Common Real Estate Terms for First Time Home Buyers

Like all industries, buying and selling real estate has it’s own unique lingo, that might not be obvious to first time home buyers. Here’s a list of some common terms that you will likely hear if you’re considering buying a home. If you have questions, we’re here to help so feel free to give us a call.
Terms about Representation:
  • Brokerage: This is a term used to describe the real estate company, under which individual real estate agents are licensed.
  • REALTORS® : Only a person who is a licensed real estate professionals AND who is a member of a local real estate board AND a member of the Canadian Real Estate Association (CREA) can legally apply this term to the services they offer.
  • Multiple Listing Service® ( or MLS®) : This is a selling system available to REALTORS® to provide access to information about properties for sale. These listings have a cooperative format and lets a person know which real estate agent holds the contract for selling the property. When you list your property with a real estate agent, other agents also know that your property is for sale and can suggest it to their clients if it looks like a match for them. Similarly, your agent will know about properties available as soon as they are listed and can let you know about opportunities.
Terms About Market Conditions:
  • Housing Starts: This is the number of new houses on which construction has been started in a given period, and serves as a measurement of how active or healthy an economy is. Typically construction projects indicate that employment is available, people are getting paid, and redistributing their income in the community to meet their monthly needs. It also means that there is a demand for housing, and that people are interested in buying new homes.
  • Seller’s Market:  A housing market will be described as a “sellers’ market” when there is a high demand for homes and there are 20% more people looking to buy than than there are active listings. By dividing the number of listings by the number of sales in a given month, gives you a number that is called the MOI or months of inventory. If there are 4 months of inventory or less, it’s considered a sellers market.
  • Buyers Market: This is the opposite condition, when the number of active listings exceeds the number of individuals looking to purchase real estate. If the months of inventory is 6 months more it’s considered to be a buyers market.
  • Balanced Market: This occurs when the ratio between the number of houses sold and the number of active listings is between 14 and 20%. In this market condition, there are 4-6 months of inventory and the prices for houses is stable. That’s because there is not a high demand for homes to move prices up, nor is there a disproportionately high number of listings for buyers to choose from to move prices down.
Terms for Borrowers:
  • Gross Debt Service Ratio: This is a calculation that’s used to determine whether a home is affordable to the person applying for a mortgage. Typically a lender will look at the gross monthly income, and determine that there is not more than 32% being used to pay housing related costs such as mortgage payments, strata fees, pad rental, or heating costs.
  • Mortgage Insurer: Homes that have more than 80% of their value owed to lenders are considered to be holding a high ratio mortgage. Mortgages require insurance against default either privately or through the Canada Mortgage and Housing Corporation, which is paid for by whoever is borrowing the money and protects the lender from loss.
  • Closing Costs: These are expenses over and above the purchasing price for buying or selling a property. These can include such things as legal fees, inspections, or transfer taxes.
Terms for Sellers:
  • Home Equity: This is basically the profit you would make from selling your home, calculated as the difference between the price it could sell for, and the amount that may still be owing.
  • Listing Agreement: This is the term that describes the contract between the listing broker and the owner of the home which gives authorization to the REALTOR® to act on the owners behalf to sell the property.
  • Title Search: This is detailed documentation that proves legal ownership, and lists any liens or other encumbrances on the property such as unpaid property taxes.
  • Mortgage Prepayment Penalty: When you sell your home, you may be considering paying off your existing mortgage agreement. Depending on the lender’s conditions, there may be a fee for paying it out ahead of the agreed schedule so be sure to read the conditions before making a decision.