The Essential ABC’s of Real Estate Lingo (Part 2)
As you saw in part one of this series, there are a ton of terms, phrases, and things to know when it comes to real estate. So much, in fact, that what I thought would be a simple post actually turned into several, just so you’re not overwhelmed!
While you don’t need to know every single real estate phrase on the planet, learning to speak the lingo can be a real help when you’re checking out listings, reviewing offers, and talking to your financial advisors. As an agent who prides herself on excellent communication, I’ll always make sure you understand what’s happening with the purchase or sale of your home – but if you need a refresher, well, read on!
What’s a house deed?
A huge deal! Forget handing over the keys – the deed is the document that legally transfers possession from a seller to a buyer. The deed shows you actually own the house. Without the deed, you have no legal proof that you are the home’s rightful owner.
You should also be aware of the Chain of Titles. It is a chronological record of all of the owners of a property. Without this, there’s no guarantee that the person you bought the house from is even the complete owner.
How much do you need for a down payment?
A down payment is the amount of money the buyer puts down on the property in cash (or gives to the bank on closing). The amount of your down payment varies on the price of the home and what type of buyer you are (first time, second time, investor). Your mortgage broker and your agent will be able to provide guidance based on your goals. Remember: your down payment is different from the deposit (due when you sign the deal) and closing costs.
What’s a deposit?
Kind of what it sounds like. If you’re incredibly interested in a property, you can produce a deposit when you enter into your contract; it’ll later be deducted from your total down payment and closing costs.
When you own your own home, you really only own the percentage you’ve paid off – called equity – while your mortgage lender or bank owns the rest. This amount changes with every mortgage payment or if the market value of your property increases. You can calculate your home’s equity by subtracting your outstanding balance from the market value of your home.
What’s the difference between a listing and an exclusive listing?
An exclusive listing means ‘kinda private.’ While most listings are posted for sale on the MLS system (Multiple Listing Service), some are exclusive. A seller may choose this type of listing for a few reasons:
The seller would prefer to remain private or doesn’t want many people to know about the sale of the home.
Often while agents are preparing a home for sale, we’ll discuss it with our colleagues to let them know it’s ‘getting ready for sale.
You can purchase a home while it’s exclusive, and every situation will be different. In Toronto, it’s more common for homes to be on the MLS system. In other provinces, or the USA, there may not be a central database of properties (like the Toronto MLS system) because there are so many different offices, or an agent may have access to additional listings. If you’re purchasing in the GTA, we have central MLS systems, so exclusive listings are rarer.
How do I know what fair market value is?
Fair market value is the value of your property in an open and free market, where everyone – buyers and sellers – are knowledgeable about the property in question, and no coercion is happening to complete the sale. Another way to look at it is what the most recent sale of a similar property was. Again, your realtor will be able to guide you in this estimate.
What’s the difference between a variable mortgage and a fixed-rate mortgage?
There are a few different types of mortgages. A fixed-rate mortgage means just that – your interest rate will remain fixed, or the same, for the period of your loan. A variable-rate means the rate fluctuates according to the Bank of Canada rates. To determine which mortgage is better for you, speak to a qualified (and knowledgeable) mortgage broker and discuss your long-term plan with your home/mortgage.
What does it mean when a home has a “for sale by owner’ sign?
This sign means the home is selling without a real estate agent, often because the seller wants to avoid paying a commission. While the thought of saving money is excellent, operating without a guide can backfire and could mean your house is sitting on the market for longer than it needs to, causing some buyers to question if something is wrong with the property.
For buyers, it means you can still purchase the house with the help of your real estate agent, but it can be a bit more complicated. Discuss the pros and cons with your agent – there are still many legalities involved, and this is the largest purchase of your life – so it’s best to ensure you are protected.
Is it starting to make sense yet? Not to worry – I’ll be diving back into more helpful terms and glossary definitions in some upcoming posts! To go check out Part 1, click here!