Glossary of Real Estate terms - A

Acceleration Clause

A clause in your mortgage which allows the lender to demand payment of the outstanding loan balance for various reasons. The most common reasons for accelerating a loan are if the borrower defaults on the loan or transfers title to another individual without informing the lender.

Acceptance

A positive response to an offer or counteroffer. An acceptance may be "conditional," "express," "implied" or "qualified."

Adjustable-rate Mortgage (ARM)

A mortgage in which the interest changes periodically, according to corresponding fluctuations in an index. All ARMs are tied to indexes

Adjustment Date

The date on which all adjustments of prepaid expenses, taxes, utilities, rents, interest, and similar items will be calculated.

The date the interest rate changes on an adjustable-rate mortgage (ARM).

Adjustments

Those items of a financial nature which are to be settled between the parties as of the Adjustment Date. The usual items for adjustment are annual property taxes, water rates, local utilities, garbage removal, Strata Fees, Interest on assumed mortgages, and rents, but can also include fuel in a tank, prepaid cable services, insurance, and any other item for which one or the other of the parties should be compensated before the transaction is fully completed.

Agency

The legal relationship between a principal and an agent. In real estate transactions, usually the seller is the principal, and the broker is the agent: however, a buyer represented by a broker (i.e., buyer as principal is a growing trend. In an agency relationship, the principal delegates to the agent the right to act on his or her behalf in business transactions and to exercise some discretion while so acting. The agent has a fiduciary relationship with the principal and owes to that principal the duties of accounting, care, loyalty, and obedience.

Amortization

The length of time over which a loan will be retired in full, generally by way of monthly, bi-weekly or weekly payments of principal and interest.

The loan payment consists of a portion which will be applied to pay the accruing interest on a loan, with the remainder being applied to the principal. Over time, the interest portion decreases as the loan balance decreases, and the amount applied to principal increases so that the loan is paid off (amortized) in the specified time.

Annual Property Taxes

A tax levied on a property based on the result of multiplying the assessed value time the "Mil Rate" or rate of tax per $1000 of Property value.

Appraisal

A written justification of the price paid for a property, primarily based on an analysis of comparable sales of similar homes nearby.

Appraised Value

An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property. Since an appraisal is based primarily on comparable sales, and the most recent sale is the one on the property in question, the appraisal usually comes out at the purchase price.

Appreciation

The increase in the value of a property over time due to changes in market conditions, inflation, or other causes.

Assessed Value

The value placed on a property by the BC Assessment Authority for the purposes of determining annual property taxes. Assessed Value multiplied by the "Mil Rate" equals the tax levy for the year.

Assignment

The transfer of the right to purchase a property from the original buyer (the assignor) to a new buyer (the assignee), executed prior to completion date. The assignment contract is between the assignor and the assignee and does not relieve the assignor of obligations under his/her contract with the seller.

When ownership of your mortgage is transferred from one company or individual to another, it is also called an assignment.

As of May 16, 2016, new provincial rules relating to the assignment of real estate contracts are in force. For more information, refer to the BC Real Estate Council website, recbc.ca.

Assumption of Mortgage

An agreement allowing the buyer to assume responsibility for the seller's existing mortgage loan instead of getting a new loan in his or her own name.