If you’ve never bought or sold a home before, the process is bound to come with some firsts. You’ll almost certainly hear more than a few unfamiliar words, too. While an experienced real estate agent can explain all of them to you (along with the steps involved), it doesn’t hurt to get acquainted with the terminology ahead of time. It might just help you get a jump on the buying or selling process!
Check out the first half of my real estate dictionary to learn some ultra-useful terms…
An appraisal is a professional assessment of the value of a home. When a buyer is purchasing a property, their lender will have one carried out by a qualified appraiser. The goal is to ensure that the financing they provide doesn’t exceed what the property is worth. If you’re buying, and the appraisal amount comes in lower than the offer you’ve made, you may have to make up the difference.
Appreciation is the word we use to describe the increase in property values over time. In the housing market, home worth tends to increase with demand (while supply remains relatively unchanged). Toronto homeowners enjoy fairly steady historical appreciation rates.
An assignment occurs when someone sells their interest in a property before they take full possession of it. This scenario frequently happens with pre-construction condos. Since the seller doesn’t yet own the property (as it doesn’t yet exist), they can sell their purchase agreement and right of future ownership.
A bridge loan is a financing option that can help a homeowner if they’re selling their existing property before buying a new one. It allows them to draw on the equity in their existing home and put that money towards their down payment.
When a buyer is obtaining financing, they have the option of working with a mortgage broker instead of a traditional lender. These professionals connect home hunters with a wide variety of mortgage products (unlike banks, which can only offer their own). A broker can shop around to help you find the best possible rates and terms.
In a real estate deal, closing is the last step. It refers to the period leading up to and including the closing date, when ownership of the property is officially transferred to the buyer. Your agent will help you navigate this last leg of your purchase or sale (which includes the payment of closing costs on the part of buyers).
A condition is a requirement in your agreement of purchase and sale that must be fulfilled for a real estate transaction to be considered complete. As just one example, a financing condition makes a home purchase contingent upon the buyer’s ability to obtain a mortgage. If their financing falls through, they can back out of the deal. Your agent can help you understand which conditions (if any) make sense for you.
For a home buyer, their down payment is the amount of the purchase price that isn’t covered by their mortgage. It’s due at closing. Your down payment will depend on the purchase price. It’s a sliding scale, usually ranging from 5 to 20 percent. If you pay less than 20, you’ll be required to purchase CMHM insurance (which protects your lender if you default).
Many buyers believe down payments and deposits are the same things. They aren’t. Your deposit is the amount you provide to the seller upfront (typically within 24 hours of your bid being accepted). You can offer any sum you want—but the higher it is, the more attractive your offer is likely to be to sellers.
If you’re a homeowner, your equity is the value of your property minus the sum you still owe your lender. Put another way, it’s the portion of your property that you own outright. Building equity is a good, long-term strategy for growing wealth. In many circumstances, you can also tap into it when you need it.
For Sale By Owner
While most sellers choose to list their homes with qualified real estate agents, some opt to do it on their own. Before taking this step, weighing the potential challenges involved is crucial. From expertly pricing your home to preparing it for sale to maximizing its exposure (and beyond), a skilled local professional can help ensure that your property sells successfully—the first time around.
Home Equity Line of Credit
A home equity line of credit (also known as an HELOC) is a loan that’s secured by your home. That means you’re borrowing against your equity. An HELOC is a revolving line of credit, which means you can borrow, repay, and borrow again (up until you reach your limit).
An inspection is a qualified assessment of a property’s current condition. During the process, a qualified professional will look closely at the home’s systems, components, and overall conditions to help buyers make an informed decision. Home hunters frequently make their purchase contingent upon a successful inspection—or use any defects found to negotiate for a lower price.
There you have it: some of the most commonly-asked-about real estate terms. Being familiar with them may help make the buying or selling landscape a little smoother for you—though no amount of research can replace the knowledge of an experienced local agent. Next up, part two of my real estate dictionary.
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