Real Estate Explained

Buying a new home can be a daunting project. If this is your first time there will be words and phrases that are used that might as well be in a foreign language - terms like amortization, mortgage, buyer's agency, appraisal, home inspections, property surveys, septic systems, and the list goes on. Even if you are a repeat buyer, some of these terms may still be a bit fuzzy, especially if you didn't have the terms fully explained to you first time around.
Sure, you could research the words yourself, however, it is nice to have them explained in one place, and you may not even realize there are others you could learn about. Also, some terms I have included here may seem obvious but they have been included in order to have as complete a list as possible. However, since this is an introductory article meant to be an introduction to the terms used in the housing market, the information presented is by no means as in-depth as it could be. There could be pages written about each of the items included in this list.
Being an informed buyer is a great place to be when searching for your first home, whether for personal residence or for investment. You need to know what is involved in that dream property!
Amortization - the process of spreading payments out over time. In real estate this is the length of time that an owner chooses to take to pay off the mortgage. The amortization period is broken down into shorter lengths of time called terms. So a mortgage is spoken about in terms, for example, of a 30 year amortization with a term of 5 years.
Appraisal - an unbiased determination of the value of a property, used to determine how much a home should be mortgaged for. Typically performed by qualified certified appraisers.
Buyer's Agent - a real estate agency agreement where the agent works for the buyer. It is becoming more and more popular to have buyer agency agreements signed by the prospective buyer, and this action provides benefits for both the agent and the buyer. The buyer benefits from the determined concerted effort the agent will provide for the buyer during the time of the contract. The agent benefits because if the buyer obtains a home anywhere other than through the agent, the agent will be compensated, again during the length of the contract. The length can be discussed and negotiated between the agent and the buyer.
Closed Mortgage - a mortgage provided by a financial institution that does not allow the borrower to pay off without penalty.
*N.B. - Be careful when signing for a closed mortgage as the financial institution may have very expensive costs associated with paying off a closed mortgage. In some cases, the penalty is 3 months worth of payments and in other cases the penalty is the amount of interest lost by the institution with early payoff. Read the terms carefully.
**N.B.B. - the decision to choose an open or closed mortgage should depend upon your long or short term goals. If you plan on selling the home within a short period of time then it may be a better option to go for an open term even though the rates charged are likely to be higher. It is important to discuss your real estate and financial plans with your banker or mortgage broker in order to get the best possible deal with the least cost.
Condominium - a type of property where a portion is set aside for individual personal ownership and another portion is set aside as common elements for which monthly condo fees are paid to support. Condo fees are collected to pay for common elements such as grounds maintenance, elevators, swim or exercise facilities, lighting and external features. Condominiums have written rules and by-laws that are in effect and where these rules conflict with the landlord and tenant act, it may be that the condo rules hold true. For example, condominium rules may prohibit the ownership of pets. BE sure to read the rules completely and contact legal advice if unsure on any component of the document. It is legally binding on the people who purchase a condominium.
Detached - a stand-alone house. Doesn't share walls with any other unit.
Duplex - a 2 unit building, typically with one dwelling on top of the other dwelling, but it may also be side by side and with the entire unit being sold as a single entity.
Easement - an easement is a privilege given from one owner to another owner for the purposes of transporting across a piece of land. Farmer A owns a piece of land. Farmer B needs to cross Farmer A's land to get to his own land. Farmer A allocated a portion of his land as an easement thereby allowing Farmer B unrestricted access to his own property. Easements stay with the property, not with the owner. The easement can be terminated - obtain legal advice.
Encroachment - the real estate definition of an encroachment is the use of an owner property by property belonging to a neighbour. For example, a roof overhang could cross a property boundary and this is an encroachment. It is important to obtain legal counsel if an encroachment is suspected during the buying process.
Home Inspection - a non-invasive check of a home by a qualified home inspector to see if there are major defects that may arise in the near future. Items such as fire systems, water systems, electrical systems, are checked and deficiencies noted. As well, the inspector should look for areas where there is excessive heat loss, the age of the appliances. The inspection should include exterior items as well as interior items along with the age of the home and the related elements.
Land Survey - accurate measurement of a piece of property identifying frontage, width, depth, and includes easements, and encroachments, as well as positioning of existing structures.
Life Lease - type of ownership where the buyer only buys the rights to live in the property. Land transfer taxes are not paid because the ownership doesn't come to the buyer but remains with the building or corporation. Depending on the corporation a life-lease owner may or may not be eligible to earn a profit on the investment.
Mortgage - a fancy term for loan, used in the housing market. Instead of a house loan you have a house mortgage.
Open Mortgage - a mortgage provided by a financial institution that allows the borrower to pay it off completely without penalty. Because it reduces the amount of control that the financial institution has over this particular type of mortgage, the interest amount charged by the institution tends to be higher than a closed mortgage.
Seller's Agent - the real estate agent who is working directly for the seller. This gives the seller the concerted effort of the agent for the purpose of selling the home.
*N.B. - When two individuals use the same agent to buy and sell the home there is a conflict of interest on the real estate agent. The real estate agent's objective when selling is to get the highest price possible for the home. The real estate agent's objective when buying the home is to get the lowest price possible for the home. This in and of itself creates a conflicting environment.
Semi-Detached - a type of home that shares 1 common wall. Land size is usually similar to that of a completely detached home and the homes operate as two separate entities.
Septic Systems - A closed system, self-contained. A sewage disposal system for homes that are not connected to the municipal water systems. A qualified inspection should be performed for capacity, age and structural integrity. As well, it is important to learn how to work with a septic system regarding types of waste that the septic system can safely handle. People on a septic system are also typically on a well-water system - get the water checked by a qualified water tester. Do not by-pass this step or you could end up with a huge bill for digging a new well.
Sewer Systems - these are the systems generally associated with homes in the city limits. There are two types of sewer systems - the external and the internal. The external carries away waste water from the streets and the internal carries away human waste. The external system often empties into a river, or pond or some other body of water. The internal system carries to the waste treatment plant to be cleaned before being emptied into a body of water. One thing to check for when purchasing a home is the type of pipes that are used to carry water into the home - lead or polyvinyl choride or pvc. Grants may be available to assist with the removal of lead pipes in a home.
Status Certificate - this is a set of papers obtained from a property management firm containing information relating to a specific registered condominium property. This report provides detailed financial information about the property along with any possible upcoming special assessments. It also includes information about the condominium rules as they are set out when the property was registered as a legal condominium.
Terms - the shorter time period that an amortization is broken into. This is the length of time for which a bank lends the money at a specific interest rate. The first term in your 30 year amortization could be 5 years with a 3.0% closed term.
Town-house - can also be called row housing. These types of homes have very little personal land, generally share a common municipal address and share at least 1 wall with another unit. Some inside units share 2 walls. Town-houses can be owned or rented. If owned they are known as a townhouse condominium. Condo fees apply where the residences are owned and cover items like grounds maintenance, snow removal, exterior finishes, and at times, exterior lighting and even water.
Variable Mortgage - this type of mortgage has a floating interest rate associated with it. Generally, variable rates are lower than both open and closed mortgages. However, if the interest rates are expected to increase it is wise to "lock in" your interest rate and convert your mortgage to either an open or closed mortgage, with an interest rate that doesn't change, hence the term "locked-in". Signing this type of mortgage requires the home-owner to be vigilant with regards to what the interest rate market is doing. Most mortgage companies allow the home-owner to lock-in a mortgage without penalty.

Improving the Real Estate Value of Your Home

Selling your home is a bittersweet affair. While you may be excited about moving to a new residence, your current abode has served as a place where many nice memories were made. You look back fondly on the days you threw parties, witnessed small children engage in food fights, shooed your pets when they tried sharpening their claws on the precious wooden fixtures, and a host of other events.
Over time you may have slackened off in maintaining your house, while Mother Nature subjected it to many harsh weathers. Physically, the house has changed and so has its real estate value. Now that you plan on selling it, it's time to spruce it up in order to attract a buyer as well as allow you to command a good price.
Here are several suggestions you can follow for preparing your house:
• Start getting rid of useless clutter. These are items that have zero resale or sentimental value. If you find anything that is worth donating to charity - old toys, books and clothes - then pack them up and send them over to people in need.
• Inspect each room in the house for cracks, leaks and similar defects. Their severity will impact your home's real estate value, so document everything that you see on a notepad.
• Write down a solution for each defect. Does it need just a quick coat of paint? Is new plumbing the only answer? You won't be able to justify a high price tag if the house's defects require lots of professional intervention.
• Do minor repairs you can easily handle. If you have tools available at home, you should have no trouble performing repairs that don't require a professional's attention. Some examples are fixing leaky faucets, replacing light bulbs, and repainting your child's bubble gum pink bedroom wall into a neutral shade that's easier on the eyes, like beige or pale yellow. These little changes can still do wonders for real estate value.
• Organize your daily living staples into one or two cabinets. Then, keep the rest of the closets and cabinets in the house empty for potential buyers to inspect. When trying to sell your home, expect prospects to snoop around a bit to see how organized and well-maintained the house is. Chances are, they will check every nook and cranny, down to the hinges. Giving them empty cabinets and closets to inspect will allow them to see the quality of the house while imagining how their own things would look stored inside them.
• Always keep the house and outer surroundings clean and tidy for spur-of-the-moment buyer visits. Don't throw your house's real estate value down the drain by letting the potential buyer see your unmentionables drying outside or lined up in the bathroom. This would be very embarrassing for both parties!
• Keep your refrigerator clean and presentable. You wouldn't want a prospect to catch a whiff of week-old Chinese takeaway or that unsealed tub of Caesar salad dressing sitting in your fridge as you open the door to proffer him a soda. There are people who judge others based on the cleanliness and contents of this particular appliance. Never give them the impression that you're a slob.
Good luck in selling your home and may you build more happy memories in your next one!

A Good Real Estate Agent Is Critical in A Buyer's Market

It's undeniable that the U.S. is going through one of the worst housing markets in recent memory. It seems that every time we think we've reached bottom, average prices drop another 10% to 20%. For those trying to sell their homes, the numbers can be disheartening. However, it's important to keep in mind that even though we are in a 'buyer's market', houses are still getting sold, and a good real estate agent can be very helpful in getting a home sold even in a market like this.
Choosing a realtor that is one of the top real estate agents in the marketplace can be difficult if you don't know what to look for. Here are 5 qualities that a top real estate broker or agent will possess:
1. A commitment to his career.
The first thing you need to know when considering a real estate agent for which to list your home is if they do this as a full time career. These days, there are many people who work full time jobs during the week, then work as a part-time realtor on the weekends. Back in the days of the housing boom, it may have been okay to work with someone like that, but in today's market, you need a real estate broker with a commitment to getting his/her client's homes sold.
2. Membership in the National Association of Realtors
Here is another indication of how serious the real estate broker/agent you are considering is. Have they taken the basic step of becoming a member of the nation's largest realtor trade group? If they haven't, this is a strong indication that this person is not as serious about selling homes as he/she should be.
3. Knowledge of your local community
When you are looking for a real estate agent to get your home sold, doesn't it only make sense to choose someone who is located close to your neighborhood and has worked with other homeowners in your community? A realtor who is close by will have a much better 'feel' for what's happening with other homes in the area and be able to get your home priced appropriately, so it doesn't sit on the market for months without being sold.
4. A first class team of associates
These days, the best realtors out there have a good team of various experts they work with. For example, a top real estate agent will normally work with first class mortgage brokers, home inspectors, and staging professionals that are able to combine their talents to insure a prompt and smooth transaction for the seller (and buyer).
5. Cutting edge marketing techniques
These days, it's not enough just to be committed to the sale, know the local community, and work with the best team, a top real estate broker must also be using 'out of the box' marketing techniques (both online and offline) to deliver the most possible traffic from prospective buyers. Remember, sales of any kind comes down to a 'numbers game.' The more people look at your home, the more likely you are to find a buyer willing to pay close to your asking price within a reasonable period of time.
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