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 the purchaser.

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 of each 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 any buildings 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 brokers or 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 proper financing. 

Condominium – A development where the land and all common elements 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 debt or 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 lender and 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 borrower owes more than the original sum borrowed. . 

Net Worth – Total assets minus total liabilities equal a person’s financial net worth,  

Offer of Purchase – A signed document outlining the terms under which a buyer agrees to purchase a property.  

Option Agreement – A written agreement stating that for a specific deposit amount an individual has first rights to buy a property within a certain period of time.  

PIT – Principal, Interest and Tax payments to be made on a regular basis, as outlined in the mortgage agreement. 

Principal – The actual amount of the mortgage loan, not including interest.  

Principal Balance – The remaining balance due on a mortgage loan. 

Private Sale – A sale arranged directly between a vendor and 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 before signing the document. 

Reserve Fund – Refers to that portion of condominium fees being collected and held by a condominium corporation to meet future repair and maintenance expenses.  

Reverse Mortgage – Money borrowed by senior citizens using their home as collateral. This loan has to be repaid from the proceeds of the estate when 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 is in 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 fundamental error in the legal description might constitute a title defect.   

Title Insurance - A policy of insurance that protects ownership and mortgage concerns. Title insurance can also include surveys, taxes, building and zoning issues, and other local authority searches. 

Title Search - An investigation of real property records at the local Land 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 if interest 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 is willing to hold. 

Zoning Bylaws - Local or regional laws governing land use for specific purposes

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