Suburban Dictionary: Buyers’ Edition

Subject Removal

The process whereby a buyer removes the conditions or contingencies that were included in the purchase offer. These contingencies are typically in place to protect the buyer and may include conditions such as securing financing, satisfactory home inspection, or the sale of the buyer's current home.

James: Subject removal basically just means when you tell the seller, “I'm going to buy your home, but only after these things are taken care of”. Once everything is taken care of, then you can say, “I'm going to take your home, so I'm going to take off all those subjects and then the home is yours”.

Underwriter

The underwriter is typically employed by a lending institution, such as a bank or mortgage company, and is responsible for evaluating and assessing the risk associated with lending money to a borrower for the purchase of a property.

James: It essentially means when your mortgage broker or banker has submitted your application, the bank's underwriter is the person that looks through your file to ensure that everything is accurate so that they feel comfortable granting you your final loan.

Deposit

Often referred to as an earnest money deposit or good faith deposit, this is a sum of money that a buyer provides to show their serious intent to purchase a property.

James: After you've taken off your subjects, you need to give the homeowner a bit of collateral just so they feel safe waiting a month or two before you actually complete the deal itself. Just so you know, the deposit forms part of your final downpayment, which is the amount you need to give to the bank for them to give you a loan.

Possession day

The date on which the buyer is entitled to take physical possession of the property they have purchased. This is the day when the buyer can move in and start using the property as their own. It is a critical part of the real estate transaction process and is typically outlined in the purchase agreement.

James: The possession day is the day you actually get your keys to your new home. So I also call it the celebration day. This is different from the completion day, which is the day where all funds are transferred, mortgages are enacted, titles are transferred and you're officially the owner of that home.

Due diligence phase

A period during which the buyer thoroughly investigates the property before finalizing the purchase. This phase allows the buyer to ensure that the property meets their expectations and that there are no hidden issues or problems that could affect their decision to proceed with the transaction.

James: Now this one is extremely important. This is when you're able to really find out everything that you're gonna want to know about the property, about the neighborhood itself. And for us, we call it investigative due diligence. Because in order for us to make sure you're protected, we need to know everything.

Leasehold vs freehold ownership

Leasehold:
A situation where an individual or entity (the leaseholder or tenant) has the right to use and occupy a property for a specified period, as per the terms of a lease agreement with the freeholder (landlord or property owner).

Freehold:
The outright ownership of a property and the land on which it stands. The freeholder (owner) has perpetual ownership with no time limit.

James: The main difference with freehold and leasehold is that for freehold ownership, it is the highest degree of true ownership before the Crown. In regards to leasehold ownership, you essentially have or are purchasing the legal right of use and enjoyment to the property for a specified amount of time.

Strata

A form of ownership and management structure commonly used for multi-unit residential and commercial properties, such as condominiums, townhouses, and sometimes office buildings. Strata ownership allows individuals to own their individual units while sharing ownership and responsibility for common areas and facilities.

James: You typically see this in townhome complexes and condominiums, and it just means that you're part of a strata corporation. There would be a strata fee that's typically associated with this in order to run the so-called development or strata. And you can also expect some great services like snow removal, gardening, as well as taking care of major repairs or maintenance issues.

Walkthrough

A final inspection of a property conducted by the buyer shortly before the closing of the sale. It is an essential step in the home-buying process, allowing the buyer to ensure that the property is in the agreed-upon condition and that any negotiated repairs or alterations have been completed satisfactorily.

James: This is done to ensure everything is still in good shape. Has everything been cleaned? Have some of the repairs that we've asked them to do on your behalf, have they been fulfilled? If you're buying a brand new development, there's something called a deficiency walk through. As long as we negotiated in the contract for the developer to fix an or implement a few design changes on your behalf, we’re entitled to walk through to ensure that everything is taken care of and you're happy with your purchase again before you pay the seller.

Closing costs

The various fees and expenses associated with the finalization of a property sale or purchase. These costs are incurred by both the buyer and the seller and typically include expenses related to the transfer of ownership, loan processing, and other services required to complete the transaction. Closing costs can vary depending on factors such as the property's location, purchase price, and local regulations.

James: Closing costs are essentially everything that you should be cognizant of that you will be paying for apart from the property itself. I would always recommend you get a property inspector unless you're just planning to develop on the property itself. Also be cognizant of your lawyer fees, taxation, and be aware of your property transfer tax. Thankfully these costs, compared to the housing cost itself, are pretty marginal.