Real Estate Terms for FSBO Sellers

A glossary of real estate terms and legal lingo FSBO sellers should know.

• Adjustments - Expenses like property taxes and utilities that have been prepaid by the seller and need to be pro-rated and charged to thepurchaser.
• Agent – An individual or a company representing a buyer and/ or seller
• Agreement of Purchase and Sale – a document outlining the terms and conditions under which a property is offered for purchase and sale.
• Amortize – Mortgage payments that include both principal and interest, made in installments..
• Amortization Period – The number of years required for reducing a mortgage debt to zero.
• Amortization Schedule – A table that shows how much ofeach periodic mortgage payment is principal and interest.
• Appraisal – Determining the market value of a property by an independent appraiser. This value is not necessarily the same as the selling price.
• Appreciation – The amount by which a property has increased in value.
• Approved Lender – A lending institution approved by the government to grant mortgage loans under the terms of the National Housing Act. 
• Asking Price – The price at which a property is listed for sale.
• Assumption Agreement – A buyer assumes responsibility of an original owners or builders mortgage.
• Balloon – The amount that is still to be paid on maturity of a mortgage.
• Blanket Payment – A combined mortgage payment for more than one property. 
• Blended Payments – Regularly scheduled mortgage payments consisting of principal and interest. 
• Breaking Costs – A fee paid to the lender if a closed mortgage is paid before the maturity date.  
• Broker – A person licensed to operate a business providing real estate services to buyers and sellers. 
• Buyer’s Agent (or Broker) – An individual or a firm working primarily in the interests of the buyer.
• Buyer Brokerage Agreement – A contract outlining arrangements between a buyer and his agent. 
• Certificate of Location – A surveyor’s document showing the exact size and location of a property, including a description of anybuildings and their location on the property. 
• Chattels – Chattels in a home are items that may be connected by pipes and wires, such as refrigerators, stoves, washers and dryers. Also see“Fixtures”.
• Clear Title - ownership of real property that is free of any mortgages, liens or other liabilities. 
• Client(s) – The buyer and/or seller represented by a real estate broker or agent.
• Closed Mortgage – A mortgage that cannot be renegotiated or paid off before maturity, without paying a penalty to the lender.
• Closing – When the deal is finalized and the title to the property is transferred to the buyer.  
• Closing Date – The date when the property changes hands.
• Closing Costs – All expenses related to the transfer of title to a property. These might include lawyer’s fees, insurance premiums, surveys,title search or title insurance, appraisal cost, mortgage application fees, and other.
• Collateral – A property assigned as security for a loan.
• Collateral Mortgage – A loan secured by a mortgage, but the money can be used for buying a property or for any other purpose. 
• Commission – The amount or percentage payable to brokersor agents upon completion of a purchase and sale. 
• Common Elements – Refers to all the property of a condominium development except the units owned by individual parties.  
• Condition – In a real estate document this term refers to something that must happen before the contract becomes firm.
• Conditional Offer – An offer to purchase, but with conditions such as the selling of a present home or being able to arrange properfinancing.
• Condominium – A development where the land and all commonelements of buildings are owned collectively by all unit owners and only a specific unit belongs to an individual owner.   
• Conventional Mortgage Loan – A first mortgage where the amount can not be more than 75% of the appraised property value.
• Convertible Mortgage – A short-term mortgage that can at any time be converted into a longer term closed mortgage without penalty.   
• Conveyance – The legal transfer of title to real estate property. 
• Debt-Service Ratio – The difference between gross household income and total debt payments.
• Deed – A registered document that serves as evidence of ownership.
• Default – Failing to make a mortgage payment when due or not fulfilling other terms and conditions of the mortgage.
• Deposit – Money paid in trust, usually to a lawyer, when an offer to purchase is made.
• Discharge of Mortgage – A document stating that a mortgage loan has been paid in full.
• Discount Broker – A real estate firm that charges less than the normal commission rate.
• Down Payment – The amount a buyer must put up himself, the difference between the full price of the property and the amount of the mortgage.
• Dual Agent – A real estate broker or agent who represents both the buyer and the seller.
• Easement – The right of use of another person’s land for a specific purpose or reason.
• Encumbrance – A legal claim against of property, a debtor a mortgage.
• Equity - The value of a property less the amount of the mortgage and/or other claims against the property, if any.
• Escrow - A deposit of funds by one party for the delivery to another party upon completion of a particular condition or event.
• Financial Institutions – Banks, Trust Companies, Credit Unions, Mortgage Lenders, Insurance Companies, etc.
• Financing – Looking after monetary matters, such as deposits, down payments and mortgage arrangements.
• Fire and Property Insurance – Evidence of such insurance is required by the lender and has to be arranged by the purchaser before closing.
• Fixed Rate Mortgage – The interest rate remains unchanged for the term of the mortgage.
• Fixtures – Fixtures are items that have been attached and have become part of the property, such as built-in closets, carpeting and light fixtures. Also see “Chattels”. 
• Flat Fee Broker – A real estate firm charging a set amount, instead of a percentage of the purchase price.
• FSBO – For Sale By Owner. Also known as a Private Sale.
• Foreclosure – A legal procedure for the lender to take possession of the property if the borrower defaults on the mortgage loan.
• Gross Debt Service – The payment amount needed to cover principal, interest and taxes.
• Gross Debt Service Ratio – A measurement of principal, interest and taxes as a percentage of gross household income.
• High-ratio Mortgage – A mortgage loan that is in higher than the standard criteria for lending values.
• Inspection – Checking the house for structural or other defects by the buyer or by an expert hired by the buyer.
• Interest Rate – The percentage paid to a lender for the use of the money borrowed.
• Land Survey – A certificate of location indicating boundaries of a property.
• Lender – A person or a company in the business of lending money. Also known as a mortgagee.
• Lending Value – The purchase price or the estimated market value of real estate.
• Leverage – Monies borrowed to purchase real estate property.
• Listing Agreement – A written agreement between the seller and his agent.
• Maturity Date – The date on which the term of a mortgage ends.
• Mechanic’s Lien – A claim against a property by someone who has provided materials and/or labour and has not been paid.
• Mortgage – A legal instrument assigning property as security for a loan. 
• Mortgage Broker – An individual or a firm bringing lende rand borrower together. 
• Mortgage Insurance – By law, any mortgage for which the down payment is less than 25%, must be insured to protect the lender.
• Mortgage Life Insurance – Insurance that guarantees the mortgage will be paid in full if the borrower dies.
• Mortgage Payment – Scheduled payments that include principal and interest. 
• Mortgagee – An individual or a financial institution lending money secured by a mortgage. 
• Mortgagor – A borrower who gives title to his property as security for a mortgage loan.
• Negative Amortization – When installment payment amounts are less than the interest rate on the mortgage. The principal increases and the borrowerowes more than the original sum borrowed. .
• Net Worth – Total assets minus total liabilities equal aperson’s financial net worth, 
• Offer of Purchase – A signed document outlining the termsunder which a buyer agrees to purchase a property. 
• Option Agreement – A written agreement stating that for aspecific deposit amount an individual has first rights to buy a property within a certainperiod of time. 
• PIT – Principal, Interest and Tax payments to be made ona regular basis, as outlined in the mortgage agreement.
• Principal – The actual amount of the mortgage loan, no tincluding interest. 
• Principal Balance – The remaining balance due on a mortgage loan.
• Private Sale – A sale arranged directly between a vendorand a purchaser, without the involvement of any agents.
• Property Disclosure Statement – This document summarizes the seller’s knowledge of the property. It is not mandatory in most jurisdictions.
• Realtor – A person licensed to engage in the business of buying and selling real estate.
• Refinancing – Paying off an existing mortgage and arranging a new mortgage, often with a different lender.
• Representations and Warranties – Legal clauses sometimes built into a buy/sell contract. Be sure to have them reviewed by your lawyer beforesigning the document.
• Reserve Fund – Refers to that portion ofcondominium fees being collected and held by a condominium corporation to meet futurerepair and maintenance expenses. 
• Reverse Mortgage – Money borrowed by senior citizensusing their home as collateral. This loan has to be repaid from the proceeds of the estatewhen the owner dies.
• Second Mortgage – A loan in addition to the first mortgage, usually at a higher interest rate,
• Seller’s Agent – A real estate person or firm working mainly on behalf of the seller. 
• Term – Defines the length of time a mortgage agreement isin effect before it has to be paid off or renegotiated.
• Time of the Essence –  Date and time limits on a contract are strictly enforced.
• Title – The proof of ownership of a property
• Title Defect - An un-discharged mortgage, a lien, or a fundamentalerror in the legal description might constitute a title defect.  
• Title Insurance - A policy of insurance that protects ownership andmortgage concerns. Title insurance can also include surveys, taxes, building and zoningissues, and other local authority searches.
• Title Search - An investigation of real property records at the localLand Registry Office or Land Titles Office.  
• Variable-Rate Mortgage  -A mortgage where installment amounts remain constant, but interest rates fluctuate. If interest rates are low, more money goes towards payment of principal, or the opposite ifinterest rates are high.
• Vendor – The seller of a property.
• Vendor Take-Back – A financial arrangement between the seller and the buyer of a property. This often consists of a second mortgage the seller iswilling to hold.
• Zoning Bylaws - Local or regional laws governing land use for specific purposes

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