Glossary Of Real Estate Terms

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ALR – Agricultural Land Reserve

A provincial zone in which agriculture is recognized as the priority use, farming is encouraged and
non-agricultural uses are controlled.


The number of years a borrower is scheduled to repay the entire amount of a mortgage.


An estimate of a property’s market value, used by lenders in determining the amount of a mortgage.


The increase of a property’s value over time.


The value of a property, set by the local municipality, for the purposes of calculating property tax.

Associate Broker

An individual that holds a broker license and chooses to associate or affiliate with another sponsoring
broker rather than opening their own brokerage office.

Average Price

The average price of all home sales over a given period calculated as total dollar volume divided by
total unit sales.


Balanced Market

A market in which the sales to active listings ratio is in a range of 14 to 20 per cent. In general, a
balanced market results in home prices remaining relatively stable.

Bank of Canada Overnight Target Rate

The target level interest rate set by the Bank of Canada at which major financial institutions borrow and
lend one-day (or “overnight”) funds among themselves.

Basis Point

A unit equal to 1/100 of one per cent used to denote changes in bond yields and other interest rates.

For example

A 25 basis point change in the Bank of Canada’s target overnight rate refers to an increase of 0.25 per cent.

Benchmark Property or Home Price

A property or home price against which other properties can be evaluated.

Bond Yield

The percentage return that an investor can expect to earn from a bond issue over the maturity of
the bond


A real estate company under which an individual is licensed.

Buyer’s Market

A housing market is typically characterized as a “buyers’ market” when there is an excess of supply
over demand for homes. This is generally assumed to be when the ratio of home sales to active listings
is below 14 per cent.


Capitalization (“Cap”) Rate

The ratio between the net operating income produced by an asset and its capital cost (the original price
paid to buy the asset) or alternatively its current market value.

Carrying Cost

Financial and operational expense associated with an investment. For example, the carrying cost of an insured
mortgage would include the monthly mortgage payment as well as CMHC mortgage insurance charges.

Closing Costs

Expenses in addition to the purchase price for buying and selling a property.

Commercial Leading Indicator (CLI)

A measurement designed by BCREA to forecast changes in broad commercial real estate activity.
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Shared ownership in property. Owners have title (ownership) to individual units and a proportionate
share in the common elements.

Consumer Price Index (CPI)

A measure that examines the weighted average of prices of consumer goods and services, such as
transportation, food and medical care, calculated by averaging price changes for each item.

Conventional Mortgage

A mortgage loan that does not exceed 80 per cent of the lending value of the property.

Core Inflation

A measure of inflation that excludes products that face volatile price movements or that can have
temporary price shocks which can diverge from the overall trend of inflation and give a false measure of

The Bank of Canada’s measure of core inflation excludes eight of the Consumer Price Index’s
most volatile prices including energy products, fruits and vegetables, mortgage interest costs, and
tobacco products.


One party’s written response to the other party’s offer during negotiation of a real estate purchase
between buyer and seller.


Debt Service Ratio

The percentage of a borrower’s gross income that can be used for housing costs, including mortgage
payment and taxes (and condominium fees, when applicable).

Down Payment

The part of the purchase price of a property that the buyer pays in cash and does not finance with
a mortgage.



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.


FICOM – BC Financial Institutions Commission

An agency of the provincial government that provides public protection through ten statutes, including
the Real Estate Development Marketing Act.


Gross Debt Service Ratio

The ratio of housing costs (including mortgage payments, taxes, heating costs, condominium and other
fees, if applicable) to gross monthly income. A general rule applied by mortgage lenders is that this ratio
should not exceed 32 per cent.

Gross Domestic Product

The monetary value of all the finished goods and services produced within a country’s borders in a
specific time period.

Grow Op

A marijuana-growing operation, usually located in a house.


Headline/Total CPI Inflation

The raw inflation figure as reported through the Consumer Price Index (CPI) that is released monthly by
Statistics Canada.

High-Ratio Mortgage

A mortgage that exceeds 80 per cent of the loan-to-value ratio; must be insured by either the Canada
Mortgage and Housing Corporation or a private insurer to protect the lender against default by the
borrower who has less equity invested in the property.

Housing Starts

The number of privately owned new houses (technically housing units) on which construction has been
started in a given period.



A rise in the general level of prices of goods and services in an economy over a period of time.

Inflation Adjusted

A measure of a change in price that accounts for the period’s inflation rate.

Inflation-Control Target

The target range established by the Bank of Canada and the federal government within which the Bank
aims to contain annual inflation as measured by the rate of change in the total CPI. The Bank of Canada
is currently mandated to keep inflation within a range of one to three per cent, with a two per cent
inflation target.


The cost of borrowing money.



Controlling a large asset with a relatively small amount of cash. In real estate, $20,000 down payment
(or less) can be used to purchase (control) a $100,000 home, for example.


Any legal claim against a property, filed to ensure payment of a debt.

Listing Agreement

The contract between the listing broker and an owner, authorizing the REALTOR® to facilitate the sale or
lease of a property.

Listing Broker

The REALTOR® who signs a contract with an owner to sell the property.


Median Home Price

The midpoint price of home sales transactions over a given period.


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.

Mortgage Broker

A person or company having contacts with financial institutions or individuals wishing to invest in mortgages.

Mortgage Insurance

Government-backed or privately-backed insurance protecting the lender against the borrower’s default
on high-ratio (and other types of) mortgages.

Mortgage Insurer

In Canada, high-ratio mortgages (those representing greater than 80 per cent of the property value) must
be insured against default by either CMHC or private insurers. The borrower must arrange and pay for the
insurance, which protects the lender against default.

Mortgage Payment

The regular installments made towards paying back the principal and interest on a mortgage.

Mortgage Prepayment Penalty

Is a fee paid by the borrower to the lender in exchange for being permitted to break a contract (a
mortgage agreement); usually three months’ interest, but it can be a higher or it can be the equivalent of
the loss of interest to the lender.

Mortgage Term

The length of time a lender will loan mortgage funds to a borrower. Most mortgage terms run from six
months to five years, after which the borrower can either repay the balance (remaining principal) of the
mortgage, or renegotiate the mortgage for another term.

Multiple Listing Service® (MLS®)

A co-operative selling system for relaying information to REALTORS® about properties for sale.


Presale Cross Reference List

A tool developed by BCREA, the Canadian Home Builders’ Association of BC (CHBA BC) and the Urban
Development Institute (UDI) to assist homebuyers in the purchase of homes under development, also
known as presales.

Prime Rate

The lowest rate of interest at which money may be borrowed commercially.


The mortgage amount initially borrowed, or the portion still owing on the mortgage. Interest is calculated
on the principal amount.

PTT – Property Transfer Tax

A land registration tax that must be paid when an application for a taxable transaction is made at any
Land Title Office in BC to register changes to a certificate of title.


Rate (Interest)

The return the lender receives for advancing the mortgage funds required by the borrower to purchase
a property.

Real Estate Development Marketing Act

The BC statute that imposes disclosure requirements on developers marketing various forms of

Real Estate Services Act

The BC statute that imposes licensing requirements on persons who provide trading services related to
real estate, rental management services and strata management services.


A real estate professional who is a member of a local real estate board and the Canadian Real Estate
Association (CREA). Only these professionals can call themselves REALTORS®.


The process of obtaining a new mortgage, usually at a lower interest rate, to replace the existing


Sales to Active Listings Ratio

The sales to active listings ratio is a measure of balance between supply and demand in the housing
market. It is calculated as the number of unit sales divided by the number of active listings.

Seasonally Adjusted Annual Rate (SAAR)

A rate adjustment used for economic or business data that attempts to remove the seasonal variations in the data.

Seller’s Market

A housing market is generally characterized as a “sellers’ market” when there is an excess of demand for
homes over current supply as measured by active or new listings. A sellers’ market typically occurs when
the ratio of home sales to active listings is above 20 per cent.

Stress Test

A stress test is the term given to the process by which lenders assess the sustainable affordability of a loan to a buyer. The standard mortgage stress test will consider household income, monthly outgoings, number of incomes in the household and the likely impact on affordability of rises in interest rates, etc.

Superintendent of Real Estate

The office of the Superintendent falls under the BC Financial Institutions Commission (FICOM), an agency of
the provincial government that provides public protection through ten statutes, including the Real Estate
Development Marketing Act which governs marketing, sales and long-term leases of development units.



The length of time a lender will loan mortgage funds to a borrower. Most mortgage terms run from six
months to five years, after which the borrower can either repay the balance (remaining principal) of the
mortgage, or renegotiate the mortgage for another term.

Term Mortgage

A non-amortizing mortgage under which the principal is paid in its entirety upon the maturity date.
Sometimes called a straight loan.


The legal evidence of ownership of a property.

Title Search

A detailed examination of the ownership documents to ensure there are no liens or other encumbrances
on the property, and no questions regarding the seller’s ownership claim.

Total Debt Service Ratio

The maximum percentage of a borrower’s income that a lender will consider for all debt repayment (other
loans and credit cards, etc.) including a mortgage.



Term used to describe the individual home or apartment held by the owner within a condominium


Variable-Rate Mortgage

A mortgage for which payments are fixed, but whose interest rate changes in relationship to fluctuating
market interest rates. If market rates go up, a larger portion of the payment goes to interest. If rates go
down, a large portion of the payment is applied to the principal.



A period, starting from the beginning of the current year, and continuing up to the present day.


Zoning Regulations

Strict guidelines set and enforced by municipal governments regulating how a property may or may not be



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