Glossary Of Real Estate Terms

Glossary Of Real Estate Terms

For most people, real estate is an industry that they are involved in only a handful of times in their life. Even with clients I've worked with for over a decade, many still struggle in keeping track with the unique lexicon that we in the real estate industry use on a daily basis. From Status Certificate to GDS Ratio here are the terms I have seen confused most often.

Assignment
The sale of one's interest in an "Agreement of Purchase and Sale". Most commonly, a Buyer purchases a property from a Developer and then before it is built sells it to a third party. Since the Buyer does not yet have title to the property he or she is effectively "Assigning" his or her interest in the original Agreement of Purchase and Sale with the Developer thus becoming the "Assignor". The new Purchaser or "third party" becomes the "Assignee" and assumes responsibility for the completion of the transaction with the Developer according the the original "Agreement or Purchase and Sale" including all hidden charges included within.

Condition
Broadly defined as a stipulation in a contract/agreement that provides for a consequent result on the occurence of an event. In simple terms, a condition must be "waived" or "fulfilled" by the party which included the condition before the contract/agreement can become firm and binding. This must occur in writing by way of either a "waiver" or a "notice of fulfilment" within a certain time period failing which the contract/agreement becomes null and void. The most common condition in a residential agreement would be a finance condition followed by an inspection condition for freehold properties or a status certificate condition for a condominium (see status certificate).

Condominium
Refers to a system of land ownership where each individual owner holds title to a specific unit as well as owning a share of common property typically referred to as "common elements". The owners of the condominium unit also own an undivided interest in the common elements (gym, party room, hallways, lobby, pool, property surrounding the building etc.).

Conventional Mortgage
A first mortgage granted by an institutional lender such as a bank or trust company in which the amount does not exceed 80% of the appraised lending value of the property. This type of mortgage is not normally insured or guaranteed by any government or private agency such as CMHC or Genworth (GE Capital).

Exclusive Listing
Under an exclusive listing, one brokerage is authorized by the Seller to sell the property during a specific time. If the property is sold during that time, the brokerage receives a commission. With this type of Listing, only the brokerage with whom the listing is signed may sell the property and receive the commission, however, the brokerage has the option of Co-operating with other brokerages.

Freehold
An interest in real estate for an infinite period of time.

GDS Ratio
Lenders use GDS ratios to determine if a borrower can afford to carry mortgage payments. GDS or Gross Debt Service Ratio compares the borrowers gross income to the expenses of carrying mortgage payments including costs such as heat.

High Ratio Mortgage
A mortgage loan which exceeds 80% of the appraised lending value of the property and therefore is insured through CMHC or Genworth.

HST
HST is included in straight residential purchases in the resale market. However, if you purchase a new development condominium on a builder's form you will make a statutory declaration with your lawyer upon closing as to the use of the property. If that use is for your principal residence then HST is included. If you are going to "flip" or sell the property right away then you must pay the rebate portion of the HST on closing. If you are going to rent the unit out for a year or more you will have to pay the rebate portion of the HST but can file to "claw" it back from Revenue Canada. If the property you purchase is a mixed use property such as a house or three storey building on a retail strip then you will make a statutory declaration on closing as to the portion of the property which is to be used as commercial and therefore subject to HST and that portion which will be your residence and therefore not subject to HST.

Land Transfer Tax
A tax imposed on real property typically calculated on the value of the property being registered in a land registration office (see land transfer tax calculator under "Calculators" heading on this website to calculate your land transfer tax).

MLS
The Trademarks known as MLS, Multiple Listing Service and the MLS design marks are certification marks registered and owned by "The Canadian Real Estate Association".

Status Certificate
Common to condominiums, the status certificate is a document or set of documents which are produced by the Property Manager which provide the financial status of the Condo Corporation including a Reserve Fund Study which determines whether or not the Corporation has adequate funds to carry on business for the foreseeable future without either increasing Condo Fees or asking for a Special Assessment from the individual unit owners. It also shows if there are any lawsuits by the Corporation or against the Corporation as well as provides the list of By-laws for the Corporation including such things as pet restrictions. When purchasing a condominium it is recommended that the purchase offer be conditional upon the Buyer obtaining the Status Certificate and the Buyer's solicitor reviewing the Status Certificate. 

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