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Adjustment Date. - The day from which all calculations of interest, tax adjustments, utility bill adjustments (if applicable) are made to the credit of either the Sellers or Buyers. This is usually the same date (but not always) as the possession date.

Amortization. - The number of years it takes to repay the entire amount of the mortgage.

Appraised Value. - The process of accurate estimation of the market value or probable selling price of a property. It is usually conducted for the purpose of mortgage lending by a certified appraiser. There are two commonly used approaches to value:

• Cost — The appraisal of a property by estimating the land value and cost to re-build less accrued depreciation.
• Direct Comparison — Compares property being appraised with similar properties that have recently been sold, listed, or which listings have recently expired.

Agency. - The legal relationship which exists between the client & the brokerage, and the representative. The essence of the agency relationship is that the brokerage has the authority to represent the client in dealings with others. Representatives are obligated to protect & promote the interests of their clients as they would their own and also owe certain fiduciary duties to their clients (see Fiduciary Duties).

Agency Disclosure. - The fiduciary duty that requires a representative to tell his/her client all facts & information that might affect the client’s decisions concerning either the property or the transaction.

Appreciation. - The increase in the properties value over time.

Assessed Value. - The value of a property, set by the local assessment authority for the purposes of calculating property tax.

Arrears. - To be behind in the payments called for under a mortgage agreement.

Balance Owing. - The amount outstanding after all other forms of financing have been accounted for. It is due on Completion Day unless other arrangements have been made.

Blended Mortgage Payments. - Payments consisting of principal and interest component of a mortgage.

Breach of Contract. - If one party refuses to carry out the obligations required under the contract the contract is broken.

Bridge Financing. - Money borrowed against a homeowner's equity in a property, usually for a short term, to help finance the purchase of another property or make improvements to a property being sold.

Building Permit. - Required for the actual construction of a building; related to a Land Use By-Law. For construction on Gabriola Island, building permits are obtained through the Regional District of Nanaimo.

Buyer Agency. - A relationship in which the brokerage has entered into an agency relationship with the buyer to act on behalf of the buyer.

Catchment. - The surface from which rainfall is collected and may include roof or ground surfaces.

Certificate of Pending Litigation. - A legal document giving notice that an action or proceeding is pending in the courts and which affects the title to the property.

Certificate of Title. - Describes the owners of the property and bears notations of the right any other parties may have to that piece of property.

Cistern. - A covered watertight tank for storing collected rainwater from a catchment.

Client. - The person being represented by a brokerage. The brokerage owes the client a duty of care, integrity, confidentiality & loyalty.

Closing. - The real estate transaction’s completion, when the parties involved agree that all legal & financial obligations have been met & the deed to the property is transferred from the seller to the buyer.

Closing Costs. - Expenses in addition to the purchase price for buying & selling a property.

Commitment. - A notice from a mortgage lender to a prospective borrower that the lender will advance mortgage funds in a specified amount under certain conditions. We recommend that you ask your financial institution to put the commitment in writing, & provide a copy to you, prior to the removal of any financing conditions.

Comparative Market Analysis (CMA). - A form of the Direct Comparison Approach. It uses sales, competitive listings & expired listing to try to determine the probable selling price for the subject property.

Completion. - The day the transaction is finalized and on which the buyer becomes the legal owner of the property. Completion is noted on the contract.

Conventional Mortgage. - A first mortgage issued for up to 75 per cent of the properties appraised value or purchase price, whichever is lower.

Consideration. - What each party in a contract receives in exchange for its promise to act in a specified way.

Conveyance. - The transfer of the title of land from one person to another, or the means/medium by which legal title to the property is transferred.

Counter-Offer. - Any change made to the terms of the other parties contract. It is the negotiation process involved in dealing with a contract, usually in reference to the Purchase Contract. An altered contract in response to a preceding one.

Covenant. - Formal legal agreements between persons to do or not do a certain thing.

Deed. - An instrument, in writing, duly executed and delivered, that conveys title or an interest in real property.

Deposit. - Money that is paid by the buyer to the seller, the amount of which is agreed upon by both parties. It is held in a trust account by the real estate company as stakeholder, (unless otherwise specified).

Depreciation. - A loss in value due to any cause, ie. age or otherwise.

Discharge of Mortgage. - A document executed by the lender and given to the borrower when a mortgage loan has been repaid in full before, at or after the maturity date.

Disclosure. - The fiduciary duty that requires an agent to tell his/her client all facts and information that might affect the client’s decisions concerning either the property or the transaction.

Dual Agency. - A situation where the brokerage (including the broker, all associate brokers, and representatives registered to it) enters into an agency relationship with the buyer & the seller, or two buyers in order to act on behalf of both parties in a real estate transaction. Dual agency must be acknowledged in writing by the parties. Both buyer & seller are the brokerage’s clients.

Dual Agency Disclosure. - Since the brokerage is working for both parties in a dual agency situation, it becomes necessary to limit the fiduciary duties owed to both clients. The dual agent may not disclose that the seller will accept less or the buyer will pay more than the asking price or motivation for the sale.

Down Payment. - The buyer's cash payment toward the property. The difference between the purchase price and the amount of the mortgage loan.

Easement. - A legal right to use or cross (right-of-way) another person’s land for limited purposes. A common example is a utility company’s right to run wires or lay pipes across a property.
Encroachment. An intrusion onto an adjoining property. Examples might include a neighbor’s fence, storage shed, or overhanging roof line that partially (or even fully) intrudes onto your property.

Encumbrances. - A restriction that is either a monetary claim against the land (such as a lien, mortgage or lease), or a non-monetary one such as a an easement.

Equity. - The interest an owner of a real property has in its total assets after allowing for encumbrances and creditors claim.

Ethics. - Rules of behavior or conduct that provide a standard of fair, moral practice and a guide by which that behavior or conduct is evaluated.

Exclusive Listing. - Only one brokerage has the sole authority to sell the property during a specified period of time.

Fiduciary Duties. - The duties of loyalty, disclosures, confidentiality obedience, seasonable care & diligence and full accounting that are required by law of any agent relative to his/her client.

Financial Institutions. - Banks, credit unions, insurance &/or trust companies.

Foreclosure. - A legal process by which the lender takes possession and ownership of a property when the borrower doesn’t meet the mortgage obligations.

Gross Debt Service Ratio (GDSR). - The percentage of the borrower’s gross income that will be used for monthly payments of principal, interest and taxes, heating costs, etc. In general the GDS should not exceed 30%.

High-ratio Mortgage. - A mortgage that exceeds 75% of the loan-to-value ratio; must be insured by either Canada Mortgage & Housing Corporation (CMHC) or private insurer like the Mortgage Insurance Company of Canada (MICC) to protect the lender against default by the borrower who has less equity invested in the property.

Interest. - The value charged by the lender for the use of the lender's money. Expressed as a percentage.

Joint Tenancy. - A joint ownership where, if one owner dies his/her ownership is automatically transferred to the other owner(s).

Lending Value. - The amount of the loan is limited to not more than 75% of the selling price or appraised value of the property.

Lien. - A right of encumbrance affecting any property, as security for a debt or charge (usually for labor, services, or materials supplied to it).

Listing Agreement. - The legal agreement between the Seller and listing brokerage which lays out the services to be rendered, describing the property for sale and stating the terms of payment.

Loan-to-Value Ratio. - The ratio of the principal amount of the loan to the lending value of the property.

Market Value. - The highest possible estimated price which a property will bring if exposed for sale in the open market, allowing a reasonable time to find a knowledgeable buyer. It is the expression of the objective concept of value.

Maturity Date. - The end of the term, at which time you can pay off the mortgage or renew it.

Mortgage. - An interest in land that is created by a contract as security for a loan made by the lender to the borrower, with stated rights and remedies in the event of default. There are several types of mortgages:

• Blanket Mortgage — covers two or more specific parcels of real property.
• Collateral Mortgage — a mortgage taken as collateral security to a promissory note.
• Equitable Mortgage — a mortgage secured on the basis of equity in property. The property owner retains title to the property.
• Fully Closed Mortgage — cannot be paid out before its term has expired. It usually offers a lower interest rate than an open mortgage for the same term.
• Fully Open Mortgage — contains a provision allowing partial or full prepayments of the lower interest rate than an open mortgage for the same term.
• High Ratio Mortgage — a mortgage in which the loan-to-value ratio is above 75%.
• Limited Prepayment Mortgage — one that is closed in for part of the term then open for prepayment but is subject to payment of a three month interest penalty/bonus.
• Portable Mortgage — allows the borrower to transfer a mortgage to a new property for the duration of the term without penalty.
• Pre-Approved Mortgage — tentatively approved by a financial institution for a specified amount, interest rate and monthly payment.
• Reverse Annuity Mortgage — the loan takes the form of monthly payments or loan advances or even a lump sum which a senior uses to purchase an annuity. The property serves as collateral and the loan and accrued interest are not paid until after a specified term.
• Variable Rate Mortgage — mortgage in which the rate fluctuates during the term and either the payments or balance outstanding is adjusted accordingly.
• Vendor Take-Back Mortgage — seller takes back a mortgage for part of the sale price of the property.

Mortgage Broker. - A person or company who, for remuneration, negotiates for other parties, the buying and selling or arranging of a mortgage on a particular piece of property.

Mortgage Term. - The period of time for which money is loaned and the interest rate is set.

Mortgagee. - The person or financial institution lending the money.

Mortgagor. - The borrower of a mortgage.

Multiple Listing. - A brokerage, associate broker or representative uses the facilities and services of other brokerages through a current & comprehensive listing system for relaying property information to Realtors. This service offers the widest exposure to properties listed for sale.

Non-Conforming Use. - A use that was legal at one time, but which has later become illegal by reason of a change in the Land Use By-law.

Offer. - The document containing the purchase price & terms/conditions that the buyer suggest to the seller that he/she would be willing to pay for a particular piece of property. The seller may accept, reject, or alter the buyer’s offer.

Open Mortgage. - Allows partial or full payment of the principal at any time, without penalty.

Permitted Use. - Land use classifications which are specifically allowed for in a designated category under Land Use By-Law.

Pre-Approved Mortgage. - Qualifies you for a mortgage before you start shopping.

Prepayment Privileges. - The paying off of all or part of the principal separate and apart from payments called for under a mortgage agreement.

Principal. - The mortgage amount initially borrowed or the portion still owing on the mortgage. Interest is calculated on the principal amount.

Property Disclosure Statement. - A form filled out by the sellers to disclose the properties condition and any other information about the property that could be important to a buyer.

Property Taxes. - This levy is affected by location and is determined by local property tax assessment practice. Taxes are paid on an annual basis.

Property Transfer Tax. - Payment to the provincial government for transferring property from the Seller to the Buyer. First time buyers, under certain circumstances, may be exempt.

Purchase Price. - The price that the buyer & seller agree on for a particular piece of property. It may be broken down to include such things as other value.

Purchaser. - The buyer of a property. The client of the Buyer’s Brokerage.

Qualifying. - Usually referred to as qualifying the Buyer/Seller. The process of establishing the needs, wants, abilities, & seriousness of the customer.

Real Estate. - The physical land and improvements made to it, including structures thereon.

Real Estate Transaction. - The purchase, agreement for sale, exchange, option, lease rental or otherwise of real property.

Realtors. - Real Estate professionals who subscribe to a high standard of professional service and adhere to a strict Code of Ethics

Refinancing. - Paying off the existing mortgage and arranging a new one or re-negotiating the terms and conditions of an existing mortgage.

Renewal. - Re-negotiation of a mortgage loan at the end of a term for a new term.

Residential Tenancies Act. - Provincial legislation that applies to the rental of residences such as houses, suites, apartments and rooming houses.

Restrictive Covenant. - A registered limitation against the land title.

Second Mortgage. - Additional financing. Usually has a shorter term and a higher interest rate than the first mortgage.

Setbacks. - The amount of space between the property lines and the development, required by the Land Use Bylaw.

Statement of Adjustments. - Closing statements in a real estate transaction which set out the sources of funds which make up the purchase price, adjustments to and from the purchase price, the final amount required from the purchase and the amount due to the Seller. Lawyers/Notaries prepare a statement for the Seller and the buyer.

State of Title Certificate. - A copy of the title which lists charges against the property. ie. Liens, mortgages, rights of way, etc.

“Subject-to” Clause. - A statement of a condition to be fulfilled before the contract will become unconditional, must include a specific deadline for removal.

Surveyor’s Certificate. - The legal outline of a property and location of all buildings on the land.

Tenancy in Common. - The owners each own part of a common land. If one owner dies the interest goes to his/her heirs rather than the other owner(s).

Term. - The length of time the interest rate is fixed. It also indicates when the principal balance becomes due and payable to the lender.

Title. - Legal ownership in a property.

Title Search. - A detailed examination of the ownership documents to ensure that there are no liens or other encumbrances on the property, and no questions regarding the Seller’s ownership claim.

Total Debt Service Ratio (TDSR). - The ratio of annual or monthly charges for principal, interest and taxes, plus payment on various other debts (ie. bank loans, or finance company loans). It is compared to the total gross income of the borrower. Trust Account. A bank account into which the deposit in a Real Estate transaction is placed, in accordance with the Real Estate Act.

Zoning Regulations. - Strict guidelines set and enforced by local governments regulating how property may or may not be used.