There’s a lot to know about buying a home, including certain terms that you may encounter for the first time. Here are some of the terms you are likely to come across when purchasing your new home.
Appraisal: Process for estimating the market value of a property.
Closing costs: Costs in addition to the purchase price of the home, such as legal fees, transfer fees and disbursements, that are payable on closing day. They range from 1.5 per cent to 4 per cent of a home’s selling price.
Closing day: Date on which the sale of the property becomes final and the new owner takes possession of the home.
Conditional offer: An Offer to Purchase that is subject to specified conditions, for example, the arrangement of a mortgage. There is usually a stipulated time limit within which the specified conditions must be met.
Counteroffer: If your original offer to the vendor is not accepted, the vendor may counteroffer. This means that the vendor has amended something from your original offer, such as the price or closing date. As this new offer varies the terms of the original offer, this rejects the original offer. If a counteroffer is presented, the individual has a specified amount of time to accept or reject.
Deposit: Money placed in trust by the purchaser when an Offer to Purchase is made. The sum is held by the real estate representative or lawyer/notary until the sale is closed and then it is paid to the vendor.
Down payment: The portion of the home price that is not financed by the mortgage loan. The buyer must pay the down payment from his/her own funds or other eligible sources before securing a mortgage.
Equity: The difference between the price for which a home could be sold and the total debts registered against it. Equity usually increases as the mortgage is reduced through regular payments. Market values and improvements to the property may also affect equity.
Lien: A claim against a property for money owing. A lien may be filed by a supplier or a subcontractor who has provided labour or materials but has not been paid.
MLS — Multiple Listing Service: A multiple listing service that contains descriptions of most of the homes that are for sale. This computer-based service is used to keep up with properties that are listed for sale.
Offer to Purchase: A written contract setting out the terms under which the buyer agrees to buy the home. If the Offer to Purchase is accepted by the seller, it forms a legally binding contract that binds the people who signed to certain terms and conditions.
Survey or Certificate of location: A document that shows property boundaries and measurements, specifies the location of buildings, fences, and other improvements on the property and states easements or encroachments, at a specific point in time.
Title: A freehold title is an interest in land that gives the holder full and exclusive ownership of the land and building for an indefinite period. A leasehold title is an interest in land that gives the holder the right to use and occupy the land and building for a defined period.
Vendor: The seller of a property.
Be prepared by learning the ABCs of homebuying. CMHC’s Homebuying Step by Step: A Consumer Guide and Workbook will lead you through the homebuying process in five simple steps. Download your free copy at www.cmhc.ca under the buying a home section.
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