Real Estate Terms and Phrases
During the course of buying a home, there are many Real Estate Terms that can be a little confusing to the general public.
Here is a brief explanation of just some of the terms you may come across in your home search.
Offer – After you have found the perfect home, the decision is made to submit an offer. The offer is prepared on the buyer’s behalf and clearly outlines the offer price, closing date, inclusions, terms and conditions that the buyer would like. This offer is then presented to the seller and the negotiation process begins.
Chattles Included – These are items that belong to the seller that you would like them to “include” in the purchase price. They are items that are NOT fixed to the property and can be easily removed from the home. Typically these items may include items such as a Fridge, Stove, Washer, Dryer, BBQ, Lawn Tractor, Bar Stools etc. Remember, you can ask for anything you like and as long as the seller agrees they can be included.
Fixtures Excluded – In any sale transaction, any items that are attached or permanently fixed to the property are deemed as included. In other words, if you would need a tool to remove it, it stays UNLESS you specifically exclude it on the offer. An example of this might be a wall mounted tv. Technically the TV itself can be easily lifted off the wall and would be considered a Chattle, however, the wall mount which is affixed to the wall, would be deemed a fixture and would have to stay unless you “exclude all wall mounted tv’s and wall mounts” in the offer.
Conditions – Many offers contain specific conditions that will be satisfied in a specified period of time following the acceptance of the offer. These conditions may include items such as a home inspection, mortgage approval, insurance etc. By including a “condition” in the offer, it tells the seller that you want their home, provided that these “conditions” can be met. Having a conditional offer accepted gives the buyer peace of mind to know that no one else can scoop the house out from under them while giving them time to meet their conditions. There are other cases where an “escape clause” is used, however, that is not very common unless the offer is conditional upon a buyer selling their current home. That being said, there are always exceptions and at the end of the day, an offer can include anything that a buyer and seller agree to.
Common Conditions may include:
A Finance Condition – Including a finance condition in an offer allows the buyer a specific period of time (often 5 business days) to forward the offer and mls listing to their lender. In return, the lender will “approve” the home purchase and forward the buyer a Mortgage Commitment. Providing the Mortgage Commitment is satisfactory to the buyer, the buyer then has peace of mind knowing that they will have the funds necessary to purchase the home.
A Home Inspection Condition – Buying a home with having it inspected can potentially lead to a lot of unseen problems. Including this type of condition gives the buyer a specific period of time (often 5 days) to have a qualified home inspector complete a general inspection of the home and the property being purchased. The inspection generally takes on average about 3 hours. At the end of the inspection, the home inspector provides the buyer with a report outlining the results of their inspection along with any defects or deficiencies. At this point, the buyer can chose to take the home ‘as is’, they could walk away from the deal or they could ask the seller to remediate the deficiencies.
There are and can be many other types of conditions that would simply explain what the buyer or seller needs or wants to do in order to buy the house and when they would need to be done by. i.e. Well water tests, status certificate reviews, receiving permits for work to be done etc.
Irrevocability – Every offer must have a deadline for acceptance contained within it…This is known as the Irrevocability. This simply means that “as is” the offer is good until a specific date and time. The other party can accept the offer at any point before the irrevocable time passes but can NOT accept once the time has passed. This does not mean you can’t “revitalize’ the offer, it just means another sign back must occur before the offer can be accepted.
Sign back - Once a buyer’s offer has been submitted to the seller, the seller reviews it with their Realtor and then has 3 options.
1. They can accept the offer "as is" if they are happy with everything.
2 They can reject the offer all together if they are not satisfied.
3. They can make a counter offer (give the buyer a "sign back") with the terms and conditions they would like to see instead. These changes could include a better price, different closing date, less inclusions ect.
Once an offer is signed back, the buyer then has the same three options. Accept, Refuse, or Sign back. The signing back process can go back and forth a couple of times, or it could go back and forth for days. It is important to note that once you sign back an offer to the other party, this opens the door for them to walk away or potentially even entertain other offers. As a seller you could now entertain offers from other buyers or as a buyer, you might find another home you like better.
Acceptance - Once all terms have been agreed upon by both parties, the Confirmation of Acceptance part of the offer is signed by the last party to touch and accept the offer. This makes the deal firm and binding.
Deposit – Once an offer has been accepted, a deposit must be given by the buyer. The amount of the deposit and any terms pertaining to the offer would be agreed to in the offer. Typically the deposit is help by the Listing Broker and remains in their Trust account until closing. Typically the deposit is required within 24 hours of an offer being accepted (firm or conditional). **If your deposit money is not already sitting in your bank account ready and waiting for you to buy the perfect house, you should speak to your financial institution to take the steps necessary to ensure funds are easily and readily available. Cashing in investments, getting a line of credit or withdrawing from an RRSP can take time that you don’t have.
Sold Conditional – If the offer that was accepted contains “conditions” that must be met, the property is stated to be “Sold Conditionally”. These conditions must be met within a specific time period as set out in the agreement. Once they are met, and waived the property becomes “Sold Firm”.
Waiver - This is the form used to remove a condition that was originally contained within the offer. By signing a waiver, you are simply saying you no longer require the specific condition(s) and would like it removed from the offer. That being said, you can actually waive a home inspection condition without actually doing one should you decide that you no longer wish to do it.
Notice of Fulfillment – This is the form used to not only remove a condition from the offer, but also states that the condition was actually met. i.e. A mortgage was approved or the home inspection was actually done and you were satisfied with the results… Therefore you fulfilled the condition and therefore would like to remove the condition from the offer.
Amendment – Since you cannot make any changes to the original copy of the offer once it is accepted, the only way to fix, change, add or delete items from the offer after acceptance is by using an amendment. One example of when an amendment might be used could be if the buyer does an inspection of the home only to reveal that there is more work to be done than originally expected. The buyer may be happy to remove their condition provided that the price of the home is reduced accordingly. The buyer would then submit an amendment to the seller stating their intentions to remove their condition providing the price is changed. If the seller agrees and accepts the amendment, these changes are now considered to be a part of the offer.
Sold Firm – If the accepted offer did NOT contain any conditions it is deemed to be Sold Firm. As well, once a conditional offer has removed their conditions, the offer is Sold Firm at this point also.
Title Search – This is a date set out in an offer that gives the lawyer time to ensure that clean title can be given to the buyer. Typically this date is about 2 weeks prior to closing, however, can be anytime up to the closing date. The idea is that IF something unexpected should pop up, it gives the lawyers time to deal with the issues and ensure the closing can still continue.
Closing Date - This is the point in time when the legal title changes hands from the seller to the buyer. This date would have been set out in the original offer as the Closing Date. In some offer negotiations, the closing date can be as big a factor as the purchase price. If the seller needs to get out of the home quickly and you can be flexible, this can go a long way to help you secure the home. Typical closings are usually 30-90 days however, can be as quick as 2 weeks provided the lawyers can get everything together in time.