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Find
the meaning of all the key terms used in Real Estate Vocabulary.
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all listed in alphabetical order. We hope this service helps you
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CALIFORNIA BUNGALOW:
Compact, early twentieth-century single-storey house.
CALIFORNIA RANCH:
One-storey house, in a post-Second-World-War style, known for its
ground hugging design and low, pitched roof.
CALL OPTION
(PROVISIONS, RIGHTS):
A lender's right to demand payment of the outstanding balance of the
loan at a time specified in the loan agreement.
CANCELLATION CLAUSE:
Provision in a contract that gives one or more parties the right to
terminate the contract if a specific event occurs.
CAP:
A limit. In variable
rate mortgages, a limit as to how high periodic payments
may go or how much the interest may change within a given time
period or over the life of the mortgage.
CAP RATE:
Short form for capitalization rate.
CAPACITY OF PARTIES:
Legal competence to sign and be bound by a contract. One might lack
capacity as a result of being a minor, being mentally challenged or
not being of right mind. A contract signed by an incapable person is
not binding.
CAPE COD COLONIAL:
A one-storey house, compact in design and in an
early-American-style. Symmetrical layout with a central entrance.
Steep, gable-type roof, usually shingled, with a low central
chimney.
CAPITAL:
The working money in a business venture.
CAPITAL ASSET:
Assets of a permanent nature used to produce income, such as
machinery, buildings, equipment, land, etc. Must be distinguished
from inventory. A machine which makes pencils, for example, would be
a capital asset to pencil manufacturer, but inventory to the company
whose business is to sell such machines.
A property to which certain tax rules (capital gains and capital
losses) apply.
CAPITAL EXPENDITURE:
Money spent to improve a property and enhance its value over an
extended period of time (as opposed to a repair). May be added to
the adjusted
cost base of the property improved or depreciated over
the useful life of the improvement.
CAPITAL GAIN:
Gain realized from the sale of a capital asset. The difference
between the purchase and sale price less allowable deductions, plus
depreciation. (a property other than a principal residence) upon
which tax is payable, either upon disposition of the property or the
deemed disposition of the property under tax rules.
CAPITAL IMPROVEMENT:
Value enhancing work carried out on a capital property.
CAPITAL LOSS:
Loss from the sale of a capital asset. The difference between the
purchase and sale price plus allowable deductions, less
depreciation. (a property other than a principal residence). May be
set off against capital gains or against regular income according to
the tax rules.
CAPITALIZATION:
Determining a present value of income property by taking the annual
net income (either known or estimated) and discounting by using a
rate of return commonly acceptable to buyers of similar properties.
CAPITALIZATION
RATE:
The percentage (acceptable to an average buyer) used to determine
the value of income property through capitalization.
CAPITALIZE:
To determine the present money value of future income, whether
estimated or fixed.
CAPITALIZED
VALUE:
The value of the property after use of the capitalization approach
of appraisal
CAPTURE RATE:
A comparison of the sales or leasing rate of a particular real
estate development to the sales or leasing rate of all developments
in the same market.
CARRYING CHARGES
(COSTS):
The expense required to maintain a property over a given period of
time, including property taxes, maintenance, insurance payments,
interest charges on financing, etc.
CASH EQUIVALENT:
The amount a vendor would have realized on the sale of a property
had she not accepted unfavorable (or favorable) financing of the
purchaser but received cash instead.
CASH
FLOW:
Description of the net income from a property after all expenses of
holding and carrying the property are paid.
In investment property, the actual cash the investor will receive
after deduction of operation expenses and debt service (loan
payments) from his gross income.
CASH METHOD:
An accounting method, based on actual cash moving in and out of the
company over a given period. See accrual
method.
CASH RESERVE:
An amount of money that the purchaser of a property still has after
the transaction closes. Some lenders require a certain level of cash
reserve (equal to two payments) before granting a mortgage.
CASH THROW-OFF:
See cash flow.
CASH-OUT REFINANCE:
When an owner renegotiates or negotiates a new mortgage and the
proceeds of the new financing exceed the money required to pay out
the old mortgage and any other costs, liens or expenses, leaving
money for the borrower.
CAVEAT EMPTOR:
Latin, meaning "Let the Buyer beware". Maxim which applies
to real estate transactions where the onus is on the Purchaser to
satisfy herself as to the suitability and condition of the property
she is considering for purchase. Vendor is not responsible to the
Purchaser for the condition of the property and, unless he is
specifically asked, does not generally have an obligation to reveal
problems to the Purchaser (except where the defect is hidden,
serious and could not be discovered by the Purchaser after
reasonably prudent inquiries and investigations).
CC&R'S:
Short form for "covenants, conditions, and restrictions",
which are the rules of general application governing the relations
between land owners in a specific subdivision, development,
condominium development or cooperative housing facility. May be
registered on title.
CEILING:
The limit over which the interest rate on a variable
rate mortgage may not rise over the life of the loan.
CENTRAL BUSINESS
DISTRICT (CBD):
The business and commercial "core" of a municipality (also
known as "Downtown").
CERTIFICATE OF
ELIGIBILITY:
Document issued by the Department of Veteran's Affairs to qualifying
veterans which entitles them to apply for subsidized or guaranteed
loans.
CERTIFICATE OF
INSURANCE:
A document, issued by the insurance company, setting out the
particulars of the insurance coverage for a particular property.
CERTIFICATE OF NO
DEFENSE: Document which sets out a certain set of facts which
the issuer is agreeing to be bound by. Same as estoppel
certificate.
CERTIFICATE OF
OCCUPANCY:
Document issued by the local municipality indicating that a new
dwelling is suitable for occupation. Generally confirms that the
dwelling complies with local building, safety and health by-laws.
CERTIFICATE OF
REASONABLE VALUE (CRV):
Document issued by the Department of Veterans Affairs (VA). Based on
an appraisal, sets out market value of a particular property for the
purposes of establishing maximum principal amount available for a VA
mortgage on the property.
CERTIFICATE OF
SATISFACTION:
Document registered on title which provides evidence from the lender
that a loan instrument (deed of trust, mortgage, other lien) has
been paid out and released.
CERTIFICATE OF TITLE:
A written opinion of the quality of a person's ownership of
property, issued by a lawyer or a title insurance company after a
search of the title records has been conducted. May contain
qualifications to the certification regarding defects found or
potential defects not investigated.
CERTIFICATE OF
VETERAN STATUS:
Document issued by Department of Veteran's Affairs confirming that
the person named in the Certificate has served at least 90 days of
continuous active duty (including training time) and is eligible for
certain VA benefits (such as a VA mortgage).
CERTIFIED COPY:
A copy of a document which bears some form of declaration (usually
by the holder of the original document) that it is a true copy of
the original.
CERTIFIED GENERAL
APPRAISER:
A person who has met the requirements to be licensed to appraise the
value of property. Qualification requirements may vary from one
jurisdiction to the next.
CERTIFIED HOME
INSPECTOR:
A person who has met the requirements to be "certified" to
inspect the physical condition of homes. Qualification requirements
may vary from one jurisdiction to the next.
CERTIFIED PROPERTY
MANAGER (CPM):
A person who has met the requirements of the Institute of
Real-Estate Management.
CERTIFIED RESIDENTIAL
APPRAISER:
A person who has met the requirements to be licensed to appraise the
value of residential properties of no more than four units.
CERTIFIED RESIDENTIAL
BROKER (CRB):
A person who has met the requirements of the Realtors National
Marketing Institute.
CERTIFIED RESIDENTIAL
SPECIALIST (CRS):
A person who has met the requirements of the Realtors National
Marketing Institute.
CESTUI QUE TRUST:
The beneficiary of a trust, the person who is the
beneficial/equitable owner of the property held in trust for which
the trustee holds legal title.
CHAIN OF TITLE:
A part of a title search. A listing, in chronological order, of
successive legal owners of a property, often listing as well the
registration particulars of the document by which title is
transferred from each owner to his successor in title.
CHAIN:
An old unit of measurement of land, measuring 66 feet in length. A
chain equals 100 links, each 0.66 feet in length.
CHANGE FREQUENCY:
Term describing the period of time between changes in the interest
rate and/or payments of a variable rate (adjustable rate) mortgage
or loan (i.e. one week, one month etc.).
CHATTEL:
An item of personal property which is not affixed to the land or
building (as opposed to a fixture, an item which is a part of the
land or building). Chattels are generally not included in the sale
of property unless specifically included in the Agreement of
Purchase and Sale.
CHATTEL MORTGAGE:
A debt secured against items of personal property rather than
against land, buildings and fixtures.
CLEAR TITLE:
Ownership of land which is marketable and free of competing claims,
liens, mortgages or other encumbrances.
CLAIM:
A right asserted against another party. One might register a claim
on title to the property to which the claim applies, file a claim
under an insurance policy or file a Statement of Claim in court to
assert one's rights.
CLASS ACTION:
A legal proceeding which presents the related or similar claims of
an identifiable group against a single or group of defendants,
usually by using one representative claimant to assert the claims on
behalf of the group.
CLIENT:
Customer. The person who hires a professional (broker, banker,
lawyer, investment counsellor, etc.)
CLOSED MORTGAGE:
A land loan that cannot be prepaid or re-negotiated before the end
of its term without the payment of an interest penalty.
CLOSED-END MORTGAGE:
A mortgage with a set principal amount which cannot be increased or
extended during the life of the mortgage.
CLOSING:
The culmination of any transaction in which the interested parties
(or their representatives) meet to exchange documents, funds, and
property and, if necessary, to register the transfer of title.
CLOSING
COSTS:
Moneys expended by a party in completing a transaction, over and
above the purchase price, including: legal fees, taxes, mortgage
application charges, interest adjustments, registration fees,
appraisal fees, etc.
CLOSING
DATE:
Also known a Completion Date. The date set in the Agreement of
Purchase and Sale upon which the transaction is to be completed, the
purchase price paid and the transfer of title registered.
CLOSING STATEMENT:
Also known as HUD-1
statement. A document which sets out the financial
agreement between the parties, the costs each must pay, and all
other similar information regarding a transaction (may be joint or
separate for each party).
CLOUD (ON TITLE):
Any unresolved claim against ownership of all or part of a property,
affecting the owner's title to the property and marketability of
that title.
CLUSTER HOUSING:
Development design which places attached dwelling in close proximity
to each other, with nearby open spaces set out for common use of the
dwelling owners.
CODE OF ETHICS:
A set of rules governing the behavior of members of the organization
that has established the Code. Lawyers and real estate
brokers/agents both have their own Codes.
COINSURANCE:
A technique used to share the risk of a larger development between
several insurance companies, each company covering a certain
percentage of the total value of the insured property. Each policy
may include a clause setting a minimum percentage of the total value
of the insured property which the owner must keep insured in order
to be eligible for payment under the policy.
COLD CANVASS:
Also known as "Cold Call". Contacting home owners out of
the blue to solicit business or, in the case of a real estate broker
or agent, listings.
COLLATERAL:
Property (real or personal) which is pledged to secure a loan or
mortgage. If the debt is not paid, the lender has the right to sell
the collateral to recoup the outstanding principal and interest on
the loan.
COLLATERAL MORTGAGE:
A loan which is secured by some sort of written note of indebtedness
(such as a Promissory Note) which is secondarily secured by a
mortgage registered against a property.
COLLECTION:
The act of pursuing a debtor who is delinquent on his loan payments.
CO-MAKER:
Also known a "Guarantor". Someone who signs a loan
document along with the principal borrower, pledging to be
responsible for the loan should the borrower fail to pay it.
COMMERCIAL BROKER:
A real estate professional who deals in properties with commercial
(business, retail, etc.) uses.
COMMERCIAL PROPERTY:
As opposed to residential or industrial property. Property zoned,
designed or intended for use retail, office, or similar users.
COMMINGLE:
To allow to mix, as in money belonging to two or more people
deposited to the same account and used by each person regardless of
the amount they have deposited.
COMMISSION:
Payment to a salesperson (a listing real estate agent or broker) for
her efforts in marketing and selling a property, usually expressed
as a percentage of the purchase price.
COMMISSION SPLIT:
The division of the payment made to the listing agent between that
agent and her broker, or between the listing agent and agent
representing the Purchaser (the selling agent).
COMMITMENT:
A promise, usually in writing, to provide a mortgage or other loan.
May also be used in insurance field. Sets out details of mortgage,
insurance. Often referred to as Commitment Letter or Binder.
COMMITMENT
FEE:
The fee charged by the lender to commit itself to a mortgage or loan
on specific terms.
COMMON AREA
ASSESSMENTS:
Also known as Common Element Fees. A periodic charge levied against
all of the owners of units in a condominium or planned unit
development (PUD) project which is used by the condominium
corporation or homeowner's association to pay for repair,
maintenance and other expenses of the common areas in the
development.
COMMON AREAS:
Portions of the property and buildings owned by a condominium
corporation or planned unit development (PUD) homeowners'
association, or a cooperative development's association that are
available for the use of all unit owners. Also used in rental
properties to refer to those facilities for the use of all tenants.
COMMON ELEMENTS:
A common area in a condominium project which is owned by the
condominium corporation and for the use of all unit owners.
COMMON LAW:
As opposed to statute law. Laws or legal principles that have been
established by courts over the years. May be codified into a statute
or overruled by a statute passed by the government.
COMMUNITY
ASSOCIATION:
Any organization established and run by property owners in a
particular area, often to represent the common interests of the
owners in dealings with government, planning bodies, developers or
other outside parties.
COMMUNITY HOME
BUYER'S PROGRAM:
Program established to find creative ways to finance home purchases
for people with modest income.
COMMUNITY PROPERTY:
The principle that property accumulated by the joint efforts of a
married couple should be considered to be owned by both of them in
equal shares, no matter who has legal title to the property.
COMPARABLES:
Used in assessing or establishing the fair market value of a
property, a property which has been sold recently that is similar in
size, condition, location and amenities to the subject property.
COMPETENT PARTIES:
People who are legally capable of entering and being bound by a
contract (i.e. of age, mentally capable).
COMPLETION DATE:
See Closing Date.
COMPONENT
DEPRECIATION:
For tax purposes, allocating a portion of the total cost of
renovation to each component of the renovation (roof, plumbing,
electrical, foundation, etc.) and then depreciating the cost of each
component separately.
COMPOUND INTEREST:
As opposed to simple interest. The accumulation of interest on a
loan over time where interest is charged not only on the principal
of the loan but also on all interest accrued against the principal
to the end of the last compound period.
CONCESSIONS:
Sacrifices made by a party to convince another party to enter a
contract.
CONDEMNATION:
1. The taking of private land for public use by a municipal or other
government body through a court action under the principal of
Eminent Domain. See also Expropriation.
2. An order made by a health or building department barring the use
of a dangerous or hazardous property.
CONDITION(S):
Clauses in the Agreement which must be fulfilled before the
Agreement becomes firm and binding. If the condition is not
fulfilled, the Agreement will usually become null and void and any
deposit paid returned to the Purchaser.
CONDITIONAL OFFER:
An offer to purchase a property which is contingent on the
fulfillment of certain conditions before it becomes firm and
binding. Also known as "Conditional Sales Contract".
CONDOMINIUM:
A development where individuals own dwelling units but share common
areas with the other unit owners of the complex. The maintenance of
the common areas etc. is taken care of by the Condominium
Corporation in which every unit owner owns a share and has voting
rights. The Condominium Corporation is created by the registration
of a Declaration and by-laws on title to the property and all
individual units.
CONDOMINIUM OWNERS
ASSOCIATION:
An organization made up of unit owners in a condominium development
established to govern relations between the owners and to administer
the rules, by-laws and covenants of the condominium
CONFORMING:
Complying with the requirements of a certain statute, by-law or
organization.
CONSERVATOR:
Also called a Committee, Personal Representative or Guardian, a
person appointed by the Court to administer the property of a person
who is not capable of managing his own affairs.
CONSIDERATION:
The value, asset, service, information etc. which is offered to
another party in a contract in exchange for that party's agreeing to
enter the contract. A contract is not binding if each party does not
offer at least some consideration to the other party(ies).
CONSTANT PAYMENT
LOAN:
A type of loan which requires equal, periodic payments over a
certain term, at the end of which the amount owing under the loan
will be completely paid out.
CONSTRUCTION LOAN:
A structured, short-term loan to a builder or developer to allow for
the development of land. Funds are advanced at certain stages of the
development project to pay for specific expenses, fees or costs.
CONSTRUCTIVE
EVICTION:
Actions of a landlord (or third party) which interfere with a
tenant's use and enjoyment of the rented premises to such an extent
that the tenant is, at law, considered to have been improperly
forced out of the premises.
CONSTRUCTIVE NOTICE:
The legal principle that deems that a person has knowledge of a
certain fact once that fact is made a part of a public record. The
registration of a lien on title to a property represents
constructive notice to all persons interested in that property of
that lien, whether they have investigate the title records or not.
CONSUMER REPORTING
AGENCY (OR BUREAU):
Also known as Credit Bureau. The source to which the banks or other
lenders turn for information on the credit history of an applicant.
CONTIGUOUS:
See also Abutting.
Sharing a common boundary, touching.
CONTINGENCY:
An event which may (or may not) happen in the future, a condition
that must be fulfilled before a contract becomes firm and binding.
CONTRACT:
A legally binding agreement (oral or written) between two or more
persons regarding an exchange of some sort. A legally binding
contract must include consideration passing between the parties, an
intention on the part of all parties to be bound to the contract, a
meeting of the minds of the parties as to the contents of the
contract, and an element of clarity such that the terms of the
contract may be interpreted, understood and enforced by a court.
CONTRACT
FOR DEED:
Also known as a Land Contract or Land Installment Contract.
Transfer of a property where the title remains in the Vendor's name
until the Purchaser makes the final payment to the Vendor of the
Purchase Price.
CONTRACT OF SALE:
Also known as Agreement of Purchase and Sale, Offer to Purchase,
Contract of Purchase. The written agreement between the Vendor and
Purchaser for the sale of property which contains all of the terms,
conditions and financial details of the transaction.
CONTRACT RENT:
The periodic rental payment as set out in the lease contract.
CONTRACTOR:
A tradesman who works in the construction industry under a contract
with the owner of the property. See also "sub-contractor".
CONVENTIONAL LOAN:
1. A loan or mortgage to which the normal rules of such transactions
apply without the inclusion of a government program (i.e. VA or FHA
insurance).
2. A loan or mortgage with a fixed interest rate, fixed payments and
a fixed term.
CONVERSION
CLAUSE:
A provision in a variable
rate mortgage (adjustable
rate mortgage) which allows the borrow to change the
mortgage to a fixed rate mortgage upon the occurrence of certain
events.
CONVERSION:
1. a change in the use of a property, or in the way a property is
owned (i.e. from private to condominium ownership)
2. the improper taking of the property of another for one's own use;
3. In Ontario, the transfer of a property from the Registry System
of land registration to the new Land Titles Conversion Qualified
(LTCQ) computerized system by the agents of the Ontario government.
CONVERTIBILITY
CLAUSE:
See "Conversion
Clause".
CONVEY:
To transfer title to (or any other interest in) a property to
someone else.
CONVEYANCE:
The act of transferring an interest in property to someone else or
the document which effects the transfer.
CO-OP:
Short for Cooperative, a mode of land ownership where the occupiers
of individual units in a building own an interest in the Cooperative
Corporation that owns the whole property.
COOPERATING BROKER:
A Broker who is involved in a real estate transaction and is,
therefore, entitled to share in the commission from the transaction.
COOPERATIVE (CO-OP):
See "Co-op".
CORPORATE RELOCATION:
The movement of an employee of a corporation to a new city (or other
location) as part of the normal business of the corporation. The
employee's moving expenses (including the costs of selling and
buying a home) may be paid by the corporation and are tax
deductible.
CORPORATION:
A legal entity created by the registration of appropriate
incorporating documents with the supervising government office. May
be private (ownership held by specific individuals and not traded on
a public stock exchange) or public (shares traded on stock
exchange). Shareholders are protected from liability for the actions
of the corporation. Corporations may enter contracts and own
property.
CORPOREAL:
Tangible.
COST APPROACH:
An appraisal method where a property's value is estimated using the
cost of the property plus cost of all improvements, minus
depreciation.
COST ESTIMATING:
Predicting the total cost of a construction project by estimating,
in advance, the actual costs of all elements in the project,
including legal fees, labor, permits, materials etc.
COST PLUS CONTRACT:
An agreement with a contractor or builder which sets the
contractor's compensation for the project as a percentage of the
total cost of all labor and materials.
CO-TENANCY:
When more than one person owns a piece of property. Title will be
held by the owners as Joint Tenants (each owns the land equally and,
in the event of the death of one of the owners, the survivors
continue to share title equally by right of survivorship) or as
Tenants in Common (each owner has title to a specific percentage of
the land and may sell, mortgage, or bequeath her interest to a third
party without consent of the other owners).
COUNTEROFFER:
An answer to an offer. If a prospective Purchaser presents an offer
to purchase a property to the owner of the property, that owner may
accept the offer as it stands, reject it outright or respond with a
"counteroffer" which changes certain terms of the original
offer. Making a counteroffer, at law, entails rejection of the
original offer. The Purchaser may then counteroffer back, making
changes to the owner's counteroffer. Sometimes, the process of
counteroffering is referred to as "signing back" the
offer.
COUNTY:
A territorial division of land in a geographic region (state or
province). Similar to Regions and Regional Municipality.
COVENANT:
A promise contained in a contract or agreement.
COVENANT RUNNING WITH
THE LAND:
A covenant that is literally attached to the land and binds present
and future owners to the requirements of the covenant. In new
developments, such covenants may be restrictive: the owner is not
allowed to alter grading patterns of the land, or erect new fences,
or put up TV aerials, or to change the color of the exterior of the
house. Such restrictive covenants may be enforced by a Homeowners'
Association.
CREATIVE FINANCING:
An arrangement for the financing of the purchase of a property which
is outside the normal practice of residential financing.
CREDIT:
1. The ability to access money, to use money prior to earning it.
2. The accounting term for a liability or for equity, entered on the
right side of the ledger.
3. As a verb, to allot for the benefit of a person (i.e. You must
credit the Purchaser on closing for the deposit paid).
CREDIT HISTORY:
A statement of the debts and obligations, whether current or past,
of a person which helps a lender to assess the risk of a loan to
that person.
CREDIT LIFE
INSURANCE:
A form of insurance which is designed specifically to pay out the
debts of the insured person in case of their death.
CREDIT LIMIT:
The maximum amount available to a person under a loan, credit card
or other borrowing arrangement.
CREDIT RATING:
Based on an analysis of a person's credit history, an evaluation of
that person's ability to manage a new debt or debts overall.
CREDIT RISK:
The potential for a borrower to fail to live up to her obligations
under a loan arrangement.
CREDITOR:
Any person to whom money is owed. May be secured (the debt has been
registered against the property of the debtor) or unsecured.
CUL-DE-SAC:
French term for a "dead-end
street". A street which meets another street at one
end but is closed at the other, such that little traffic will travel
down it and the property owners enjoy excellent privacy.
CUMULATIVE INTEREST:
The total amount charged as interest on a loan or mortgage to a
certain date.
CUSTOM BUILDER:
A builder or developer who specializes in creating homes to the
specifications and requirements of individual land owners.
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