Nicole Lopez (00:00):
It's supercalifragilisticexpialidocious even though the sound of it is something quite atrocious, if you say it loud enough, you'll always sound precocious. supercalifragilisticexpialidocious Okay, that's it. The origins of the word supercalifragilisticexpialidocious are unknown, however, it's considered a nonsense word. No gov to express approval or it's used as a positive adjective. supercalifragilisticexpialidocious Okay, I'll give you some background on this. The song comes from a scene from the movie Mary Poppins, and this is where Mary Poppins, just after winning a horse race, is surrounded by reporters peppering her with questions, paparazzi like, and they're suggesting that she is at a total loss for words. However, Mary disagrees and says that at least one word is right for the situation and begins the song with this exceptionally long, hard to say word.
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I remember once when I was with one of my cousins who claimed he could talk Ewok. I asked him to prove it and I got gibberish. However, a friend he was with seemed to understand what he was saying, or perhaps they were just teasing me. I think I probably should have responded. M-T-F-B-W-Y may the force be with you. I am HO, in my humble opinion, I think we've all been there when some folks around us are using terms and jargon, acronyms that we have absolutely no clue about what they mean or we even catch them in a conversation. Just so frustrating. So hi everyone. Welcome back to another episode of Real Estate with Nicole.
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Today we are diving into real estate speak. I'll touch on a few terms and provide some good to knows, tips, and maybe even an antidote to help with the definition of these words. I want to demystify real estate speak for you, and as you know, my motto is to know more, be and be confident. This episode is highly focused on the no more segment, so grab a cup of your favorite beverage and settle in. Okay, so I'm going to start off with common real estate terms and provide you with a few good to knows in this section. So the first one is MLS or multiple listing service. So MLS is actually a registered trademark or certification owned by the Canadian Real Estate Association, otherwise known as CREA. These marks are protected throughout Canada and for the exclusive use of the Canadian Real Estate Association members in connection with listing properties to achieve the purchase and sale of real estate. Basically, it's a database that's used by the real estate agents to list properties for sale, and it shows you all the available homes in your particular desired area. My next term or terms freehold versus condo, so the freehold and condo properties. A freehold means you own the house and the land that it sits on. Condo, which is short for a condominium means that you own your particular unit, but you share ownership in the common areas such as hallways, gyms, parking, anything else that other residents are using.
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Another term I'd like to speak to today is vendor. It's not a term that is used as much as it was in the past, but I thought it would be good for you to have an understanding. So basically vendor is the seller in a real estate transaction, and this term refers to the person or the entity who owns the property and is selling it to a buyer deposit. A deposit is a sum of money paid by the buyer to show that they have serious intent to buy the property. This amount is often held in an escrow or a real estate trust account and is applied towards the purchase price On closing, if the buyer breaches the contract, the deposit may be forfeited to the seller. Another terminology that's often encountered is offer date. So you might hear this term often when you're looking at listings, and this is a date set by a seller to review all purchase offers.
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Typically, it's provided for in the seller in writing, and it's common in competitive markets to create what's called a bidding war. So typically you will see offer dates in a seller's market, but you can see them at any time and in any type of market closing costs. So closing costs are fees that you need to pay when completing the purchase of a home. These can include lawyer fees, land transfer tax, and home inspection costs, and it's really important to budget for these costs in addition to your down payment. So a good to know item is that closing costs can range between one and 4% of the purchase price. This is dependent on your specific situation. Next term, land transfer tax. In the GTA, you'll need to pay land transfer tax when you buy a property. An important thing to note is the city of Toronto has its own municipal land transfer tax in addition to the provincial land transfer tax.
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So that's something for you to consider if you're purchasing a property in the city or the municipality of Toronto. So good to know. As I mentioned previously, this can add a significant amount to your closing costs. So it's really important to have that consideration when you're closing to have those costs between one and 4% of your purchase price allocated for closing title insurance. Title insurance is a type of insurance that protects home buyers and lenders from financial loss due to defects in the property title such as liens, encumbrances, or ownership disputes. It ensures that the buyer has clear ownership of the property and that the title is free of legal issues. Some good to know items. The fee associated with this element should also be factored into your closing costs. I highly recommend that you listen to the podcast episode on title insurance and fraud to further educate yourself on the importance of title insurance.
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Now, I'll get to a couple of other terms. Pre-construction versus resale. So pre-construction refers to buying a property before it's built and it's often at a lower price depending on the phase of the project. So typically in phase one when the project is initially being launched, you'll probably find that the prices for those particular properties are the lowest. It's the best opportunity for you to get in early in phase one as additional phases come on, the builder usually assesses the current market state and they would price those units in accordance with the current market rate, and it's typically going to be higher. As I've mentioned previously in the GT, a year over year property values increase about 6.6% year over year on average. So that is one of the aspects that builders take into consideration when they're phasing the properties. Resale means that you are buying a property from someone who already owns it.
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So though pre-construction properties can be a promising investment, they do come with risks like delays, changes in the market as I mentioned. So yes, typically we see a trend of 6.6% year over year. However, there are instances where the trend is a little bit lower and prices for the homes are a little bit lower and builders may put a pause on building new homes or putting on new phases into the market. So that's just something for you to consider. But it is true that typically pre constructions are a promising investment, especially when you get in on phase one. So another term rental market terms, and I put this in here because of the current situation in the GTA. So if you are looking to rent, you might hear the terms like lease and sublet. So a lease is a contract between you and the landlord, and it's typically for a year of occupying that particular unit or property.
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Subletting means renting out your space to someone else with your landlord's permission. So I'd like to provide you with a little story. So names have been changed, information has been revised, but you'll get a general understanding there. Once was a landlord Sue who leased a downtown Toronto property for $1,500 a month. That sounds like an awesome deal. That was back in the distant 2016. The tenant, Amy proved to be a great one paying on time and just super for Sue. So Sue had no issues with this great tenant and as a result, she did not make any rental increases that she was allowed to. Based on the Ontario Residential Tendencies Act. Fast forward seven years, there are changes in the landscape that affected the real estate market, and some of these changes included the economy, interest rates, immigration, global pandemic, and all of these and many others resulted in a desirable and highly dynamic housing market.
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This also led to challenges with affordability of purchasing homes and rentals saw an increase in demand. Amy was very smart or so she thought she saw an opportunity where she was able to sublet her unit and make extra money. She decided to rent the property for $3,000 a month without seeking input from Sue. Sadly, that was a wrong move. Ultimately, the moral of the story or what I want to really emphasize is beware of subletting without the landlord's permission. I've really seen this in a few cases recently and just want to educate you on this. This could lead to headaches. Headaches from a landlord perspective, the condo corporation, the tenants that you're subletting to who are not paying because if you as a tenant give possession of the rental unit to another person without the landlord's consent, the sublet agreement that you have is not valid at the landlord tenant board and the person who has taken possession could be evicted by the landlord.
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So that's just something for you to be aware of. Now, I'll focus on some additional definitions along with tips. We'll look at chattels and fixtures. Chattels are movable items that are not permanently attached to the property and can be removed without causing damage. Examples include furniture, appliance, personal belongings. However, fixtures are items that are permanently attached to the property and are considered part of it. Examples include built-in cabinets, certain lighting fixtures, plumbing installations, built-in microwave and security systems just to name a few. As a tip, when you as a buyer draft an offer, it's important to clearly say what items you wish to have included in the sale. Otherwise, it's presumed that the previous owner or the seller will take all chattels with them. As a seller, you should specify items that are not included in your home's. Listing description items such as built-ins, outdoor plants, say an outdoor pizza oven, any special light fixtures. All of these can fall into a gray area and it's important for you to ensure that they are included in your listing disputes between buyers and sellers over what stays and what goes can be time consuming and stressful. So be sure to get your chattels and fixtures in writing.
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Next terminology are clauses and conditions. These are basic specific provisions or wordings included in a real estate contract that outline the terms and obligations of the parties involved for the buyers and the sellers. Clauses can address various aspects such as financing inspections, closing dates, while conditions are specific requirements that must be met by either the buyer or the seller for the contract to be enforceable. Conditions on the other hand are optional mortgage approval. Getting pre-approved for a mortgage means a lender has checked your finances and agreed to lend you a certain amount of money to purchase the property. This gives you a clear budget and shows sellers you are a serious buyer. So this is so critical for you to ensure that you have mortgage pre-approval. I also recommend as a tip that you listen to the episode on mortgage pre-approval as it goes into more detail in terms of what's required and how a mortgage broker or a mortgage specialist at a financial institution is able to assist you in obtaining a mortgage. Pre-approval, house appraisal. House appraisal is an assessment conducted by a certified appraiser to determine the market value of a property. This evaluation is typically required by lenders or the financial institution to ensure that the loan amount does not exceed the property's value. Appraisals consider factors such as the property's condition, location, and comparable sales in the area.
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Home inspections. A home inspection is a critical step before buying a home. It involves hiring a qualified professional to check for any issues with the property, like structural aspects, components, exterior coverings, roofing systems, plumbing, electrical heating, central air conditioning, installation, ventilation, and interior structure as applicable and assessable by the inspector. This can save you from costly repairs down the line. In general, a home inspection is designed to provide you with a thorough understanding of the condition of the property as of the date of the inspection. The resulting report is a summary of the visual inspection of the accessible features of the property.
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My strong tip is that it is a good practice for you as a buyer to attend the home inspection visit. It's a great learning experience as you'll learn about the condition of your home that you're buying and be better able to understand that written report that's provided by the home inspector also added bonus. It provides you with the opportunity to ask the home inspector questions right there on the spot as he's going through the process. Bidding wars. Bidding wars were common in the GTA not too long ago when we were experiencing a hot seller's market and a hot seller's market when there were few homes that were available for sale and a lot of buyers looking to purchase the homes that were there.
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So basically, in a bidding war, multiple buyers are interested in the same property, thus driving up the price. And often to win a bidding war, you might need to offer more than the asking price or have fewer conditions on your offer. So big tip for this one is to critically assess the risks associated with potentially submitting an offer with without conditions. And I'm particularly pointing out conditions of a home inspection or financing conditions as there may be instances where home appraisal report does not fall within the range of the purchase price. So what the appraiser appraises the home value for is much less than what the purchase price is that you've offered the seller. And without that financing condition, you as the buyer will need to come up with the difference between what the financial institution will finance or provide to lend you to purchase the price and the actual purchase price of the property.
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And this can be a significant amount. So truly critically think about this as this is something that has been seen in the past few years, happen quite often. So the next term is irrevocable date and time. Basically, this is a period during which an offer or an agreement cannot be withdrawn or changed by the party who made it, whether it's the buyer or the seller. So in real estate transactions, it's often used in the context of an offer to buy the property that we're talking about where the buyer sets a deadline for the seller to accept or reject the offer. Or conversely, when the buyer submits the offer and the seller provides a counter offer and they give a particular deadline for when the buyer needs to accept or reject the counter offer.
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A tip slash caveat just for your information, I get this question quite a bit for first time buyers or buyers who haven't been in the market in a while, is can I submit an offer for this home and my backup home? Especially in that seller's market where things were just going very quickly, the prudent response is no. And I explain that this particular situation could lead you as the buyer to be purchasing two properties. So it's really important when you submit an offer, it's just one offer to one property. You give your irrevocable date and time, and then once that time period is up and you have not received a counter offer or response from the seller, you are able to move to the next. But it's really important to know that that's why this irrevocable date and time is so important for you to understand multiple representation.
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This occurs when a single real estate agent or brokerage represents both the buyer and the seller in the same transaction. So while this can lead to conflicts of interest, it's legal in many areas if full disclosure is made and both parties, meaning the seller and the buyers provide consent ahead of presenting the offer, and in Ontario, consent must be provided in writing ahead of presenting that offer. So the tip is you do not have to agree to multiple representation and your agreement, whether it's your listing agreement or your buyer representation agreement, should be clear about what happens in the situation of multiple representation. For example, that agreement could end completely or you may be referred to another brokerage or designated representative for that specific transaction, but otherwise remain under the agreement with the brokerage. So it's really important to understand multiple representation, what it means to you and what will happen if the situation does occur in your particular real estate transaction. So that's a wrap for today's episode of Real Estate with Nicole, and I hope you have a better understanding of real estate speak jargon that's typically used in the GTA. If you have any questions or topics you'd like me to cover in future episodes, feel free to reach out. Don't forget to subscribe so you never miss an episode and leave a review and share the podcast with anyone who could benefit from this information. I hope you found that this episode was supercalifragilisticexpialidocious Until next time, this is Nicole Lopez signing off. Stay informed and stay empowered in your real estate journey.
