Confused About
Real Estate Terminology?


Real estate terminology can be very confusing.

When listening to your agent, lawyer or mortgage broker use real estate terminology while describing the real estate contract and the various real estate clauses used during the process of trading houses, does it sometimes seem like they're speaking a foreign language? Common real estate terms can certainly seem that way.

Do you hear real estate terminology you've never heard before or may have, but still don't really understand? Have you ever heard real estate terms that you always thought meant something completely different than what you're now told? Since you don't buy or sell a home everyday, it's quite understandable. Fortunately, the older and oft confusing 'legalese' real estate terminology has been replaced with more common language.

To get you through your real estate contract for purchase or sale, here's a little ABC primer for you, in alphabetical order, on commonly misunderstood real estate terminology.

Included are explanations for acknowledgement, adjustments, amendment, buyer agency, chattels and fixtures, client vs customer, commission, confirmation of acceptance, confirmation of cooperation and representation, completion date, cooperating brokerage, deposit vs down payment, dual agency, easement, encroachment, environmental issues, escape clause, exclusive listing, highest and best use, holdover period, irrevocable date, Kitec Plumbing, knob and tube, lawyer's title opinion, legal description, liens and encumbrances, listing agreement, listing brokerage, market value, mortgage, multiple representation, mutual release, notice to conditional buyer, notice of fulfillment, null and void, power-of-sale, property assessment, radon, right-of-way, representations and warranties, requisition date, sheriff's execution search, seller property information statement, spousal consent, status certificate, survey, survive and not merge on closing, termites, title insurance, title search, urea formaldehyde foam insulation, vacant possession, waiver and zoning.

There is obviously lots of other location-specific real estate terminology in use, but in my area of the world, these seem to be the most misunderstood. In your area, other real estate terms may be more common, but the ultimate meaning of the related terms will likely be similar, if not identical.


Is there a real estate term about which you're unfamiliar that's not on the list? Or do you have an interesting story to tell? Click here to submit your explanation request or your story.


Acknowledgment

At the bottom of the signature page of a real estate sale contract, more correctly called an Agreement of Purchase and Sale (APS) - whether buying or selling, is an area where the parties to the contract affix their signatures, address, phone number and lawyer's contact information. By signing here, the parties are simply acknowledging receipt of a true copy of the real estate contract, which is legally necessary to form a binding contract between the parties.

The address portion may be particularly important for the delivery of notices, unless a clause is included in the agreement designating the agents as authorized recipients of any notices between the parties.

Adjustments

When you buy a home, you obviously require a down payment. Unless you have sufficient cash to pay the entire purchase price, you'll also require a mortgage.

A deposit is submitted with your offer or delivered to the listing brokerage upon acceptance of your offer by the seller. This deposit is credited toward the purchase price on completion (closing) as part of your down payment. The balance of your down payment, in addition to the full mortgage advance from your lender, is also paid to the seller on closing and adjusted to reflect such things as prepaid property taxes, monthly condo fees or fuel oil.

For example, if your closing occurs in the middle of the month and the seller has paid the full condo fee for the month, you owe them two weeks worth of fees for the last two weeks of that month. Similarly, if the seller has paid property taxes until the end of the year, it's your responsibility to reimburse them for the taxes applicable for that period of time from your closing date until year end.

Depending on when during the month the closing is scheduled to occur, adjustments could also include a partial month's interest on your mortgage. This is referred to as a mortgage interest adjustment.

If your 'new' home is heated with oil, the seller normally has the tank filled immediately prior to closing, and the cost of a full tank of oil is charged to you on the Statement of Adjustments prepared by your lawyer and credited to the seller.

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Amendment

This document is used when one or more of the terms of your real estate contract require changing after it's been executed by both the buyer and seller. Real estate clauses, the price or completion date may be deleted, inserted or altered. To be legally valid, it must be signed and dated by all parties to the agreement, with each receiving a true copy prior to the irrevocable (expiry) date of the amendment. It's also preferable, though not absolutely necessary, to have signatures properly witnessed. And since digital signatures are now in vogue, witness signatures seem to be going the way of the dodo bird. For more on amending a contract, click here.

Buyer Agency

Another type of written real estate contract is called a Buyer Representation Agreement (BRA), which creates an agency relationship between a buyer and a real estate brokerage. It explains services to be provided by the brokerage, establishes a fee arrangement, term and specifies any obligations of the buyer. This type of agency and its associated real estate terminology has become quite common over the past couple of decades.

Normally, the principle obligation of the buyer is to work exclusively with the named brokerage during the term of the contract. The brokerage owes the buyer, his client, confidentiality and owes a seller (who is not a client of the same brokerage) fairness and honesty. In many areas, buyer agency has become the default arrangement between buyers and their agents.

To learn more about buyer agency, visit the Toronto Real Estate Board.

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Chattels and Fixtures

The real estate terminology for items included and excluded in a sale are oft confused. In a typical APS, items such as appliances, carpets, plug-in electric lights, pool tables or curtains are often, but not always, included in the contract. As these are movable and not physically attached to the property, they are referred to as chattels. And unless specifically mentioned as being included in the contract, they are automatically excluded.

Fixtures, on the other hand, include such items as furnaces, air conditioner systems, drapery tracks, built-in appliances, installed broadloom, hard-wired electric lights, garage door openers (remotes, though considered chattels, are typically included), owned security systems and satellite dishes and attached swimming pool equipment. Unless specifically excluded in the real estate contract, anything that is physically attached to the property is automatically included in the purchase.

Chattels, however, must be written into the agreement to be included in the sale, otherwise, they're automatically excluded from the sale.

If a furniture-type wall cabinet, for example, is physically attached to the wall, technically, it's considered a fixture. Thus, the seller's agent would be wise to inquire if such a piece is attached in any way and if so, exclude it on the listing. Otherwise a seller might be force to leave it behind.

A buyer may request a warranty (promise) from the seller that the fixtures and chattels will be in good working order on the date of completion, free and clear of any encumbrances (liens). The seller may refuse and instead, demand the buyer buy them on an “as-is” basis.

Rental items, such as hot water tanks, water softeners and sometimes furnaces and air conditioners, are excluded from a sale because a seller has no right to sell them. The buyer must agree to assume the rental contract(s) as part of the agreement. If there's no reference made to rental items, a problem could arise after closing when the rental company demands payment. If unpaid, they typically have the right to remove their equipment from the property or, depending on the terms of the rental contract, go after the previous owner.

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Client vs Customer

The regularly used real estate terminology defining the relationship between a buyer or seller and the brokerage is often confusing for the public.

A brokerage may provide services to buyers and sellers as clients or customers. If a buyer or seller prefers to have their own representation, they enter a Buyer Representation Agreement (also referred to as a Buyer Agency Agreement) or a Listing Agreement respectively and become a client of the brokerage.

If a buyer or seller prefers not to be represented as such, they become a customer of the brokerage. This would be documented in a Customer Service Agreement.

Unlike a client relationship, the brokerage does not owe a customer the duty of confidentiality - only honesty and fairness. However, a brokerage can still provide many valuable services to a customer.

A buyer who chooses to be a customer must understand that "their" agent legally works for the seller as a sub-agent and owes the seller confidentiality. Therefore, anything a buyer says to "their" agent, while believing it's being said in confidence, must be relayed to the seller. In the vast majority of cases, the buyer elects to be represented as a client since it's in their best interests to do so.

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Commission

With the onslaught of flexible commission rates, flat fees and mere postings to our MLS® system since late in the last century, this part of our industry's real estate terminology has become quite topical.

When a homeowner enters into a listing agreement with a real estate brokerage, authorizing the brokerage to market their property, the homeowner agrees, amongst other things, to pay the brokerage for its services by way of a commission, usually but not always calculated as a percentage of the sale price of the property. It could also be a flat fee, and is payable upon the date set for completion or closing of the APS.

Sometimes, under the terms of a BRA, a buyer must pay a commission to their agent. In the vast majority of cases, however, the seller pays the buyer's agent, referred to as the cooperating brokerage (CB) in the agreement, through the listing brokerage. If the BRA states that their agent is to receive a certain commission as stated on the listing and during negotiations, the CB commission is reduced, the buyer could be held responsible to pay any difference between what was contractually promised in the BRA and what is to be paid by the seller. This reduction must be indicated on the Confirmation of Cooperation and Representation (see below), and agreed to by all parties, including the buyer.

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Confirmation of Acceptance

Once the negotiations of an APS are complete, the last party to affix their initials to the document must also add their signature, date and time on the appropriate line on the signature page. This confirms the final acceptance date and time from which the clock begins to tick for any time-related conditions that may be contained in the agreement.

For example, unless stated otherwise in the agreement, the deposit must typically be delivered to the listing brokerage within 24 hours from this date and time.

Confirmation of Cooperation and Representation

This standard form, executed by all parties to an APS, including the two agents on behalf of their respective brokerages, must form part of every real estate transaction when a brokerage is involved. It sets out the relationships between the buyer(s), seller(s) and brokerages, that is to say, who is working for whom.

It also states what commission will be paid to the cooperating brokerage representing the buyer. If there's no cooperating brokerage, it's called multiple representation. This is also stated on this form, wherein all parties provide their consent and acknowledgment to the dual agency relationship.

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Completion Date

When a buyer and seller enter into an APS, along with numerous other terms and conditions, the agreement must include a completion date when the balance of funds are to be paid by the buyer to the seller in exchange for possession and the transfer of clear title to the buyer. The more common real estate terminology for this is activity closing date. For information about altering a closing date, click here.

Cooperating Brokerage

In most real estate transactions, there are two brokerages involved - the listing brokerage representing the seller and the cooperating brokerage acting for the buyer. Sometimes, the same brokerage represents both parties, as a dual agency (multiple representation). In this case, there is no cooperating brokerage involved.

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Deposit vs Down Payment

This real estate terminology refers to monies submitted with or upon acceptance of an offer. It is often confused with the monies paid by the buyer on closing. It is not the down payment. It's usually made payable to the listing brokerage, held in their trust account and credited to the buyer on closing as part of their purchase price.

The deposit provides a level of comfort to the seller that the buyer will honour the terms of the agreement and close on the date agreed for completion.

Some brokerages insist on bank drafts or certified cheques, but non-certified is often acceptable. However, if a buyer fails to satisfy a condition in the APS and a mutual release is executed, the return of their deposit may be delayed because the listing brokerage must await the clearing of the cheque before they can issue their own. Thus, it's a good idea to pay by certified cheque, bank draft or money order.

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Dual Agency

Occasionally, a brokerage will represent both buyer and seller in the same transaction. Both parties must provide written consent to this arrangement prior to entering into any APS. Since the brokerage's loyalty is divided between each of the parties, who obviously have conflicting interests, it's absolutely essential that a dual representation relationship be properly explained, documented and acknowledged by all parties.

Normally, under a dual agency situation, an agent can discuss all the contractual terms with both parties - except for price and motivation, which must be kept confidential with each respective party. And of course, the agent must be fair and honest with each party without disclosing confidences.

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Easement

Since easements are extremely common, this real estate terminology rarely crops up in the home trading business. An easement, which is registered on title, is a non-possessory interest in real property owned by someone else to use for a specific purpose. Often, for example, utility companies have easements so they may enter onto a property to service their equipment. Unlike a lease, an easement doesn't give the holder a right of possession of the property.

A license, which is a lesser interest than an easement, gives a holder a personal privilege to only use the land of another for a limited purpose. For example, a license, which can be terminated more easily than an easement, is granted when a landowner gives his neighbor verbal permission to park his car in his driveway.

An easement also differs from a license in that the benefits of most easements flow to an adjacent parcel of land - not to a specific person. As such, the owner of the adjacent land that benefits from the easement will continue to enjoy the easement, even if he's not the initial owner of that property. A right-of-way, easement of support (pertaining to excavations), easement of light and air, and rights pertaining to artificial waterways are examples of easements.

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Encroachment

This real estate terminology refers to the unauthorized intrusion onto the lands and property of another.

The right to an encroachment by one landowner over an adjoining owner's property is sometimes granted by express written agreement. Examples are when a window sill, eave, deck, porch or chimney extends over a side yard area. This is particularly common in older urban areas with narrow side yards. When the overhang is no longer present, the encroachment ceases to exist. Except by further agreement, no right to substitute an encroachment exists if one is lost.

An agreement permitting the encroachment of an improvement onto an adjoining parcel of land may be registered against the title of both properties affected by the encroachment.

Under an encroachment agreement, the owner whose land has been encroached upon by the improvement, essentially forebears from exercising his/her legal right to require the improvement be removed from the land. Encroachment agreements are often encountered where one owner has inadvertently constructed a building, fence or driveway over adjoining land.

An encroachment agreement may contain provisions that call for the removal of the offending improvement upon the occurrence of some future event, such as destruction by fire or wind or by a specific time. The market value of the property may be adversely affected to the extent that a risk exists and/or that the offending improvement might have to be removed at a certain time or in the event of partial or full destruction by fire or other cause.

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Environmental Issues

Environmental issues, commonly referred to as hazards, are significant factors in real estate transactions. Agents must ensure accurate information is provided to clients and customers, and that due care is taken by advising them to seek expert advice from environmental auditors and specialist lawyers. No easy method exists to categorize significant hazards. In some instances, hazardous conditions have not gained widespread public awareness or condemnation. Consequently, agents are challenged with everyday marketplace negotiations complicated by vagueness and ambiguity.

Hazardous waste depots are provided in most urban areas for dropping off such items as spray paints, glues, cement, paint strippers, enamel and latex paints and stains, insecticides and herbicides, rodent poisons, thinners, unused medicines, nail polish remover, wood preservatives, rust removers and compact fluorescent light bulbs (which contain mercury, a highly toxic substance). Hazardous products should not be disposed of as ordinary garbage or down drains. Considerable literature is available at the federal, provincial/state and municipal levels (Toronto) to provide guidance on such matters.

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Escape Clause

If you happen to come across this bit of real estate terminology, you're either a buyer offering on a property, conditional on your house selling, or a seller who has been presented with an offer from a buyer with a house to sell.

Basically, this clause provides the opportunity for a buyer, who currently owns a home,  to offer on a property without the risk of owning two homes if their current property fails to sell. It also allows a seller to accept such an offer and to continue marketing and entertaining offers.

For a more detailed explanation of this common real estate term, click here.

Exclusive Listing

Before the introduction of the Multiple Listing Service (MLS)®, whenever a homeowner wanted to sell their home, they hired a real estate brokerage to list their property. A listing contract was signed by the homeowner that included the address, asking price, expiry date of the contract and all the usual real estate terminology. The brokerage installed a lawn sign and began an advertising campaign, usually in the newspaper. Eventually, it would sell or the contract would expire.

Occasionally, an real estate sales person from another brokerage saw the ad or sign and asked if the listing brokerage would cooperate by allowing him to show that listing, and if an offer was generated, pay a cooperating brokerage commission. This express permission would be necessary because all listings during those times were exclusive to just one brokerage.

Nowadays, exclusive listings are rare because homeowners want the huge exposure offered by the MLS® system and the Internet.

When an exclusive listing is created, it's usually because the agent already has a prospective buyer for the property. Thus, there's no need to share the listing. Of course, the seller must agree to this limited method of marketing their home.

Sometimes, a seller may prefer a quiet sale because they're in no rush, or they prefer their own agent sell it themselves. In any case, the exclusive agent, who is in no way compelled to cooperate with another brokerage, must share the listing with fellow sales people of their own brokerage. All listing contracts actually belongs to the brokerage and not solely the sales person who obtained the exclusive (or MLS®) listing.

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Highest and Best Use

This real estate terminology is typically used with respect to commercial or industrial property. It's defined as the use which, at the time of the appraisal, is most likely to produce the greatest net return in money or amenities to the land over a given period. Net return may be monetary, as with an income property. Or in the case of a single-family dwelling, it may take the form of amenities such as pride of ownership, comfort and convenience. In cases where a site has existing improvements, the present use may fail to meet the criteria of this definition. The highest and best use may be determined to be different from the existing use. The present use will typically continue, however, unless and until land value in its highest and best use meets or exceeds the total value of the property in its existing use.

In estimating market value, the appraiser must consider not only the current use, but also the likely uses to which it is adapted and is capable of being used in the reasonably foreseeable future. Purely speculative future uses may not be considered.

Since property owners normally utilize their property as advantageously as possible, and since economic pressures usually dictate the optimum or most profitable use, the highest and best use of a property will most often be its present use. However, this is not always the case. Instances exist where owners, for various reasons, do not use their property at its highest and best use. This is especially true along major new highways and rapidly expanding areas where sudden changes in demand occur and appropriate uses are necessitated. Also, the passage of time typically causes radical changes in optimum land usage.

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Holdover Period

This bit of real estate terminology is from a listing contract with a seller. It refers to the period following the expiry of the contract.

The duration is agreed upon between the agent and the seller(s), but a typical period is 60 days. During this time, if the seller or someone on behalf of the seller agrees to or accepts an offer to purchase the subject property from a buyer who had been introduced to or shown the property by the listing brokerage from any source during the term of the listing, the seller must pay the brokerage the contractually agreed commission.

After the expiry date of the listing, if the seller enters into a new listing agreement with another brokerage, his liability to pay commission to the first brokerage is reduced by the amount of commission due to the second brokerage.

For example, if the original brokerage commission was to be 5%, and the seller signs a new contract with a competing brokerage at 4%, and the property subsequently sells to a previously introduced buyer as described, then the seller may still be liable to pay the first brokerage a commission of 1% of the sale price plus applicable HST.

This clause is included in all listing contracts to discourage the practice of an unscrupulous buyer, who was introduced to a listed property by an agent during the term of the contract, usually near the expiry date, from returning after the expiry date to attempt to buy the property privately, and to dishonourably exclude the brokerage and deprive it of its rightful commission.

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Irrevocable Date

An irrevocable date is always included in an offer to purchase or an amendment to an existing contract. If the recipient of the document fails to accept it during this open period, by affixing their signature(s), and prior to the irrevocable date and time, then the 'offer' effectively will expire. The offer cannot be legally revoked or withdrawn by the party making the offer once they sign it. But it is automatically revoked if not accepted by the recipient prior to this date.

Having said this, sometimes, a conditional offer might be withdrawn by a buyer prior to the stated irrevocable date in the offer because they simply changed their mind about buying the property. In such a case, unless special circumstances exist, since the buyer could easily not fulfill their conditions, thereby ultimately escaping the transaction anyway, it's practical to permit them to revoke their offer and save everyone a lot of time and effort. There's no point in removing the listing from the market for an offer that is doomed to fail anyway.

Kitec Plumbing


Kitec® plumbing has become somewhat controversial in the marketplace. One alleged issue is with fittings that contain high levels of zinc, resulting in corrosion and weakness over time. The results could be leaks and water damage to the home, clogging, poor water pressure and flow or dark spots and/or blisters forming on the pipe.

The products most often involved in lawsuits are usually blue on cold water pipe and red or orange on hot water pipe. It may also be black, white or grey. Heating system piping is most often orange. Check for it near the hot water tank or the boiler, under the kitchen sink or bathroom vanities. Or there may be a notice on the electrical panel stating that Kitec® is used in the home, warning electricians not to ground the electrical system to it. Arguably the best way to determine if such plumbing is installed is to ask a professional home inspector or a plumber.

If you find Kitec® plumbing in your house, and would like to explore the possibility of reimbursement, as a precautionary measure, it's advisable to register with the class action website www.kitecsettlement.com prior to 2020.

In the meantime, watch for white corrosion on brass fittings, any discolouration or a drop in water pressure, particularly on the hot water pipes, and for black spots or blisters on the pipe, especially near the water heater.

For more information, visit the Carson Dunlop website page that addresses the subject in more detail. There's also an informative article by Bob Aaron, a local real estate lawyer, who writes a column for the Toronto Star.

Knob and Tube

This real estate terminology is rarely seen nowadays. Knob and tube wiring was used extensively in residential construction prior to 1950. The name derives from the ceramic knobs by which the wire is secured and the ceramic tubes which it passed through wood-framing members such as studs and joists. Wire insulation breakdown is the most frequent reason for replacement.

Your realty agent must be aware of recent concerns regarding knob and tube electrical systems. In particular, insurance companies are increasingly cautious both about 60-amp services and older buildings with knob and tube wiring. While some insurers will renew existing policies on such properties, a change of ownership and/or selection of a new insurer can mean a declined application.

Older systems may not be inherently dangerous, but problems can arise with overloading due to new higher demand appliances and other modernization. A fire inspection of an older building might expose the need for expensive  electrical system repairs.

Thus, if you're offering on an older house that might be wired with this antiquated wiring system, it would be wise to include a condition in your offer allowing you to obtain written confirmation that you'll be able to obtain an insurance policy.

No insurance = no mortgage loan = no closing

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Lawyer's Title Opinion

This is a service provided by a lawyer in the form of a letter stating the lawyer's view of whether or not a buyer has good and marketable title to the property. It includes search and inquiry results, along with any outstanding issues that may affect future title to the property.

Title insurance can be arranged to safeguard a buyer, or a seller, and is particularly important if there is even a remote possibility of an issue arising regarding title to a property.

In any real property transfer, the legal description must be included any and all documents pertaining to the transfer. This entails adding the municipal lot and plan numbers, possibly a block or reference plan number, or in the case of a condominium, the corporation, level and unit numbers. For a rural property, it would be the concession and lot or part lot numbers, possibly east or west half or something similar, approximate acreage and the frontage, depth and any irregularities of the lot or parcel.

I would also normally include a brief description of the property using phrases such as detached brick dwelling with an attached double garage and paved private driveway. I realize many agents don't follow this practice anymore. So, call me a bit old fashioned, but it doesn't hurt, and may help clarify what is actually being purchased. It's best to use accurate, unambiguous real estate terminology.

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Liens and Encumbrances

A lien is a form of non-possessory security interest granted over a property to secure the payment of a debt or performance of some other obligation. There are many types of liens, but most common are mortgages, secured credit lines, mechanics liens or those granted as security for installed rental equipment such as a furnace or home security system.

An encumbrance is a legal term for anything that affects or limits the title of a property, such as a mortgage, lease, easement, lien or restriction. Also, those considered as potentially making the title defeasible (voidable) are also encumbrances. For example, charging orders from a court on behalf of a creditor, or a work order from the local municipality, can result in a title transfer not being fulfilled unless such order is satisfied. In other words, the debt must be paid before title can transfer.

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Listing Agreement

This is a contract that establishes an agreement between a brokerage and a seller (vendor) and creates an agency between the parties. It basically details services to be provided by the brokerage, the fee for said services and any seller obligations.

A listing agent must share with their seller any knowledge about a prospective buyer, including, if known, whether or not a buyer will pay more for the seller's property. The exception to this rule, however, is if the buyer is also a client of the same brokerage under a BRA. Then, the 'dual' agent must maintain confidentiality on behalf of both clients in the transaction. A buyer working as a customer with a listing agent can expect fair and honest service from the seller's agent, and disclosure of pertinent information about the subject property.

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Listing Brokerage

A real estate brokerage that enters into a contract with the titled owner or someone legally authorized to act on the owner's behalf, to market a particular property in exchange for a commission, is referred to as the listing brokerage. Typically, the choice is to list the property on the MLS® system, but occasionally, a property owner chooses to list exclusively with one brokerage.

The listing brokerage can act as the 'selling' brokerage, but is not referred to as such.

Usually, in the successful marketing of a property, there are two brokerages involved - the listing brokerage, representing the interests of the homeowner, and the cooperating brokerage who does the same for the buyer. Usually, only the listing brokerage has the right to advertise the listing, including the placement of a for sale and sold sign on the property.

Occasionally, a seller and listing brokerage grant the right to advertise to a competing brokerage, but this permission must be in writing. And nowadays, many brokerages are members of listing advertising exchange groups wherein property listing details and photos are advertised by all members of that group.

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Market Value

Market value is defined as the highest price in terms of money, that a property will bring to a willing seller if exposed for sale on the open market, allowing a reasonable time to find a willing buyer who is buying with the knowledge of all the uses to which the property is adapted and for which it can be legally used, and with neither buyer nor seller acting under necessity, compulsion nor peculiar and special circumstances.

Market value is not to be confused with market price, which is an accomplished or historic fact, as the amount paid or to be paid for a property in a particular transaction. Market price tends to closely align with market value in an efficient market system involving willing, informed parties acting rationally and prudently and given reasonable periods of time with no undue influences. Successive market prices in the sale of comparable homes form the basis of estimating the market value of a particular property.

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Mortgage

Since the correct usage of this word includes the word "loan", this is arguably the most misused real estate terminology anywhere.

A mortgage loan is a loan secured by real property through the use of a document which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan. However, the word 'mortgage' alone is most often used in everyday usage to mean mortgage loan. More simply stated, when someone with insufficient cash to pay the full price wants to purchase property, they must borrow the needed balance from a credit union, bank or trust company (mortgagee). Mortgages can also be arranged with the services of a mortgage broker or agent.

This loan becomes a mortgage and is registered on the title of the property, with monthly or weekly payments of blended principle and interest being made by the borrower (mortgagor). The amount of the payment is determined by the principle amount of the loan and interest rate, and the amortization period or the number of years it would take before the loan is fully paid. The rate of interest remains constant for the term of the loan, often one to 5 years or longer, or unless it's a variable rate mortgage, which usually varies directly with the bank prime lending rate.

A mortgage is the transfer of an interest in property (or the equivalent in law - a charge) to a lender as a security for a debt (loan of money)

While a mortgage in itself is not a debt, it's the lender's security for the debt. This transfer of interest from the owner to the lender is made on the condition that such interest will be returned to the owner when the terms of the mortgage have been satisfied or performed. In other words, when the debt is finally paid in full, the borrower truly owns the property.

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Multiple Representation

This is synonymous real estate terminology for dual agency. It's possible for a brokerage to represent multiple parties, as happens when numerous buyers, who are not represented by their own agent under a Buyer Representation Agreement (BRA), submit offers on the same listing. If a buyer is represented by an agent from the same brokerage who has the listing on the property, or if the listing agent also represents the buyer, a multiple agency is created. Technically, the brokerage is the 'agent', and not the individual salesperson.

Mutual Release

Hopefully, since it means a failure, you'll not come across this real estate terminology very often.

When the parties to a contract, whether an Agreement of Purchase and Sale (APS), listing contract, BRA or lease, wish to terminate and release each other from a contract, they enter into a mutual release. When fully executed by all parties to the contract, this legally binding document, which sometimes includes the brokerage(s), effectively puts an end to the agreement.

In the case of an APS, instructions to the deposit holder (usually the listing brokerage) are included for the disposition of any deposit paid previously by the buyer. Usually, but not always, the deposit is returned to the buyer without interest or deduction. For more details, click here.

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Notice to Conditional Buyer

If a buyer submits an offer on a property that is conditional upon the sale of their present property, it'll include an escape clause for the seller. The seller will continue to market the property while the buyer is busy trying to sell their present home.

If the seller receives another acceptable offer, the seller can accept it, conditional upon being released from the APS they have with the first buyer. Through their agent, they deliver a Notice to Conditional Buyer (NCB) to the buyer, the buyer agent or to the buyer's address.

Once delivered, the buyer will typically have 48 hours (or whatever time period was established in the APS) to either waive (remove) the condition or conditions (depending on how the clause was phrased in the APS) or execute a mutual release. If the buyer signs a waiver, they've bought a house. If they release, they're out and will usually receive a refund of any deposit paid.

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Notice of Fulfillment

When a buyer submits an offer, it usually contains at least one condition and probably more, especially if they're buying a rural property. For example, time is needed to arrange a new mortgage or a home inspection. Once a firm written commitment from the lender or a satisfactory report from the home inspector is received, the document to sign is called a Notice of Fulfillment (NOF). This is delivered to the seller, and once signed by them, acknowledges the condition(s) has been fulfilled and the purchase is now firm and binding.

In common practice, however, many agents mistakenly use a form called a Waiver. This form actually just removes the condition from the APS and fails to state that the condition was fulfilled. The two forms ultimately accomplish the same result, but in a different way. If there's any conflict later, such as a misunderstanding regarding mortgage approval, a buyer agent might regret not having had the buyer execute the proper form in which the buyer confirmed they actually fulfilled the condition and didn't simply remove it. If I were the listing agent for the property involved, I'd also prefer to know that the buyer did indeed fulfill it.

It may be a mute point, but to be clear, use the correct form.

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Null and Void

In law, the real estate terminology of 'null' and 'void' means of no legal effect. A transaction which is void is of no legal effect whatsoever or an absolute nullity. The law treats it as if it had never existed or happened. For example, when a condition for the benefit of a buyer contained in an Agreement of Purchase and Sale (APS) is not fulfilled, the buyer declares the contract null and void or as having never existed.

Other commonly used terms for such action are cancelling or aborting the agreement.

In practice, once an APS is so declared (which is accomplished by a clause in the contract), a mutual release is normally prepared by the buyer agent, signed by the buyer and delivered to the listing sales person for the seller to execute. The two authorized representatives of the brokerages involved will also affix their signatures. And unless there are extenuating circumstances, the deposit is normally returned to the buyer in full without interest.

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Power-of-Sale

A Power of Sale (POS) is the process used by a lender (mortgagee) as their primary debt recovery method in Ontario, Newfoundland, New Brunswick and PEI. A method called judicial sale, which is more costly and time consuming because it requires the commencement of a legal action against the mortgagor (borrower), has been adopted as the primary debt recovery method in BC, Quebec and the prairie provinces. In Nova Scotia, the most popular method is foreclosure, but is still considered judicial as the court must still be involved.

POS proceedings in Ontario are fairly fast because of the rights of the lender documented in the mortgage.

POS is also referenced in the Ontario Mortgages Act, which refers to two different types - contractual and statutory. It's contractual if the mortgage document includes this provision. It's statutory (rarely used) if a mortgage document does not include a power of sale clause and the mortgagor has defaulted for at least 3 months.

When a homeowner with a mortgage defaults by more than 15 days on their responsibility to make the monthly or weekly payments as agreed in the mortgage document, the lender has the right to deliver a written Notice of Sale under Mortgage, which contains details of the mortgage along with a payment demand by a certain date, to anyone with an interest in the property. This group might include subsequent encumbrancers (i.e. second mortgagees), statutory lien holders and those who have informed the lender in writing of their interest. The notice must contain a warning that if the mortgagor fails to redeem (bring the debt current) by a certain date, the lender intends to sell the property. The lender cannot proceed any further during this redemption period.

For a contractual power of sale, the mortgagor has 35 days (45 days for statutory) to redeem the mortgage. If the mortgagor fails to do so, the lender can seize the property and evict the mortgagor.

Once the redemption period expires and the mortgagor has failed to rectify the default, the lender can sell the property. Under POS, the property can be sold by auction, private contract or tender. Typically though, the property is listed with a real estate brokerage on the Multiple Listing Service (MLS®), sometimes after obtaining appraisals.

The lender has a duty to obtain the best possible price for the property

Once the property is sold, the lender must account to the mortgagor as well as all subsequent encumbrancers. The Mortgage Act requires that the sale proceeds first be applied to the cost of conducting the sale (legal and property management fees, real estate commissions, etc), then to debt interest and costs owing under the mortgage, then to the outstanding principle, then to monies due to subsequent encumbrancers and finally, to return tenants’ security deposits if the property had been rented during the marketing period.

After all of these priority responsibilities have been fulfilled, any remaining balance must be returned to the mortgagor.

And since municipal governments have first claim for property tax arrears, they demand to be paid before everyone else. In most cases, I suspect that there's little left of the pie for the original borrower.

For more information on buying a Power of Sale, click here.

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Property Assessment

Periodically, a homeowner receives a Notice of Assessment with a value applied to their property. The local municipality or tax authority determines the tax (mil) rate, which in conjunction with this assessed value, establishes the amount of property taxes payable for that property.

In Ontario, the organization for establishing this value is the Municipal Property Assessment Corporation (MPAC). In arriving at this value, they consider the improvements to the property, as well as the sale prices of comparable homes in the area, much the same as what a realty agent would do to establish an estimate of Fair Market Value (FMV).

An assessment increase doesn't necessarily translate into higher taxes. And there are appeal options if the homeowner disagrees with the assessment increase. In Ontario, it's called a Request for Reconsideration.

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Radon

This real estate terminology refers to an invisible, odourless and tasteless gas produced by the decay of uranium that occurs naturally in the earth's crust. The gas itself is not dangerous, but becomes hazardous when it breaks down into progeny that cling to dust and soil particles. These radioactive particles also attach themselves to lung tissue when the radon gas is inhaled. Though radon is diluted outdoors, indoor levels of concentration can reach hazardous levels. Basements are often tested for the presence of this gas.

If a particular building is suspect, some home inspectors have the necessary equipment to test for the presence of such gas. For more information, visit The Government of Canada. In the USA, visit The Environmental Protection Agency (EPA).

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Right-of-Way

A ROW refers to the right to pass over land owned by another party, more or less frequently, according to the nature of the easement. If such a right exists, a reference to it must be included in any Agreement of Purchase and Sale (APS.)

Representations and Warranties

All contracts contain representations and warranties, which are basically the underlying matters or facts as they're being presented in terms of the contract.

When selling real estate, the sellers represents themselves to be the owners who possess the legal authority to sell the property, and warrant that the property is as they represent it to be.

A representation is defined as an account or statement of facts, allegations or arguments. They present everything from its past to present status and are created to induce someone to enter into a contract.

A warranty moves from the present to the future. In real estate, when a seller warrants something, they're promising that the 'item' is free of defects and will repair or replace it if found otherwise for a specified amount of time into the future. The warranty obligates the seller to the terms of the contract.

Warranties can be either expressed (written) or implied (verbal or assumed), though implied have less force in court. Thus, a buyer should insist on any warranty being expressed, that is written into the Agreement of Purchase and Sale.

Used together, the terms 'representations' and 'warranties' are assurances that the seller gives to the buyer that the buyer can rely on as factual.

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Requisition Date

This real estate terminology involves the lawyer or closing service. A closing or completion date is the date when funds are exchanged for a transfer/deed and possession of the property.

A requisition date, often referred to as a title search deadline date, is the last date upon which a buyer's lawyer can require the seller to clear up any title problems. This may be important, especially if the buyer intends to mortgage the property. The lender will require clear title before advancing any funds.

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This vital function is performed by the law office or closing service handling a closing. It's done for the current owners (soon to be previous), as well as all named buyers of the property, and discloses any unsatisfied judgments (claims) that may have been filed which may create a lien or interest in the subject property. If any of the parties to the transaction are aware of any judgments against them, they should inform their lawyer as early as possible in the buying/selling process.

Seller Property Information Statement

A Seller Property Information Statement (SPIS) (different monikers in different areas) is a highly controversial document. It's designed in part to protect sellers by establishing that correct information concerning a property is being provided to prospective buyers of their property.

Such statements assists buyers in the decision-making process. However, since more and more buyers are relying on home inspection reports, such seller statements are not universally employed.

For more information about the SPIS, visit The Real Estate Council of Ontario (RECO) or its counterpart in your area.

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Under the Family Law Act, if a spouse is not named on the title to the property,  before a sale can be valid, the non-named spouse must expressly consent to the sale. To give the sale full force and effect, they must affix their signature to the Agreement of Purchase and Sale where appropriate, and to all other pertinent documents. It refers not only to married couples, but also common-law relationships, provided the non-titled spouse has resided in the property for a certain period of time as described in the act. Any transfers without such consent would be considered fraudulent.

No Spousal Consent = No Sale

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Status Certificate

This is real estate terminology used in the purchase and sale of condominium property. When a buyer makes an offer on a condominium, they want to be assured that they're not buying shares of a legally or financially unhealthy corporation. Since buying a condo and explaining the significance of the Status Certificate is a rather lengthy topic of great importance, I've created a separate page with more details.

Survey

The term 'survey' is loosely used - sometimes erroneously - to refer to a Survey, Surveyor's Real Property Report (SRPR) or a Reference Plan (RP).

An SRPR is a legal document that shows the location of all improvements (buildings, decks, pools, fences, etc) relative to the boundaries of the subject property. It usually includes an illustrated plan along with a written report of the surveyor's opinion regarding any concerns. In a real estate transaction, it may be relied upon by all parties to the transaction as an accurate representation of the property.

An RP is a graphical representation of a description of land and is necessary for a severance. It shows the boundary and dimensions and any physical or documentary evidence that could affect property title, such as the location of fences, hedges, retaining walls or overhead wires in relation to the boundaries. Evident or registered easements and rights-of-way would also be shown. Buildings and any improvements would generally not show unless they were used for boundary positioning or encroach on the subject property. For further information on this topic, visit The Association of Ontario Land Surveyors.

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Survive and Not Merge on Closing

In an Agreement of Purchase and Sale (APS) of real property, a buyer usually wants assurance that any chattels or fixtures included in the agreement will be in good working order when they take possession. They want to know that what they're paying for will be as represented by the seller.

However, once a transaction is closed, when the transfer/deed has been exchanged for the closing funds, the realty sale is completed, along with all the obligations by both parties. Under the Doctrine of Merger, unless some provision was included in the contract, all obligations have merged or have been fulfilled, completed and satisfied.

To provide a buyer with assurance that any seller warranty in the contract will be effective, the buyer must insist that some reference for a warranty to survive closing be included in the real estate contract.

The usual clause states that the 'warranties and representations shall survive and not merge on completion of this transaction, but apply only to the state of the property at completion of this transaction'.

For example, if a seller warrants that the kitchen appliances will be in good working order and there's no reference in the APS to such warranty surviving closing, then once the deal is completed and the appliances turn out to be malfunctioning, the buyer is out of luck.

In this example, if the buyer's agent had included the correct real estate terminology, that is the survival clause, the buyer would have a 'reasonable' time following closing to ensure they're in good working order. After closing, if the appliances were found otherwise, the buyer would have a remedy, and could make a claim against the seller for the cost of repairing or possibly replacing the defective appliance. Normally, though, these situations can be cleared up through the assistance of the real estate agents involved.

Another example: A buyer enters into an APS in winter to buy a home with an in-ground swimming pool, and a spring completion date. Obviously, the buyer can't test the pool in winter, but prefers to be guaranteed that the pool will be in good working order when opened in the spring. To provide the buyer with reasonable time to satisfy themselves of its proper operation when the pool is opened, it would be prudent to add a future spring date following completion of the APS to the warranty clause. The warranty will not merge on closing and will survive until said date. If there's a problem, there's a remedy for the buyer.

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Termites

These insects feed on wood and moisture and are found chiefly in tropical climates, but have been known to exist in North America since the mid 20th century.

They live in sophisticated social colonies in the soil - not in wood, as is commonly believed. In colder climates, their colonies are usually located below frost level and close to a moisture source. They travel through wood (following the grain) and soil or via shelter tubes that they construct to avoid their bodies drying due to exposure to open air. Such tubes, small fragile, sandy-coloured tunnels across open surfaces, are made of earth and debris, with excretion to hold the tubes together. Termites tend to eat in parallel galleries inside any type of wood, preferably damp or rotted, and leave a smooth honey-combed appearance.

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Title Insurance

An insurance policy typically offered to a buyer by their lawyer, it is designed to protect against certain undesirable situations that might limit or affect the use, marketability or forced removal from the property. Since it's a very important topic, I've created a detailed page on the topic here.

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Title search is the process normally performed on a purchase of real property, or when an owner wishes to mortgage his or her property, primarily to ensure that a seller has the right to sell or transfer a property. It provides information regarding any restrictions or allowances pertaining to the use of the land, such as real covenants or easements. Also, if any liens exist on the property which need to be discharged at closing, such as mortgages, municipal tax arrears or mechanic's liens. This search is completed prior to closing and before the Requisition Date included in the Agreement of Purchase and Sale (APS).

Since documents concerning conveyances of land are a matter of public record, anyone can perform a title search. However, it's advisable to hire a title company or lawyer to conduct an exhaustive search. A title report may show recorded legal rights to the property, such as a right to share a driveway given by a previous owner to a neighbour. Or the municipality may have the right to strips of the property for installation of power or communication lines or water or sewer pipes. The fee paid to the lawyer is normally included in closing costs.

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UFFI

Urea Formaldehyde Foam Insulation is a colourless, chemical compound found in certain resins, glues and bonding agents, and most commonly associated with insulation. It's a low density foam made from plastic resins, a foaming agent and compressed air. At time of installation, it has the appearance and consistency of shaving cream. While normally identified as a white or cream-coloured substance, at least one such product contained blue dye.

A controversy arose from the curing process when the product was injected into walls and other areas in residential property, and formaldehyde gas was released. Because of potential health concerns after an estimated 100,000 Canadian homes were insulated, mostly between 1975 and 1979 under government homeowner incentive programs, the product was banned in Canada in 1980.

Nowadays, the general consensus is that UFFI presents a minimal health concern. However, The Canadian Real Estate Association (CREA) has urged its members to stay informed, not to treat it as a non-issue and maintain UFFI references in listing documents and agreements.

For more information about UFFI, visit The Real Estate Council of Ontario (RECO).

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Vacant Possession

This real estate terminology refers to a property, usually occupied by the homeowner or tenant, that is for sale on the understanding that the present occupants will vacate (move out) prior to completion. The seller must remove all chattels not included in the Agreement of Purchase and Sale (APS), and the buyer can move into the property immediately upon closing. The same applies at the end of a tenancy.

When a property is sold subject to an existing tenancy, such as when an investor buys a tenanted property and agrees to assume the tenant, then vacant possession will not apply. Or there may be part vacant possession with only certain rooms, levels or a basement apartment occupied by a tenant.

Landlord and tenant legislation is complex and can occasionally change. Thus, landlords should thoroughly understand their responsibilities and tenants their rights before committing to any course of action.

If a buyer wants vacant possession of a property that is currently tenanted, they may not be able to evict the tenant - and certainly not prior to closing - since the buyer is not the landlord. The buyer will have to appoint the seller - in writing - to act as their agent to provide the tenant with appropriate notice to vacate. Even then, the tenant may not comply. 

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Waiver

When a buyer purchases real property, the offer often includes conditions to facilitate such requirements as arranging satisfactory financing, a home inspection, well water potability test or to sell their present property. When such conditions are fulfilled, they may sign a waiver form which effectively removes the condition(s) from the Agreement of Purchase and Sale. Technically, if the condition has actually been fulfilled, the correct form to execute would be a Notice of Fulfillment of Condition, but waivers are often used erroneously in its place.

A waiver would be used correctly if the buyer wanted to remove a condition if that particular condition had not yet been fulfilled. For example, if the buyer decided not to pursue a home inspection even though they had the contractual  right to do so, they would sign a waiver. In Ontario, learn more about the Ontario Residential Tenancies Act.

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Zoning

These are rules established by various levels of government for controlling the usage of specific parcels and individual lots of land and set aside land for certain predefined purposes. In an urban area, for example, some land is zoned residential and some commercial. If one wishes to sell or buy property, how the property is zoned, be it commercial or residential, could be an integral component in the decision process. Each zone type, sometimes referred to as a zoning district, has its own set of restrictions regulating how such type may be used.

One of the main functions of zoning requirements is to ensure that adjacent lands have compatible uses. Most people would not want a noisy, unsightly factory or pig farm next to their home. To ensure compatible activities, each zone type has its own restrictions regarding the kind of activity that can occur within its boundaries.

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Are you wondering about the meaning of a particular real estate term that's not on the above list?

I've included on this page many common real estate terms and phrases used in Ontario, Canada, at least those I recall that clients sometimes found confusing.

If you're curious about a particular term missing from the list, maybe one I may not be familiar with, here's your chance to ask and learn. Share your experience with other guests who may have suffered from the same calamitous confusion.

I invite guests from your home country or province/state - consumer or professional - to offer their personal interpretations or definitions and to tell their stories or ask questions. (If professional, please state your credentials.)

To help, in what context did you hear this term? Do you have a funny or interesting story to tell about it? For example, what were you lead to believe it meant? Did you make decisions based on a misunderstanding that proved disastrous or comical?

I invite you to submit your story, article, commentary or questions about your experience - successful or otherwise.

This support forum is not intended as an opportunity to complain. It's a chance to express yourself and hopefully help others who may be faced with similar challenging situations. Maybe they can learn from your story. Please provide respectful remarks and advice only. Profanity, disrespectful or abusive comments will not be tolerated.

I implore you to treat this as a soft place for friendly people to land, share and learn from each other. I'll do my best to respond when appropriate in a supportive and encouraging manner, and answer any questions within the realm of my expertise.

Submissions and Inquiries of Other Guests

Click the links below to see story contributions from other visitors.

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What phrase could be used instead of "through no fault of the buyer" in connection with a lost opportunity cost agreement if buyer fails to perform on …

Texas Real Estate 
I want to sell my home. I had remodeling done in the last two years, and all the work has been paid off except for the cost of the back deck. How can I …

As Is, Where Is 
What does "as is, where is" mean? Does that mean no negotiating the asking price?

The Escape Clause 
I went to make an offer on a building and was told there was a 'no escape clause' offer already there, and was therefore rejected until it ran out in 18 …

Oklahoma Clause 
What is an Oklahoma Clause in real estate?

What does CPPS stand for? 
I am going to list a house for sale in ontario within the next 2 weeks. In a previous sale of a home in Toronto (2001), the realtor included the following …

Click here to write your own.


If you're considering selling or buying a home - with or without the assistance of an agency - check out my book The Happy Agent. Though written for agents, it's also a great resource for consumers interested in increasing their knowledge of real estate terminology and about real estate in general. It contains the sum total of the professional knowledge, philosophies and techniques that I've accumulated, practiced and polished during a highly successful 40-year realty career.

As a buyer, you'll learn how to more efficiently search for a home, what to watch out for in city, suburban and rural real estate, whether freehold, condominium or vacant land, how to choose and work with an agent, how to negotiate an offer and more.

As a seller, learn how to effectively evaluate your home and prepare it for market to maximize the ultimate sale price, how to market and advertise effectively, how to handle showings and open houses like a pro, techniques for successful offer negotiation and more. And if you're trying to sell privately, you'll learn how to recognize when it's time to hire a professional - and what to expect from them.

When you consider the huge possible savings in real estate commission with a private sale attempt and the fact that, whether buyer or seller, you're dealing with your largest single financial asset, a small investment of your time and a pittance of your money could save you thousands of dollars and a ton of heartache. At the very least, sellers will be encouraged to try it alone, at least for awhile. Remember - knowledge is power.

Available virtually everywhere print and e-books are sold.


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