Real Estate Terminology Explained

Buying a new home can be a daunting project. If this is your first time there will be words and phrases that are used that might as well be in a foreign language – terms like amortization, mortgage, buyer’s agency, appraisal, home inspections, property surveys, septic systems, and the list goes on. Even if you are a repeat buyer, some of these terms may still be a bit fuzzy, especially if you didn’t have the terms fully explained to you first time around.

Sure, you could research the words yourself, however, it is nice to have them explained in one place, and you may not even realize there are others you could learn about. Also, some terms I have included here may seem obvious but they have been included in order to have as complete a list as possible. However, since this is an introductory article meant to be an introduction to the terms used in the housing market, the information presented is by no means as in-depth as it could be. There could be pages written about each of the items included in this list.

Being an informed buyer is a great place to be when searching for your first home, whether for personal residence or for investment. You need to know what is involved in that dream property!

TERMS

Amortization – the process of spreading payments out over time. In real estate this is the length of time that an owner chooses to take to pay off the mortgage. The amortization period is broken down into shorter lengths of time called terms. So a mortgage is spoken about in terms, for example, of a 30 year amortization with a term of 5 years.

Appraisal – an unbiased determination of the value of a property, used to determine how much a home should be mortgaged for. Typically performed by qualified certified appraisers.

Buyer’s Agent – a real estate agency agreement where the agent works for the buyer. It is becoming more and more popular to have buyer agency agreements signed by the prospective buyer, and this action provides benefits for both the agent and the buyer. The buyer benefits from the determined concerted effort the agent will provide for the buyer during the time of the contract. The agent benefits because if the buyer obtains a home anywhere other than through the agent, the agent will be compensated, again during the length of the contract. The length can be discussed and negotiated between the agent and the buyer.

Closed Mortgage – a mortgage provided by a financial institution that does not allow the borrower to pay off without penalty.

*N.B. – Be careful when signing for a closed mortgage as the financial institution may have very expensive costs associated with paying off a closed mortgage. In some cases, the penalty is 3 months worth of payments and in other cases the penalty is the amount of interest lost by the institution with early payoff. Read the terms carefully.

**N.B.B. – the decision to choose an open or closed mortgage should depend upon your long or short term goals. If you plan on selling the home within a short period of time then it may be a better option to go for an open term even though the rates charged are likely to be higher. It is important to discuss your real estate and financial plans with your banker or mortgage broker in order to get the best possible deal with the least cost.

Condominium – a type of property where a portion is set aside for individual personal ownership and another portion is set aside as common elements for which monthly condo fees are paid to support. Condo fees are collected to pay for common elements such as grounds maintenance, elevators, swim or exercise facilities, lighting and external features. Condominiums have written rules and by-laws that are in effect and where these rules conflict with the landlord and tenant act, it may be that the condo rules hold true. For example, condominium rules may prohibit the ownership of pets. BE sure to read the rules completely and contact legal advice if unsure on any component of the document. It is legally binding on the people who purchase a condominium.

Detached – a stand-alone house. Doesn’t share walls with any other unit.

Duplex – a 2 unit building, typically with one dwelling on top of the other dwelling, but it may also be side by side and with the entire unit being sold as a single entity.

Easement – an easement is a privilege given from one owner to another owner for the purposes of transporting across a piece of land. Farmer A owns a piece of land. Farmer B needs to cross Farmer A’s land to get to his own land. Farmer A allocated a portion of his land as an easement thereby allowing Farmer B unrestricted access to his own property. Easements stay with the property, not with the owner. The easement can be terminated – obtain legal advice.

Encroachment – the real estate definition of an encroachment is the use of an owner property by property belonging to a neighbour. For example, a roof overhang could cross a property boundary and this is an encroachment. It is important to obtain legal counsel if an encroachment is suspected during the buying process.

Home Inspection – a non-invasive check of a home by a qualified home inspector to see if there are major defects that may arise in the near future. Items such as fire systems, water systems, electrical systems, are checked and deficiencies noted. As well, the inspector should look for areas where there is excessive heat loss, the age of the appliances. The inspection should include exterior items as well as interior items along with the age of the home and the related elements.

Land Survey – accurate measurement of a piece of property identifying frontage, width, depth, and includes easements, and encroachments, as well as positioning of existing structures.

Life Lease – type of ownership where the buyer only buys the rights to live in the property. Land transfer taxes are not paid because the ownership doesn’t come to the buyer but remains with the building or corporation. Depending on the corporation a life-lease owner may or may not be eligible to earn a profit on the investment.

Mortgagea fancy term for loan, used in the housing market. Instead of a house loan you have a house mortgage.

Open Mortgage – a mortgage provided by a financial institution that allows the borrower to pay it off completely without penalty. Because it reduces the amount of control that the financial institution has over this particular type of mortgage, the interest amount charged by the institution tends to be higher than a closed mortgage.

Seller’s Agent – the real estate agent who is working directly for the seller. This gives the seller the concerted effort of the agent for the purpose of selling the home.

*N.B. – When two individuals use the same agent to buy and sell the home there is a conflict of interest on the real estate agent. The real estate agent’s objective when selling is to get the highest price possible for the home. The real estate agent’s objective when buying the home is to get the lowest price possible for the home. This in and of itself creates a conflicting environment.

Semi-Detached – a type of home that shares 1 common wall. Land size is usually similar to that of a completely detached home and the homes operate as two separate entities.

Septic Systems – A closed system, self-contained. A sewage disposal system for homes that are not connected to the municipal water systems. A qualified inspection should be performed for capacity, age and structural integrity. As well, it is important to learn how to work with a septic system regarding types of waste that the septic system can safely handle. People on a septic system are also typically on a well-water system – get the water checked by a qualified water tester. Do not by-pass this step or you could end up with a huge bill for digging a new well.

Sewer Systems – these are the systems generally associated with homes in the city limits. There are two types of sewer systems – the external and the internal. The external carries away waste water from the streets and the internal carries away human waste. The external system often empties into a river, or pond or some other body of water. The internal system carries to the waste treatment plant to be cleaned before being emptied into a body of water. One thing to check for when purchasing a home is the type of pipes that are used to carry water into the home – lead or polyvinyl choride or pvc. Grants may be available to assist with the removal of lead pipes in a home.

Status Certificate – this is a set of papers obtained from a property management firm containing information relating to a specific registered condominium property. This report provides detailed financial information about the property along with any possible upcoming special assessments. It also includes information about the condominium rules as they are set out when the property was registered as a legal condominium.

Terms – the shorter time period that an amortization is broken into. This is the length of time for which a bank lends the money at a specific interest rate. The first term in your 30 year amortization could be 5 years with a 3.0% closed term.

Town-house – can also be called row housing. These types of homes have very little personal land, generally share a common municipal address and share at least 1 wall with another unit. Some inside units share 2 walls. Town-houses can be owned or rented. If owned they are known as a townhouse condominium. Condo fees apply where the residences are owned and cover items like grounds maintenance, snow removal, exterior finishes, and at times, exterior lighting and even water.

Variable Mortgage – this type of mortgage has a floating interest rate associated with it. Generally, variable rates are lower than both open and closed mortgages. However, if the interest rates are expected to increase it is wise to “lock in” your interest rate and convert your mortgage to either an open or closed mortgage, with an interest rate that doesn’t change, hence the term “locked-in”. Signing this type of mortgage requires the home-owner to be vigilant with regards to what the interest rate market is doing. Most mortgage companies allow the home-owner to lock-in a mortgage without penalty.

Real Estate Landscape in India

Real estate is a highly fragmented sector in India, with only a few organized players. Most real estate developers have only a local or regional presence and there is moderate participation from large corporations till now. The top players in the Indian real estate and construction industry are DLF, Unitech, Omaxe Hiranandani and Ansal group.

Most of the real estate developers in India today are giving a lot of quality and value adds like swimming pool, health clubs, gardens in their projects. The only negative factor today is that there is limited ready stock with good developers. The demand from the information technology sector certainly has changed the urban landscape in India. The sector is the biggest driver for commercial properties in India, and residential properties in India are indirectly benefited of the economic activities created by the sector.

In the residential properties segment in India, Gurgaon has clinched the status for a case study. Gurgaon, one of the national capital regions of India, which has seen a fundamental change in not just its skyline but also in its fundamental urban demographics. Gurgaon, a few years ago, was described as just a small town built on a cow pasture. But in the past seven and eight years, it has witnessed 20 malls with many more under construction and has a skyline of shining new office buildings and call centers.

Gurgaon is considered a shopper’s paradise and the malls are similar versions of their US counterparts: five story big bazaars which house almost every international brand like McDonalds, Levis, Nokia, Nike and Tommy Hilfiger along with multiplex cinemas, escalators and large parking lots. The arrival of call center industry, information technology houses and other such BPOs in India has led to an inflow of more than 9 lakh new jobs. Outsourcing business has changed the real face of commercial properties in India, but its greater impact has been the demographic shift characterized by rising disposable incomes and increased consumerism.

Mumbai has always been the trendsetter in the indicative property prices of real estate India. Upcoming cities like Bangalore, Hyderabad, Gurgaon are seen fast catching up with this trend. But on the other hand it has been noted that there exists a tremendous shortfall of middle class housing and affordable housing in India. Majority of the developers are involved in developing high class housing, so there is a dearth of low cost affordable units.

Rental value of the properties of most of the Tier I cities has gone up at a very fast pace. Individuals have started giving a serious thought about purchasing an apartment as the installment for home loans are almost equivalent to the amount they spend on paying the rent. Moreover, at the end of the day the individual has a sense of satisfaction that he has managed a fixed asset for himself.

The boom in real estate sector, however, is restricted to areas such as commercial properties, retail and housing sectors. This growth can be attributed to various fundamental factors such as growing economy and growing business needs.

How to Use the Internet to Market Your Real Estate and Save Thousands of Dollars in Commissions

The vast majority of buyers are searching the Internet to find the real estate they are looking for. The figure keeps changing but somewhere between 85 to 90% of all buyers use the Internet as their main tool for property search.

In these economically challenging times most professional real estate offices (including the large national franchises) have cut way back on their budgets for print advertising in the newspapers. In real estate offices this is known as a BLACKOUT on advertising and it is happening all over the country.

The other reason why real estate agents and offices heavily utilize the Internet is because it costs next to nothing and it works! Plan and simple it works.

The Internet has changed the way real estate is marketed forever and agents have accepted it. Print advertising is extremely expensive and the Internet has now made print advertising passé.
This is not a bad thing. Agents place their efforts and energy on what works and now so can you!
Right now is the perfect time for the average home seller to learn this truth and use the Internet to sell their property without the expense of a listing real estate agent.

One of the best-kept secrets around is that for peanuts and very little effort, sellers can put their property on the Internet without an agent or a real estate broker.

If you have a digital camera and have ever used or seen eBay then you can figure out how to post your property on the Internet. It’s that easy. Fill in the blanks, download some pictures and your property is out there for the world to see.

Oh sure, you are comfortable with the Internet. Maybe you have sold a car on it or have bought and sold other items on eBay or Craigslist. Or perhaps you are quite leading edge using all the latest technology. But this is real estate and it all seems a bit complicated. What about all the other steps that are involved in the real estate transaction?

Relax! This is not rocket science and most professionals in the real estate business are not scientists.

Use of the following 12 steps and it will make your transaction very manageable.

THE12 PRINCIPLES FOR SUCCESSFUL INTERNET REAL ESTATE SELLING is not only a guide for using the Internet to sell real estate online but also a formula for protecting and securing the seller throughout the entire transaction.

1. Be brave and set the price. The seller always has
2. You must perform all inspections before you market the property
3. Honestly represent the exact nature and condition of the property
4. Hire an Attorney. Do it early on in the sales process
5. Get proof of insurance from everyone
6. Anything you say can and will be used against you. So zip it!
7. You need to cooperate with and pay buyers brokers and agents
8. You can sell directly to buyers without an agent. If they don’t have one
9. Online advertising is cheap
10. Showings are easy
11. Be effective and follow up
12. All information concerning the property becomes the property of the property

If sellers will follow these principles they can sell their real estate online with the confidence that they can accomplish this important transaction from beginning to end.