The ABC’s of Real Estate Lingo (Part 1)
If buying a house was easy, you wouldn’t need a real estate agent (which would be a really bad idea!). In addition to all the legal components of buying and selling, professional agents will know what to be aware of in homes or condos, how to protect your money, and help you maneuver the speed of the market. And in a busy market like Toronto, speed is critical. When you’re working with an agent, it’s helpful to become familiar with some common terminology you’ll hear in your search.
Do you have other terms you find confusing? Leave me a comment and I’ll give you the real deal!
What’s an amortization schedule?
This is the schedule of how your mortgage payments will be spread out over a period. It’s typically one monthly payment (sometimes two) spread out over 15 or 30 years.
What’s a home appraisal, and who does the appraisal?
When selling your home, an unbiased third party will come in and provide an estimate of how much they think your home is worth. This isn’t just a nice-to-have, it affects decisions by the lender (typically a bank) in whether or not they will give you the money to buy the home.
Some common slang you might hear around this: “We need to make sure it appraises.” The concern with paying too much for a house is the bank won’t agree with the price you paid. If their “appraisal” doesn’t match what you paid – you may have to make up the difference.
What does appreciation mean in terms of selling a house?
Ah, appreciation: something I give every day to my local barista…
In real estate estate speak, this is the amount your home increases in value over time. Aside from annual changes in inflation, if you’ve done renovations, or new parks or schools have opened near you, for example, your home has likely appreciated in value.
What’s a bridge loan, and do I need one?
If you end up buying a new property, but haven’t sold your current one yet (and need the cash from it in order to buy the new place), you’ll likely have to take out a bridge loan – a temporary, short-term loan just to help you have, keep, or carry both properties at the same time for a small period of time.
What’s the difference between a real estate agent, and a real estate broker?
Ever see a “For Sale” sign in front of a house, and find yourself confused by real estate agent vs. real estate broker? Here’s the difference: a real estate agent, or a realtor, is the most common level in real estate – it’s likely a realtor that’s showing you houses, or bringing prospective buyers by. The next level up is a broker – they’ve taken additional courses in real estate law, property management etc., and have passed their broker’s license exam. It’s as high up as you can go in the real estate world.
What’s a bully offer (or as I like to call it, a pre-emptive offer – sounds a lot nicer!)?
At certain times, in certain markets, there’s so much demand that properties have specific days on which buyers are allowed to submit offers (offer day). A “pre-emptive,” or bully offer is when you make an offer BEFORE the offer day. In this case, what you’re saying to the seller is: “Dear Seller: My price is going to be so good, you don’t want to wait for offer day.” Sometimes this means you can pay much more for the property. It’s a strategy best discussed with your agent!
What does closing on a home mean?
Possibly my favourite term! Closing is the last step of your real estate transaction, when everything is signed and sealed; your closing date is the big day when the property changes hands and you get to move in!
What are conditions?
Are you wondering – ‘should I put in an offer with conditions?’ If a schedule is a P.S., a condition is a great, big, “BUT”. When purchasing a home, you can add a condition, meaning you’re agreeing to purchase the property, BUT only if you sell your home by X date, the home inspection is good, or you receive your mortgage approval. These are important to be clear on, but it’s also important to note that in a multiple offer situation, they could reduce your chance of winning the bid (i.e. if a seller has several offers for the same price, but yours has a condition), they might not want to take your offer.
What are home comparables?
These are used to compare (big surprise) prices from similar homes in the area, and what they sold for. Your agent uses comparables to help determine what the current market value of the home may be, and what it might sell for. It’s good to know: appraisers and agents can sometimes use different methods to determine market value. That’s why it’s important to understand what the value of a home may or may not be.
What’s the Canada Home Buyers Plan?
Thank you, Canada! The Home Buyers’ Plan, or HBP, is a Canadian-specific option that lets you use money from your RRSP to buy, or build, your home. You can withdraw up to $35,000, which could be the difference between your offer being accepted, or not. However, like with most government programs, there are some specific rules around this excellent option – make sure you’ve read up on it, or ask a qualified agent (hint: my inbox is open to you).
Phew – so many terms, but only so much space in this post. There’s more important terms I’ll demystify for you to help you speak your agent’s language – stay tuned!