Glossary
An addendum is an additional document that gets added to the purchase and sale agreement. It can be explanatory, informational, or indicate other requirements that aren’t clearly spelled out in the contract. If a buyer or seller want to change an existing contract, they might add an addendum outlining the specific part of the contract they’d like to adjust and the parameters of that change. The rest of the contract stays the same, regardless of the addendum. Addendum VS Amendment – An amendment is typically used to change something that’s part of an original contract. Think of amendments as modifications to the earliest agreement (for example, altering an agreed-upon deadline). An addendum is used to clarify and add things that were not initially part of the original contract or agreement.
Amendment [Addendum] – An amendment (sometimes referred to as an addendum) to a real estate contract is a document attached to and made part of the original contract. The buyer or seller might want a change in the existing contract; in which case they would prepare an amendment outlining the change. It can be explanatory, informational or indicate other requirements. When an amendment is used, the rest of the contract stays the same regardless of the amendment.
Appraisal – A professional’s estimate and opinion of the market value of a property. An appraisal involves an analysis of local market data and the characteristics of a property to establish a professional opinion of its current market value. Appraisals are sometimes necessary when buying and selling a home because banks won’t lend money if the appraised value of the house is less than the loan amount.
A bridge loan is a short-term loan used to bridge the gap between buying your new home and selling your previous one. A homeowner takes out the loan against their property to finance the purchase of another property (enabling them to use the equity in their current home for the down payment of the new one). It’s usually taken out for a period of a few weeks to up to three years. NOTE 1 To be eligible for a bridge loan, a firm sale agreement must be in place on your existing home. NOTE 2 When you do sell, you can use the proceeds to pay off the bridge loan and any accrued interest. Potential advantages of bridge loans: -Can help you buy a house before yours sells -Can provide peace of mind and flexibility by giving you additional time to sell your existing home -Allows you to use the equity in your current home for a down payment on your new home -Can give you the funds and time to make upgrades to your new home before you’re living there Potential disadvantages of bridge loans: -Interest can be more expensive than conventional financing, but the shorter loan term can help offset the cost -Can vary widely in terms, costs and conditions -Can be a higher risk because you’re essentially taking on a new loan typically with a higher rate and no guarantee that your existing home will sell during the life of the loan
What are capital gains? You’ll have a capital gain when you make a profit off of selling investments like a house, land, or buildings. How are capital gains are taxed? Capital gains are 50% taxable. The amount of tax you pay on a capital gain depends on your annual income. That means 50% of the amount you made from selling your investment is added to your income, and then your personal tax rate is applied to the total. For example… Let’s say you bought a building for $400,000 and sold it for $500,000. You’ll need to add half of your profit to your income for the year. Because your profit was $100,000, you’ll report $50,000 as a taxable capital gain. Your personal tax rate is then applied to the total amount of income you reported to determine how much tax you owe. What docs will you need? • The date you purchased it; • The purchase price; • Commissions and any other relevant expenses; • The adjusted cost base (ACB) (the cost of a property plus any expenses you paid to acquire it, such as commissions and legal fees, plus any additions or upgrades made to property) Capital Gains vs Capital Losses? If you sell an investment for less than you paid when you bought it, you have a capital loss. A capital loss can be applied against any capital gains you had during the year to lower the taxes you owe on that amount. If your capital losses are more than your capital gains, you have unused capital losses. You can carry back your unused capital losses to reduce your taxable gain in any of the past 3 years, or carry them forwards to reduce your taxable gain in a future year.
Certificate of Location – WHAT IS IT – The Certificate of Location is a key document prepared by a land surveyor in the sale of a building or land. WHAT DOES IT INCLUDE It consists of a physical plan and a report. The plan is basically a drawing that provides all property details (shape, dimensions, area) as well as the main building, other buildings such as a shed, fences, hedges, pools, public utilities. The report is more detailed. This is where the land surveyor will comment on the situation and the current condition of a building in relation to ownership titles, cadastre as well as applicable laws and regulations. The Certificate of Location also answers questions: • Does a building comply with municipal regulations and provincial laws? • Is there any encroachment on neighbouring property? • Is the building located in a flood zone? THE PURPOSE The Certificate of Location is essential in any real estate transaction, whether involving a house, a condominium or a piece of land because it provides information on the current state of the land and its buildings, the certificate shows that current owners have complied with regulations in force. HOW LONG IS IT VALID In General, it’s valid for a period of 5 to 10 years. WHO IS RESPONSIBLE FOR IT Usually the seller must provide the Certificate of Location. THE COST On average, the Certificate of Location for a single-family home in the city will cost you approximately $1,300 (plus tax).
Closing costs, such as legal fees, and other one-time expenses associated with the purchase of a home can really add up (and quickly). As a general rule of thumb, you should budget at least 1.5% of the house purchase price for closing costs. You’ll need to factor these costs into your cash-on-hand budget: List of Some Closing Costs to Consider ✷ Adjustment costs: Buyer must reimburse for any property taxes or utilities the seller paid after the buyer takes possession ✷ Home Inspection: Not mandatory (but strongly recommended) ✷ Home Insurance: Mandatory ✷ Mortgage Default Insurance: Mandatory if down payment is less than 20% ✷ Legal Costs: Services provided by your notary/lawyer will include: conducting a title search, drafting the title deed, and preparing the mortgage. The associated costs will vary depending on factors like where you live, the type of home you’re buying, or if it’s a new construction.
CMA (Comparative Market Analysis)
CMA (Comparative Market Analysis) – A CMA is a method used by real estate professionals to determine the estimated value of a given residential property. This in turn helps them discuss and set a listing price for said property. How to Do a Comparative Market Analysis: Step #1: Collect detailed information for the subject property. Step #2: Review property tax assessment and previous sales data. Step #3: Analyze the neighbourhood and market climate. Step #4: Carefully select comparable properties recently sold. Step #5: Determine value adjustments for the comparable properties.
Condo Fees – If you’re planning on investing in the purchase of a condo, you should know about condo fees. What are they? Condo fees (also called co-ownership fees) are billed to the co-owners each month. How are they calculated? This fee is calculated based on your share of the condo building – the larger your unit, the greater your fee. This fee is adjusted annually based on the condo’s operating budget. • The size and age of the property • Whether the building is a high-rise • How many buildings are in a particular complex • The amenities covered Condo fees are mandatory for divided co-ownership but not for undivided co-ownership. Divided co-ownership has a group of co-owners managed by a board of directors that regularly holds meetings. Undivided co-ownership has a more flexible administration. Undivided co-ownership properties may still require a monthly or annual fee to build a reserve fund and pay for building maintenance. What do they cover? Everything that are maintenance & care of elements that are not inside the unit. Including but not limited parking garage, hallway, lobby, elevator, gym & swimming pool, etc. Watch out for condo fees that are too low. This can mean an unrealistic idea for maintenance costs or an inadequate reserve fund. What is a contingency fund? A reserve fund, which is incorporated in your monthly condo fees, is a fund maintained almost like a savings accounts for eventual repairs or replacements. What is special assessment? Sometimes, a repair or replacement has not been accounted for in the condo fees. Welcome to the special assessment; an amount each condo owner will be required to pay in their proportion amount to cover the cost.
Days on market is the number of days that a property has been on the market and until a seller has accepted an offer and a signed contract. When reviewing home listings, buyers should always ask about the number of days on market to determine how other buyers are reacting to the property. While a high number of days on the market can be a sign to buyers that something is wrong with the house, it can also indicate a potential bargain. A higher number of days on the market can indicate sellers who are refusing to budge on their asking price, it can also identify sellers who haven’t received offers and who may be open to a dramatically lower offer.(Remember: no home seller wants their home to be on the market for an excessive number of days and go stale). Not all homes with a high number of days on the market have things drastically wrong with them. It could be that the home was just overpriced from the start. However, the stigma that something is wrong with it will stick and be difficult to recover from. Everyone will be thinking…”what’s wrong with this house”. What’s wrong with the house? Could be nothing at all… An overpriced home can simply be the result of sellers who think their house is the best in the neighborhood and won’t deviate from that idea, no matter what. Something sellers should understand and keep in mind…buyers set the market numbers. In closing… A related metric is the average DOM for homes sold in a market during a specified period. A low average DOM indicates a strong market that favors sellers. A high average DOM signals a weak market that favor buyers.
Earnest money is a deposit made to a seller that represents a buyer’s good faith to buy a home. The money gives the buyer extra time to get financing and conduct the title search, property appraisal, and inspections before closing. In many ways, earnest money can be considered a deposit on a home, an escrow deposit, or good faith money. Earnest money is usually paid by certified check, personal check, or a wire transfer into a trust or escrow account that is held by a real estate brokerage, legal firm, or title company. The funds are held in the account until closing, when they are applied toward the buyer’s down payment and closing costs. Earnest money isn’t always refundable. The seller gets to keep the earnest money if the buyer decides not to go through with the home purchase for contigencies not listed in the contract or if the buyer fails to meet the timeline outlined in the contract. Earnest money is always returned to the buyer if the seller terminates the deal. The buyer forfeits the earnest money deposit if they simply have a change of heart and decide not to buy. Prospective buyers forfeit their earnest money if they decide to back out of a purchase.
Encroachment- An intrusion onto an adjoining property. Homeowners know that their relationship with their neighbour is a very important one. However, unfortunately, it can also sometimes be a source of stress and frustration. One of the biggest problem areas is often encroachment. Encroachment in real estate is defined as one property owner violating their neighbor’s rights by building or extending some feature and crossing onto their neighbour’s property lines. While encroachment may seem harmless, it can lead to liability issues, damage to your property, and problems at the time of sale. Here are some encroachment examples to watch out for: -Your neighbour builds a fence, and it extends onto your land – A structural addition to your neighbour’s home extends beyond the legal property boundaries – An overgrown garden or hedge crosses onto your land Because encroachment can make it hard to establish property lines, it can create title concerns when you’re trying to sell your home. At that time, you will be required to have a certificate of location prepared and any encroachments will be noted and will have to be dealt with. Nobody likes conflict with their neighbours. Intentional or unintentional, encroachments happen, and it’s important to deal with the issue as soon as you notice it. As is the case in many situations… It’s better to address the problem sooner rather than later.
Home Equity Line of Credit (HELOC)
Home Equity Line of Credit (HELOC) – Borrow against the available equity in your home and use the home as collateral for the line of credit. As you repay your outstanding balance , the amount of available credit is replenished. You can use your HELOC for anything you like and you don’t have to reapply each time. What can you use a HELOC for? ▪️️Finance a second property – Use the value of your home to finance another home (perhaps a vacation property) ▪️Renovations and repairs – Maintain your home and keep/add to its market value (remember there’s a difference between well maintained and renovated) ▪️Surprise expenses – Have the funds available to you immediately should any surprises arise (however unpleasant, we’ve all been there) ▪️Consolidate your debts – Save on high interest charges and simplify the process of paying back your debts (one payment is easier to manage) Your home does the financing… (what could be easier than that).
Inflation refers to the rise in prices of products and services over time. As prices go up, the value of currency declines, causing a unit of currency’s purchasing power to go down. While low rates of inflation are normal and even healthy for the economy, severe inflation can hurt consumers and have a negative effect on the economy. In real estate, inflation has a noticeable affect on mortgage rates. A high inflation rate may make it more difficult to secure a mortgage, or it may cause mortgage rates to rise. However, on the other hand, many economists see investment in real estate as a way to safely “hedge” against inflation. This is because the value of real estate tends to rise alongside inflation rates. Investing in property, in theory, is a way to prevent against currency deflation.
Intergenerational- Intergenerational Homes – What are they? Unlike traditional homes, an intergenerational home usually has two separate dwellings: a main dwelling (often occupying the largest part of the house) and a secondary dwelling. Depending on the situation, the secondary dwelling may be completely independent of the main dwelling with it’s own separate entrance. Things to consider and discuss : – Check with the municipality. Each municipality has its own list of preset criteria in order for a home to be considered multigenerational. – Know your budget. In some cases, these homes may be more expensive to run. Crunch those numbers to avoid any surprises. There are many possibilities with intergenerational living some of which may or may not suit your requirements.
A latent or hidden defect is a fault or a flaw in an immovable property that cannot be seen by the naked eye at the time of the purchase. In order to qualify as a latent defect, it must have existed at the time of the purchase and not obvious or apparent to the potential buyer.
– The number one rule in real estate… Location. Location. Location. Although unfortunately it is often not enforced and is most overlooked. Location creates desirability, desirability creates demand, and demand raises property prices. The location of your home is one of the most important (if not the most important) factor in determining it’s long-term appreciation potential. Location matters.
First used in 1653; a null and void contract is an illegitimate agreement, making it unenforceable by the law. Real estate contracts are legal documents drawn up to meet certain rules and regulations. The (real estate) contract between a property seller and a buyer must conform with rules and regulations (or, conditions of sale). If these conditions are not met as mentioned and at the time stipulated on the contract, the contract becomes null & void. A purchase and sale agreement is binding only after all the conditions of sale itemized in the (real estate) contract are met. Sellers and buyers must be committed to resolving each condition of sale. However, if either fails for one of several reasons the contract fails and becomes null & void. For a contract to be voided, one of the parties must default or not meet a condition of sale. Synonyms for null and void: bad inoperative, invalid, nonbinding, non-valid, nugatory, null, void
If your house is for sale, or, if you’re buying a house, then you’re going to be seeing this form sometime soon. The promise to purchase contains important information about the offer. Such as: *the amount of money represented in the transaction *date and time of the expiration of the offer If there are no conditions attached to the offer, then the deed of sale will be signed on the date indicated on the promise to purchase contract. If there are conditions on the contract, then the obligation to sign the deed of sale is suspended until this condition has occurred and been fulfilled. However, this does not prevent the parties being bound to the contract, as soon as the conditions are met the parties must conclude the transaction. The most common conditions include: * the inspection *obtaining the mortgage loan. The promise to purchase is an integral part of any real estate transaction; know the ins and outs.
A licensed realtor can be an invaluable asset when you want to buy and sell a home. Realtors are experts who are educated and knowledgeable. They are trained continuously to understand everything (including the laws and regulations) about the home buying/selling process. Experienced realtors can explain in more detail exactly when buying/selling a home means for you. They can also recommend when not to buy. Some homes may need extreme repairs, which would cancel out any savings you’d get by buying the home.
What does that mean? Legal warranty says that a seller sells something that isn’t of good quality and in line with any expectations the buyer may have. If this is case, the buyer can, among other things, get a refund. Legal warranty also protects against hidden defects. Sale without legal warranty means the buyer acquires the property at his own risk and waives, in advance, his right to take legal action against the seller in the event of hidden defects. However, the parties may agree otherwise. Often, properties are for sale with the indication “without legal warranty”. In such cases, the buyer acquires the property at his own risk and waives, in advance, his right to take legal action against the seller in the event of hidden defects. Often, the sellers of such properties are people with only a limited knowledge of the home, such as liquidators of an estate, for example. As for construction defects, with or without a legal warranty, the seller is obligated to reveal all of the problems that he knows of. If he fails to do so, he can be sued. However, because in many cases the seller does not actually live in the home, the known defects can be quite limited. The seller has no other responsibilities. Thus, if a defect is found after the purchase, the seller will not be held responsible.
The windows, also referred to as coffin windows, crooked windows, lazy windows or Vermont windows are used by builders as a technique to fit a full-sized window into a long, narrow wall space between two adjacent roof lines. Although less frequently used these days, they were primarily installed at 45 degree angles in 19th century farmhouses. Visiting Vermont? You’ll likely see these charming windows as common features along your travels. Or, you may spot one in an older neighborhood in your area.
FUN FACT… Folklore says that these windows are called witch windows because witches cannot fly their broomsticks through a tilted window.