security for repayment.

* An Open Mortgage can be paid off before it matures. An open mortgage generally allows a full or partial payment of the principal at any time, without penalty.
* A Closed Mortgage cannot be paid before it matures. It features fixed payment and duration schedules. If you terminate the mortgage at any time prior to the actual end if the term, you may be penalized.

Possession: The point in a real estate transaction where the purchaser is able to take physical control of, and reside in, the property.

Power of Attorney: A legal document that allows you to designate your lawyer or a third party to sign and authorize documents on your behalf should you be unavailable. This may be useful during the period leading up to and including closing day, as well as in the long-term to ensure that your affairs can be taken care of by a person you trust in the case of your leaving the country or becoming disabled.

Principal: The amount borrowed (i.e. what you owe) on a mortgage. Your mortgage interest is paid based on this principal amount.

PCDS: The Property Condition Disclosure Statement is a disclosure document a seller is required by law to complete and provide the buyer in addition to the purchase agreement. The PCDS forms part of the purchase agreement and the buyer is permitted to rely on the seller’s disclosure as set out in it. The seller must disclose various key points a buyer would want (is the property connected to sewer or on septic for example) to know before buying, as well as disclosing any defects or issues with the property that would normally require disclosure. There are requirements to inform buyers of strata details where the property is a strata. There are requirements to disclose of issues that would clearly be relevant in making a decision to buy or not to buy, such as whether or not the property has been a grow op in the past.

Real Property: Real property means land and any item permanently attached to land.

Registry Office/Land Registry Office: The office where all formal closing transactions take place, are logged and archived.

Resale: The purchase of an existing, previously-owned home. A resale transaction is substantially more involved than the purchase of a new home, as a resale home carries a history of ownership that must be reviewed by your lawyer.

Reserve Fund: A common fund into which all owners of units in a condominium property pay a regular fee for the maintenance of common elements.

Search of Title / Title Search: A process whereby your lawyer searches all archived titles to your property in order to ascertain whether the property’s title is free and clear and can be sold to you as stated.

Tax Adjustment: An adjustment in the tax account for your property. In most transactions you will see some form of tax adjustment to account for any overpayments or arrears that may exist in the tax account at closing. For example, a seller may have paid taxes for the three months following closing. In that case, a tax adjustment equivalent to three months’ would be provided to the seller by the buyer upon closing.

Tenant Protection Act: A law that governs the relationship between a landlord and a tenant, as well as a landlord’s responsibilities to tenants and their leases. Even when purchasing a rental property that is new to you, you are bound by this law, which covers leases, rental costs, and more.

Title: A legal document that identifies a property and the owner of that property.

Title Insurance: A no-fault insurance policy that protects you against any current or future claims to the title of your property. Title insurance, along with your lawyer’s Search of Title, is designed to protect you from risks such as someone else making a claim to title of your property.