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Real Estate Terminology "E - O"

Real Estate Terminology 101 (continued)


Easement — A legal right to use or cross (right-of-way) another person's land for limited purposes. A common example is a utility company's right to run wires or lay pipe across a property.


Encroachment — An intrusion onto an adjoining property. Common examples are a neighbour's fence, storage shed, or overhanging roof line which partially (or even fully) intrudes onto your property.


Encroachment Agreement — An agreement which allows the encroachment to remain. The owner of the development which encroaches onto the adjoining property is granted the right to enter onto that property to maintain or repair the construction.


Encumbrance — A restriction which is either a monetary claim against the land (such as a lien, mortgage or lease) or a non-monetary one (such as an easement).


Estoppel Certificate — A written statement of a condominium unit's current financial and legal status.


Equity — The difference between the price for which a property can be sold and the mortgage(s) on the property. Equity is the owner's stake in the property.


Extension - Homebuyers who need more time to evaluate whether or not to move forward with a purchase agreement or simply need to get their finances in order often request an extension of conditions. It should be noted, sellers do not have to grant an extension of buyers.


Fee Simple Estate — Ownership where the owner owns the land now and for all time in the future and the owner's rights are subject only to restrictions by the government.


Fair Market Value - is the dollar figure put forth by the appraiser and assessor is averaged out with other residential figures from the local market. Comparable sale prices are factored in, thus giving sellers a relatively fair market value for their home.


Fixed-Rate Mortgage - is the most popular type of mortgage given to borrowers today making the amount of your mortgage payment the same each month of the amortization period.


FSBO - For Sale By Owner

Foreclosure - Bank owned property due to a seller defaulting on mortgage or tax payments.


Fiduciary Duties — The duties require for all licenced Edmonton Realtors of loyalty, disclosure, confidentiality, obedience, reasonable care and diligence, and full accounting that are required by the law of any associate relative to his or her principal.


First Mortgage — The first security registered on a property. Additional mortgages secured against the property are "secondary" to the first mortgage.


Foreclosure — A legal process by which the lender takes possession and ownership of a property when the borrower doesn't meet the mortgage obligations.


Gross Debt Service (ADS) Ratio — Gross debt service divided by household income. A rule of thumb is that ADS should not exceed 30%. It is also referred to as PIT (Principal, Interest and Taxes) over income. Sometimes energy costs are added to the formula, producing BITE, which moves the rule of thumb ADS to 32%.


High-Ratio Mortgage — A mortgage that exceeds 75 per cent of the loan-to-value ratio; must be insured by either the Canada Mortgage and Housing Corporation to protect the lender against default by the borrower who has less equity invested in the property.


Home Inspection - An appraiser or certified property inspector who provides buyers with a summary of the overall condition of the chosen home. This cost is usually covered by the buyer and a condition or contingency on an offer to purchase.


Home Warranty - an Insurance which covers homeowners when unforeseen issues arise with their homes. In the province of Alberta, it is now a standard practice for builders to provide a five-year new home warranty.


Homeowners Association Fee (HOA) - Is becoming a more common expense for Edmonton homeowners. It is a small annual fee to maintain a community. An HOA fee may cover things such as community fences, water features or playgrounds.


Gross Debt Service (ADS) Ratio — Gross debt service divided by household income. A rule of thumb is that ADS should not exceed 30%. It is also referred to as PIT (Principal, Interest and Taxes) over income. Sometimes energy costs are added to the formula, producing BITE, which moves the rule of thumb ADS to 32%.


High-Ratio Mortgage — A mortgage that exceeds 75 per cent of the loan-to-value ratio; must be insured by either the Canada Mortgage and Housing Corporation to protect the lender against default by the borrower who has less equity invested in the property.


Home Inspection - An appraiser or certified property inspector who provides buyers with a summary of the overall condition of the chosen home. This cost is usually covered by the buyer and a condition or contingency on an offer to purchase.


Home Warranty - an Insurance which covers homeowners when unforeseen issues arise with their homes. In the province of Alberta, it is now a standard practice for builders to provide a five-year new home warranty.


Homeowners Association Fee (HOA) - Is becoming a more common expense for Edmonton homeowners. It is a small annual fee to maintain a community. An HOA fee may cover things such as community fences, water features or playgrounds.


IDX - Internet Data Exchange - a multiple listing service syndications on Edmonton Realtor websites which provide real estate internet data and can showcase listings.


Joint Tenancy — A form of ownership in which two or more individuals (often spouses) have an equal share in the ownership of a property. In the event of one owner's death, his or her share is automatically transferred to the surviving owner; and does not become part of the deceased's estate.


Latent Defects - a defect in a property such as mould hiding beneath the surface of a floor or wall which can often go unfound by inspectors.


Lien — Any legal claim against a property, filed to ensure payment of a debt. It is a debt placed against a sellers residence, usually when a party says they are owed a debt by the owner of a property. At closing, the seller's lawyer (assuming there is enough property equity) will pay out the lien.


List Price - The asking price of a property. Note this may or may not be a fair market value price or the price a seller would be willing to accept.


Listing Realtor — The REALTOR® who signs a contract on behalf of the brokerage with an owner to sell the property.


Listing Contract — The legal agreement between the listing brokerage and the seller, setting out the services to be rendered, describing the property for sale and stating the terms of payment. A commission is generally payable to the brokerage upon completion of a sale.


Listing Presentation - a presentation customized by an agent who provides information on how they get the job done. Every Edmonton Realtor listing presentations is unique offering different real estate services. Note - Not all Edmonton Realtors provide the same services.


Lockbox - A small electronic box used to store keys to a home for easy access for licenced Realtors to show clients the listing to prospective buyers. If a Realtor is not licenced by our Edmonton Real Estate Board, they may not be able to access the lockbox.


Mortgage — A contract between a borrower and a lender. The borrower pledges a property as security to guarantee repayment of the mortgage debt. Lenders consider both the property (security) and the financial worth of the borrower (covenant) in deciding on a mortgage loan. See below for more on mortgage terminology.


Mortgage Life Insurance — Insurance that pays off the mortgage debt should the insured borrower die.


Mortgagee — The person or financial institution lending the money, secured by a mortgage.


Mortgagor — The property owner borrowing the money, secured by a mortgage.


Mortgage Broker — A person or company having contacts with financial institutions or individuals wishing to invest in mortgages. The mortgagor pays the broker a fee for arranging the mortgage. Appraisal and legal services may or may not be included in the fee.


Multiple Listing Service® System — An MLS® System is a cooperative selling system operated and promoted by a Board or Association in association with the MLS® Marks. An MLS® System includes an inventory of listings of participating REALTORS® and ensures a certain level of accuracy of information, professionalism and cooperation amongst REALTORS® to effect the purchase and sale of real estate.


Mutual Acceptance - This doesn’t mean the deal is done. Mutual acceptance takes place when both a buyer and seller agree to the terms and conditions associated with a home sale. Once the paperwork is signed and initialled on all changes, the property is considered "pending." Sellers are still allowed to accept offers, but only in a backup place. In the province of Alberta, pending offers are in the first place unless the buyer is unable to remove conditions by the deadline.


Organized Real Estate — Refers to the various bodies or groups (CREA, AREA, local boards) who work together to bring about structure, standards and accepted practices in real estate. Most Edmonton Realtors belong to all three real estate boards.


Open Mortgage — A mortgage that can be prepaid or renegotiated at any time and in any amount, without penalty.


Owner Financing - This type of financing is rarer than having a mortgage. It typically occurs when a seller is fiscally well-off enough to provide a loan to a buyer.

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Data is deemed reliable but is not guaranteed accurate by the REALTORS® Association of Edmonton.