Do you know your Real Estate Terms?

A

ALR (Agricultural Land Reserve)
A provincial zone in which agriculture is recognized as the priority use, farming is encouraged and non-agricultural uses are controlled.

Amortization

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

Appraisal

An estimate of a property's market value, used by lenders in determining the amount of the mortgage.

Appreciation

The increase of a property's value over time.

Assessment

The value of a property, set by the local municipality, for the purposes of calculating property tax.

B

Bank of Canada Overnight Target Rate

The target level interest rate set by the Bank of Canada at which major financial institutions borrow and lend one-day (or "overnight") funds among themselves.

Benchmark property or home price

A property or home price against which other properties can be evaluated.

Bond Yield

The percentage of a return that an investor can expect to get from a bond issue in a period of time.

Brokerage

A real estate company under which an individual is licensed.

Buyer's Market

When there is a higher number of homes to choose from than buyers in comparison. Prices of homes tend to be lower and they remain available for sale longer. Buyers usually have more leverage in negotiating a purchase.

C

Capitalization (Cap) rate

The ratio between the net operating income produced by an asset and its capital cost (the original price paid to buy the asset) or alternatively its current market value.

Carrying cost

Financial and operational expense associated with an investment.

Closing Costs

Expenses in addition to the purchase price for buying and selling a property.

Commercial Leading Indicator

A measurement designed by BCREA to forecast changes in broad commercial real estate activity.

Condominium

Shared ownership in property. Owners have title (ownership) to individual units and a proportionate share in the common elements.

Consumer Price Index (CPI)

A measure that examines the weighted average of prices of consumer goods and services, such as transportation, food and medical care, calculated by averaging price changes for each item.

Conventional Mortgage

A mortgage loan that does not exceed 80 per cent of the lending value of the property.

Core inflation

A measure of inflation that excludes products that face volatile price movements or that can have temporary price shocks which can diverge from the overall trend of inflation and give a false measure of inflation.

Counteroffer

One party's written response to the other party's offer during negotiation of a real estate purchase between buyer and seller.

CREA - Canadian Real Estate Association

The Canadian association that represents more than 100,000 real estate brokers/agents and salespeople working through more than 100 real estate boards and associations across Canada.

D

Debt Service Ratio

The percentage of a borrower's gross income that can be used for housing costs, including mortgage payment and taxes. (and condominium fees, when applicable)

Down Payment

The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage.

E

Equity

The difference between the price for which a property can be sold and the mortgage(s) on the property. Equity is the owner's stake in the property.

F

FICOM - BC Financial Institutions Commission

An agency of the provincial government that provides public protection through ten statutes, including the Real Estate Development Marketing Act.

G

Gross Debt Service Ratio

A general rule is that your housing costs (mortgage payments, taxes, heating costs, and 50 per cent of condominium fees, if applicable) should not be more than 32% of your gross monthly income.

Gross Domestic Product

The monetary value of all the finished goods and services produced within a country's borders in a specific time period.

Grow op

A marijuana-growing operation, usually located in a house.

H

Headline/Total CPI inflation

The raw inflation figure as reported through the Consumer Price Index (CPI) that is released monthly by the Bureau of Labor Statistics.

High-ratio Mortgage

A mortgage that exceeds 80 per cent of the loan-to-value ratio; must be insured by either the Canada Mortgage and Housing Corporation or a private insurer to protect the lender against default by the borrower who has less equity invested in the property.

HST - Harmonized Sales Tax

The tax created as a combination of the Goods and Services Tax (GST) and the Property Sales Tax (PST), which is 12 per cent in BC.

Housing Starts

The number of privately owned new houses (technically housing units) on which construction has been started in a given period.

I

Inflation

A rise in the general level of prices of goods and services in an economy over a period of time.

Inflation Adjusted

A measure of return that accounts for the return period's inflation rate.

Inflation-control target

The target range established by the Bank of Canada and the federal government within which the Bank aims to contain annual inflation as measured by the rate of change in the total CPI.

Interest

The cost of borrowing money.

L

Leverage

Controlling a large asset with a relatively small amount of cash. In real estate, $20,000 down payment (or less) can be used to purchase (control) a $100,000 home, for example.

Licensee

A managing broker, associate broker and/or representative of a brokerage. A licensee is not necessarily a REALTOR®.

Lien

Any legal claim against a property, filed to ensure payment of a debt.

Listing Agreement

The contract between the listing broker and an owner, authorizing the REALTOR® to facilitate the sale or lease of a property.

Listing Broker

The REALTOR® who signs a contract with an owner to sell the property.

M

Median or average home price

The average home price of a home calculated by adding all sold prices and dividing by the number of homes sold.

Mortgage

A contract between a borrower and a lender. The borrower pledges a property as security to guarantee repayment of the mortgage debt. Lenders consider both the property (security) and the financial worth of the borrower (covenant) in deciding on a mortgage loan.

Mortgage Broker

A person or company having contacts with financial institutions or individuals wishing to invest in mortgages.

Mortgage Insurance

Government-backed or privately-backed insurance protecting the lender against the borrower's default on high-ratio (and other types of) mortgages.

Mortgage Insurer

In Canada, high-ratio mortgages (those representing greater than 80 per cent of the property value) must be insured against default by either CMHC or private insurers. The borrower must arrange and pay for the insurance, which protects the lender against default.

Mortgage Payment

The regular instalments made towards paying back the principal and interest on a mortgage.

Mortgage Prepayment Penalty

Is a fee paid by the borrower to the lender in exchange for being permitted to break a contract (a mortgage agreement); usually three months' interest, but it can be a higher or it can be the equivalent of the loss of interest to the lender.

Mortgage Term

The length of time a lender will loan mortgage funds to a borrower. Most mortgage terms run from six months to five years, after which the borrower can either repay the balance (remaining principal) of the mortgage, or renegotiate the mortgage for another term.

Multiple Listing Service® (MLS®)

A co-operative selling system for relaying information to REALTORS® about properties for sale.

P

Presale Cross Reference List

A tool developed by BCREA, the Canadian Home Builders™ Association of BC (CHBA BC) and the Urban Development Institute (UDI) to assist homebuyers in the purchase of homes under development, also known as pre-sales.

Prime Rate

The lowest rate of interest at which money may be borrowed commercially.

Principal

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

Property Transfer Tax (PTT)

A land registration tax that must be paid when an application for a taxable transaction is made at any Land Title Office in BC to register changes to a certificate of title.

R

Rate (Interest)

The return the lender receives for advancing the mortgage funds required by the borrower to purchase a property.

Real Estate Development Marketing Act

The BC statute that imposes disclosure requirements on developers marketing various forms of development.

Real Estate Services Act

The BC statute that imposes licensing requirements on persons who provide trading services related to real estate, rental management services and strata management services.

REALTOR®

A real estate professional who is a member of a local real estate board and the Canadian Real Estate Association (CREA). Only these professionals can call themselves REALTORS®.

Refinancing

The process of obtaining a new mortgage, usually at a lower interest rate, to replace the existing mortgage.

S

Sales to active listings ratio

The number of unit sales divided by the number of active listings.

Seasonally Adjusted Annual Rate (SAAR)

A rate adjustment used for economic or business data that attempts to remove the seasonal variations in the data.

Seller's market

A market which has more buyers than sellers. High prices result from this excess of demand over supply.

Shelter taxes

BCREA describes the Property Transfer Tax (PTT) and Harmonized Sales Tax (HST) as provincial shelter taxes.  HST and PTT negatively impact the affordability of housing, which directly impedes the quality of life of British Columbians.

Superintendent of Real Estate

The office of the Superintendent of Real Estate falls under the BC Financial Institutions Commission (FICOM). FICOM is an agency of the provincial government that provides public protection through ten statutes, including the Real Estate Development Marketing Act (REDMA). REDMA governs marketing, sales and long-term leases of development units.

T

Term

The length of time a lender will loan mortgage funds to a borrower. Most mortgage terms run from six months to five years, after which the borrower can either repay the balance (remaining principal) of the mortgage, or renegotiate the mortgage for another term.

Term Mortgage

A non-amortizing mortgage under which the principal is paid in its entirety upon the maturity date. Sometimes called a straight loan.

Title

The legal evidence of ownership of a property.

Title Search

A detailed examination of the ownership documents to ensure there are no liens or other encumbrances on the property, and no questions regarding the seller's ownership claim.

Total Debt Service Ratio

The maximum percentage of a borrower's income that a lender will consider for all debt repayment (other loans and credit cards, etc.) including a mortgage.

U

Unit

Term used to describe the individual home or apartment held by the owner within a condominium development.

V

Variable-rate Mortgage

A mortgage for which payments are fixed, but whose interest rate changes in relationship to fluctuating market interest rates. If market rates go up, a larger portion of the payment goes to interest. If rates go down, a large portion of the payment is applied to the principal.

W

Working With a REALTOR® Brochure

A standard tool used by all REALTORS® in BC that explains agency relationships and describes which personal information is collected.

Y

Year-to-Date

A period, starting from the beginning of the current year, and continuing up to the present day.

Z

Zoning Regulations

Strict guidelines set and enforced by municipal governments regulating how a property may or may not be used.


My business grows by building strong client-focused relationships. I would welcome the opportunity to answer any questions about the real estate market that you may have.

If you would like to find out how much your home is worth in today's market, to discuss listing your home or buying a new home, please contact me on (604) 781-5692 or via email - tim@timwray.ca