Glossary Of Terms

ABANDONMENT: Abandonment occurs when a person with a right or interest in a property voluntarily gives up that right or interest, either by physically "abandoning" the property or by showing the intention to give up the right or interest.

ADJUSTABLE RATE MORTGAGE (ARM): Also known as a Variable Rate Mortgage, a loan secured against land which has an interest rate that changes according to some outside index -- such as the federal prime rate or the interest rate paid on government bonds -- over the term of the mortgage. The change in interest rate will result in a change in the periodic payments due under the mortgage.

ANNUAL PERCENTAGE RATE (A.P.R.): A rate designed to allow for the comparison of one type of loan to another. The annual cost of borrowing under a given form of loan (includes in the calculation compounded interest, cost of borrowing etc.). Required to be disclosed by the lender under the American Truth in Lending Act, Regulation Z.

BACK END RATIO: A comparison of a borrower's monthly expenses to her gross monthly income used to assess her ability to carry a mortgage or other loan.

BRIDGE FINANCING: Also known as a "swing loan", a loan used to fill a gap in financing, often between the purchase of a new home and the sale of the old one. If the purchase closes before the sale, the home owner needs to borrow enough money to pay for the new house for the period of time before the equity in his old house comes available as a result of the completion of the sale.

BACK TITLE LETTER (OR CERTIFICATE): Notice by a Title Insurance Company to a person searching and certifying title that a previous search has been completed, setting out the status of title of the property as at a given date such that the person searching need only up-date the search. 

CALL OPTION (PROVISIONS, RIGHTS): A lender's right to demand payment of the outstanding balance of the loan at a time specified in the loan agreement.

CANCELLATION CLAUSE: Provision in a contract that gives one or more parties the right to terminate the contract if a specific event occurs.

CAVEAT EMPTOR: Latin, meaning "Let the Buyer beware". Maxim which applies to real estate transactions where the onus is on the Purchaser to satisfy herself as to the suitability and condition of the property she is considering for purchase. Vendor is not responsible to the Purchaser for the condition of the property and, unless he is specifically asked, does not generally have an obligation to reveal problems to the Purchaser (except where the defect is hidden, serious and could not be discovered by the Purchaser after reasonably prudent inquiries and investigations).

DATE OF APPRAISAL: The precise day, month and year upon which an assessment of the value of a property has been given.

DATE OF INSTRUMENT: The specific day, month and year a legal document was signed or prepared.

DEBT RATIO: Also known as Debt-to-Income ratio. A comparison of the total monthly payments of all of the borrower's debts (including the mortgage) with the gross monthly income of the borrower, used to assess borrower's ability to pay mortgage.

EARNEST MONEY DEPOSIT: A sum of money paid by a potential purchaser as proof of her intention to complete the purchase transaction. Held in trust, usually by the Listing Agent, and credited to Purchaser off purchase price. May be forfeited if Purchaser fails to complete transaction.

EASEMENT: The right of the owner of one parcel of land to use all or part of the land of another for a specific purpose. Runs with the land. Requires one property to be in dominant position (enjoys the benefit of the easement) and one property to be in servient position (is subject to the right).

FAIR MARKET VALUE: The value of an item as established by a consideration of how much an independent buyer would pay to an independent seller in a completely free transaction for the item.

GRANTEE: One who receives title.

GRANTOR: One who gives title to another.

HUD 1 SETTLEMENT STATEMENT: The form in which the costs of purchasing a home are itemized.

IMPROVEMENTS: Things added to vacant land with the view to increasing its usefulness and value, such as buildings, parking areas, drainage works, etc.

JUDGMENT LIEN: A general lien which applies to all property owned by a judgment debtor located in the county where the judgment is recorded.

KEY LOT: A piece of property which is pivotal to the success of a proposed development.

LEGAL DESCRIPTION: A description of a piece of real estate that is drafted according to legal requirements and which clearly and adequately establishes the identity of the property so described. Found in most instruments for registration on title to land.

MARKET VALUE: An estimation of the price that could be obtained for a particular asset if it were sold in an arm's length transaction on the current market.

NET CASH FLOW: The amount of money leftover from the income of a property after all costs and expenses of the property have been paid.

OCCUPANCY PERMIT: Issued by local building departments, permission to enter and occupy a newly built or renovated dwelling after an inspection has established that there are not potential threats to the safety of occupants.

PLANNED UNIT DEVELOPMENT (PUD): A housing development where a homeowner's association administers common property owned and shared by all dwelling owners in the project. Dwellings are often clustered to allow for more common space and special zoning is required for this kind of development.

QUIT CLAIM DEED: A conveyance which releases any interest the conveying party may have in a property without any warranty as to that party's claim.

RATE LOCK-IN: A written agreement in which the lender guarantees the borrower a specified interest.

SALE AGREEMENT: Also known as "Agreement of Purchase and Sale" or "Purchase Agreement:. The contract that sets out the terms and conditions agreed to by the purchaser and the vendor in the sale of land.

TIME IS OF THE ESSENCE: A standard statement in a contract which ensures that all dates and times of day noted in the contract are important and cannot be ignored by any of the parties without the consent of the others except in breach of the contract.

UNINSURABLE TITLE: Ownership of land which is subject to flaws such that a title insurance company refuses insure it.

VEST: To become the property of someone through action of law.

ZONING BYLAW: A rule passed by the local government which regulates the use of property according to its location within the municipality, placement of structures on the property, maximum floor area, minimum lot area, minimum floor-to-lot area ratios, etc.