OREA offers help in understanding often confusing real estate terminology

When it comes to real estate, there is no shortage of terminology and plenty of room for confusion. From mortgage types and periods to title searches and conditions, there are countless variables to consider in every real estate transaction.

Ron Abraham, president of the Ontario Real Estate Association says that buyers and sellers needn't be overwhelmed by any of the terms, rather, they should focus on the big picture and let their realtor work through the details.

"For both buyers and sellers, the sheer volume of information and options can be a little overwhelming. However, it's important that both buyers and sellers focus on the larger picture. If you have a clear idea of your needs and go in with realistic expectations, the whole process will be very rewarding."

Here is a cheat sheet of a few common and (commonly misunderstood) real estate terms: 

Fixed-rate Mortgage: A set amount is paid each month. The interest payable is predetermined and fixed at the time of taking the loan, and holds for the entire term. Buyers are protected from any increase in prime lending rates in future.

Variable-rate Mortgage: An adjustable interest rate, which can be altered depending on the market situation. These loans may be beneficial if there is a sudden fall in lending rates, but higher interest rates mean greater monthly payments.

Amortization: The number of years it takes to repay the entire amount of the mortgage.

Title/Title Search: Title is the legal evidence of ownership in a property. A Title Search is a detailed examination of the ownership documents to ensure there are no liens or other encumbrances on the property, and no questions regarding the seller's ownership claim.

Conditions: Sometimes called a "Subject-to" Clause. A statement of a condition to be fulfilled before the contract will become firm and binding, must include a specific deadline for removal.

Multiple Listing Service (MLS): A current and comprehensive listing system for relaying property information. This service offers the widest exposure to properties listed for sale.

Realtors: Real estate professionals licensed by the Real Estate Council of Ontario who are members of the various Real Estate Boards and the Ontario and Canadian Real Estate Associations. 

Abraham adds, "Often people get tripped up when it comes to sifting through information surrounding financing options, as well as the nuts and bolts of the real estate transaction. Talk to your realtor about the best way to get equipped with the information you need to make a buying or selling decision that is right for you and your family."

Submitted by the Ontario Real Estate Association.

Office Space Vacancy: Numbers a good economic indicator, expert says

Barrie’s office space vacancy rate is on the rise.

Figures from the last quarter of 2012 show empty office space at almost 7.65%, compared to nearly 6.9% in the second quarter and 6.6% in last year’s first quarter.

Broker Linda Loftus, of Sutton Group Incentive Realty, prepared the report and says it shows who has the upper-hand in this marketplace. 

“The message is more for tenants. It’s a tenant’s market,” she said. “You can drive a pretty good deal.”

Loftus says these numbers show a trend.

“Rents are being driven down by oversupply and increases in operating expenses,” she said. “In many cases operating expenses are exceeding or equal to rent.”

Loftus says operating costs float and are adjusted annually, but any underestimations can be recovered from tenants.

She says for markets like Barrie, office inventory can be an important economic indicator.

“You need to analyze where the new vacancies are coming from and why,” Loftus said.

A higher office vacancy rate could mean new landlords, for example, might be more aggressive with renewals — forcing tenants to review their options, she said.

Or tenants could decide it’s better to own property because of lower interest rates.

Hany Kirolos, Barrie’s economic development director, says its office space vacancy rate can be taken two ways as an indicator.

“One, we have a challenge because of the high vacancies which may reduce new development, and two, is the reverse,” he said.

“(It) provides for good inventory that can be a plug and play for those that may need to relocate to Barrie quickly.”

Loftus says office inventory is also an economic indicator if it’s a result of company closings, directly or indirectly.

She says when office inventory increases, it’s an opportunity for business to expand — because of the cost advantage.

“Landlords offer more and take less when looking for new tenants, or renewals,” she said.

Loftus says that while landlords and tenants should be aware of office inventory, not all are and they don’t always monitor the markets.

“Since the majority of office buildings are owned (some partially) or managed by companies that have principles as realtors, it is not information that would be shared with prospective tenants — as it would disadvantage earnings,” she said.

“Most corporate clients are aware of these blurred loyalties and will generally engage a real estate firm to represent their interests by surveying the market, making recommendations and negotiating an acceptable lease agreement.”

Kirolos says his office does look at ways to reduce Barrie’s office space vacancy rate.

“(The) biggest two factors that have always been in play are, one, ensuring that we’re maintaining investment attraction and relocation activities to our best prospects in southern Ontario and beyond,” he said, “and two, synchronizing our attraction activities with those that hold the lands/vacancies and their brokers.”

The survey includes ‘Class A’ office product, which Loftus says is a very loose definition in Barrie but generally means high-rise or multi-storey and/or elevator accessed.

‘Class B’ means flexible industrial properties, as well as home conversions to office, while ‘Class C’ is second storey downtown and excess office space in industrial buildings.

Loftus says all figures gathered in her report are from the Barrie Multiple Listing Service (MLS) system. They come from 29 city properties on Bayfield Street, Bayview Drive, Bell Farm Road, Collier Street, Cundles Road, Dunlop Street East, Essa Road, Ferris Lane, High Street, Huronia Road, Lakeshore Drive, Penetang Street, Quarry Ridge Road, Simcoe Street, Sperling Drive and Wellington Street.

Her report details each building’s total area, vacancy, condition of available space, the rent being asked for, operating costs and taxes, parking, neighbours and even whether there are elevators and sprinkler systems.

(photo: The amount of vacant office space appears to be growing in Barrie, according to a recent report. Figures from the last quarter show empty office space at 7.65%, compared to nearly 6.9% in the second quarter. MARK WANZEL PHOTO

Does your REALTOR Make the Grade?

Part of my reason for wanting to become a Realtor (outside of the fact that it was a natural progression) was because of seeing flaws in my Realtor when I first started purchasing real estate. Why did the Realtor get into his/her chosen profession?

My suggestions:

• *referral & personality (even if referred by someone you know, respect and trust interview the Realtor anyway – some personalities don’t jive and if you want a relationship built on mutual respect, what “feeling” do you get when you meet with him/her)

• *how much does he/she advertise? Just because the one advertises the most, doesn’t necessarily mean he/she is “the best.” How much attention to detail will he/she be about the business you require. Will he/she handle your business directly or pass you off to a team? Also, in my personal opinion, anyone that has to refer to themselves as “#1″ or “the best” in their advertising is probably not the kind of person I’d want to work with. When I’m looking for out of town properties, I’m looking for someone that would be servicing my needs, not theirs.
• *response time: how quickly does he/she return your initial calls and/or email?
• * trust your instinct – if you’ve built a set of questions and something he/she says doesn’t “jive” then trust your instinct that even if you can’t pinpoint what it is at that particular time, there must be a reason why your “Spidy-sense” is tingling
• *use Specialists in their field. Some REALTORS may wear many hats. Don’t use someone who is not familiar with your needs or tries to do everything. They won’t be focused. For example, if you’re a real estate investor, gear your questions and use a LOCAL expert who knows the areas and what they’re talking about. Investing is about cashflow and numbers – not pretty houses. If you’re looking for your personal home, then use the Realtor that knows the neighbourhood; use a Commercial one that knows about Businesses and specific to that Industry; use one that knows specifically about Farms, etc.
• *don’t sign anything unless you understand it. When working with a Realtor, you’ll be asked to sign a Buyer Agency Agreement. Understand what you’re signing and read carefully the documentation and what you’re “locking” yourself into.

That’s about it for now. I’m sure others will have some great ideas. Please share your comments!
Have a great day and wish you the greatest success in whatever your real estate endeavours.