Real Estate Terminology

Cap: A limit. In variable rate mortgages, a limit as to how high periodic payments may go or how much the interest may change within a given time period or over the life of the mortgage.

Capital Gain: An increase in value of a capital property (a property other than a principal residence) upon which tax is payable, either upon disposition of the property or the deemed disposition of the property under tax rules.

Capital Loss: Decrease in value of a capital property (a property other than a principal residence). May be set off against capital gains or against regular income according to the tax rules.

Cash Flow: Description of the net income from a property after all expenses of holding and carrying the property are paid.

Cash Reserve: An amount of money that the purchaser of a property still has after the transaction closes. Some lenders require a certain level of cash reserve (equal to two payments) before granting a mortgage.

Caveat Emptor: Latin, meaning "Let the Buyer beware". Maxim which applies to real estate transactions where the burden is on the Purchaser to satisfy themselves as to the suitability and condition of the property they are considering for purchase. Vendor is not responsible to the Purchaser for the condition of the property and, unless 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).

Ceiling: The limit over which the interest rate on a variable rate mortgage may not rise over the life of the loan.

Certificate of Eligibility: Document issued by the Department of Veteran's Affairs to qualifying veterans which entitles them to apply for subsidized or guaranteed loans.

Certificate of Veteran Status: Document issued by Department of Veteran's Affairs confirming that the person named in the Certificate has served at least 90 days of continuous active duty (including training time) and is eligible for certain VA benefits (such as a VA mortgage).

Certified Copy: A copy of a document which bears some form of declaration (usually by the holder of the original document) that it is a true copy of the original.

Certified General Appraiser: A person who has met the requirements to be licensed to appraise the value of property. Qualification requirements may vary from one jurisdiction to the next.

Certified Home Inspector: A person who has met the requirements to be "certified" to inspect the physical condition of homes. Qualification requirements may vary from one jurisdiction to the next.

Certified Residential Appraiser: A person who has met the requirements to be licensed to appraise the value of residential properties of no more than four units.

Chain of Title: A part of a title search. A listing, in chronological order, of successive legal owners of a property, often listing as well the registration particulars of the document by which title is transferred from each owner to his or her successor in title.

Chattel: An item of personal property which is not affixed to the land or building (as opposed to a fixture, an item which is a part of the land or building). Chattels are generally not included in the sale of property unless specifically included in the Agreement of Purchase and Sale.

Clear Title: Ownership of land which is marketable and free of competing claims, liens, mortgages or other encumbrances.

Class Action: A legal proceeding which presents the related or similar claims of an identifiable group against a single or group of defendants, usually by using one representative claimant to assert the claims on behalf of the group.

Client: The person who hires a professional (broker, banker, lawyer, investment counsellor, etc.).

Closing: The culmination of any transaction in which the interested parties (or their representatives) meet to exchange documents, funds, and property and, if necessary, to register the transfer of title.

Closing Costs: Monies expended by a party in completing a transaction, over and above the purchase price, including: legal fees, taxes, mortgage application charges, interest adjustments, registration fees, appraisal fees, etc.

Closing Date: The date set in the Agreement of Purchase and Sale upon which the transaction is to be completed, the purchase price paid and the transfer of title registered.

Closing Statement: Also known as HUD-1 statement. A document which sets out the financial agreement between the parties, the costs each must pay, and all other similar information regarding a transaction (may be joint or separate for each party).

Cloud on Title: Any unresolved claim against ownership of all or part of a property, affecting the owner's title to the property and marketability of that title.

Code of Ethics: A set of rules governing the behavior of members of the organization that has established the Code. Lawyers and real estate brokers/agents both have their own Codes.

Collateral: Property (real or personal) which is pledged to secure a loan or mortgage. If the debt is not paid, the lender has the right to sell the collateral to recoup the outstanding principal and interest on the loan.

Comingle: To allow to mix, as in money belonging to two or more people deposited to the same account and used by each person regardless of the amount they have deposited.

Commission: Payment to a salesperson (a listing real estate agent or broker) for his or her efforts in marketing and selling a property, usually expressed as a percentage of the purchase price.

Commission Split: The division of the payment made to the listing agent between that agent and his or her broker, or between the listing agent and the agent representing the Purchaser (the selling agent) and their broker.

Common Area Assessments: Also known as Common Element Fees. A periodic charge levied against all of the owners of units in a condominium or planned unit development (PUD) project which is used by the condominium corporation or homeowner's association to pay for repair, maintenance and other expenses of the common areas in the development.

Common Areas: Portions of the property and buildings owned by a condominium corporation or planned unit development (PUD) homeowners' association, or a cooperative development's association that are available for the use of all unit owners. Also used in rental properties to refer to those facilities for the use of all tenants.

Common Elements: A common area in a condominium project which is owned by the condominium corporation and for the use of all unit owners.

Community Association: Any organization established and run by property owners in a particular area, often to represent the common interests of the owners in dealings with government, planning bodies, developers or other outside parties.

Community Home Buyer's Program: Program established to find creative ways to finance home purchases for people with modest income.

Community Property: The principle that property accumulated by the joint efforts of a married couple should be considered to be owned by both of them in equal shares, no matter who has legal title to the property.

Comparables: Used in assessing or establishing the fair market value of a property, a property which has been sold recently that is similar in size, condition, location and amenities to the subject property.

Competent Parties: People who are legally capable of entering and being bound by a contract (i.e., of age, mentally capable).

Concessions: Sacrifices made by a party to convince another party to enter a contract.

Conditions: Clauses in the Agreement which must be fulfilled before the Agreement becomes firm and binding. If the condition is not fulfilled, the Agreement will usually become null and void and any deposit paid returned to the Purchaser.

Condominium: A development where individuals own dwelling units but share common areas with the other unit owners of the complex. The maintenance of the common areas etc. is taken care of by the Condominium Corporation in which every unit owner owns a share and has voting rights. The Condominium Corporation is created by the registration of a Declaration and Bylaws on title to the property and all individual units.

Condominium Owners Association: An organization made up of unit owners in a condominium development established to govern relations between the owners and to administer the rules, bylaws and covenants of the condominium.

Consideration: The value, asset, service, information etc. which is offered to another party in a contract in exchange for that party's agreeing to enter the contract. A contract is not binding if each party does not offer at least some consideration to the other party(ies).

Contingency: An event which may (or may not) happen in the future, a condition that must be fulfilled before a contract becomes firm and binding.

Contract: A legally binding agreement (oral or written) between two or more persons regarding an exchange of some sort. A legally binding contract must include consideration passing between the parties, an intention on the part of all parties to be bound to the contract, a meeting of the minds of the parties as to the contents of the contract, and an element of clarity such that the terms of the contract may be interpreted, understood and enforced by a court.

Contract for Deed: Transfer of a property where the title remains in the Vendor's name until the Purchaser makes the final payment to the Vendor of the Purchase Price.

Contractor: A tradesman who works in the construction industry under a contract with the owner of the property. See also "sub-contractor".

Conventional Loan: 1. A loan or mortgage to which the normal rules of such transactions apply without the inclusion of a government program (i.e., VA or FHA insurance). 2. A loan or mortgage with a fixed interest rate, fixed payments and a fixed term.

Convey: To transfer title to (or any other interest in) a property to someone else.

Cooperating Broker: A Broker who is involved in a real estate transaction and is, therefore, entitled to share in the commission from the transaction.

Corporation Relocation: The movement of an employee of a corporation to a new city (or other location) as part of the normal business of the corporation. The employee's moving expenses (including the costs of selling and buying a home) may be paid by the corporation and are tax deductible.

Counteroffer: An answer to an offer. If a prospective Purchaser presents an offer to purchase a property to the owner of the property, that owner may accept the offer as it stands, reject it outright or respond with a "counteroffer" which changes certain terms of the original offer of the Purchaser. Making a counteroffer, at law, entails rejection of the original offer. The Purchaser may then counteroffer back, making changes to the owner's counteroffer. Sometimes, the process of counteroffering is referred to as "signing back" the offer.

County: A territorial division of land in a geographic region (state or province). Similar to Regions and Regional Municipality.

Covenant: A promise contained in a contract or agreement.

Credit History: A statement of the debts and obligations, whether current or past, of a person which helps a lender to assess the risk of a loan to that person.

Credit Rating: Based on an analysis of a person's credit history, an evaluation of that person's ability to manage a new debt or debts overall.

Creditor: Any person to whom money is owed. May be secured (the debt has been registered against the property of the debtor) or unsecured.

Cul-de-sac: French term for a "dead-end street". A street which meets another street at one end but is closed at the other, such that little traffic will travel down it and the property owners enjoy excellent privacy.

Custom Builder: A builder or developer who specializes in creating homes to the specifications and requirements of individual land owners.