McClelland Minute - May 02, 2010

Bits and Pieces

There can be a number of terms that Realtors use daily that may be confusing to our clients, so I am going to strive to explain some of them briefly today.

Mortgage insurance – insurance that protects the lender in the event of borrower default.  This coverage is required for high ratio mortgages exceeding 75% of value.  This is not to be confused with life and disability insurance that is often offered borrowers by the financial institution.  By the way, I advise my clients to seek separate life insurance rather than signing up for the one assigned to the loan.  The application process may be more rigorous but once achieved, is often a superior product.

Title insurance – an insurance statement specific to a particular title of real property that may provide protection to the owner on such matters as fraud, title unmarketability and municipal bylaw contraventions among other things.  Often recommended when a Real Property Report is not readily available, and particularly to provide protection to a lender’s security by way of mortgage.

Real Property Report – also known as the RPR.  This is essentially a certificate signed by a professional surveyor outlining the perimeter of a specific property, and the exact location of all the improvements within it as of that date. 

Letter of Municipal Compliance – a letter from the appropriate municipal government that outlines the current zoning of the subject property and reviews the RPR supplied to it to determine if improvements comply with their Development Bylaw.  For example, the distance between the property line and a structure may not meet current requirements. 

Property Condition Disclosure Statement – a prudent buyer, as a condition to their offer, will request a written statement from the seller respecting the integrity of the property and the condition of the electrical, plumbing, septic, and other systems.  In my experience, it diminishes the chance of serious problems arising after the sale.  However, practitioners should be aware that any misrepresentation may become the foundation for future litigation.

Title Search – an inspection of the public record respecting a specific parcel of land to determine what encumbrances, liens, mortgages, and other interests may impede the sale of a property and the new owner’s right to enjoy it.  It is one of the more important services a Realtor can provide to his / her client.  Our team always searches title at the time of listing, and before writing an offer to purchase on behalf of a buyer.  It is amazing how many times that simple action can mitigate future problems.

Appraised value to be equal to or greater than sale price – while in a perfect world it would be helpful to obtain an appraisal prior to making an offer, many times it is necessary to negotiate an accepted offer first.  If you have this condition in an accepted offer, and the independent appraisal does not support the purchase price, a buyer can walk away or has the grounds for further negotiation.

Multiple Listing – An arrangement among brokerages who are members of an umbrella real estate board, that allows each brokerage to share information regarding listings with other members, who then may negotiate transactions regarding these listings.  A bonus to the buying public respecting this service is that they are free to work with whichever Realtor they feel comfortable with and are not forced to use the Realtor or brokerage that holds the listing.

Vern McClelland is associate broker with RE/MAX of Lloydminster.  If you have questions or comments on this article or other real estate matters, he can be reached at 780.808.2700 or through the McClelland Group website www.mcclelland.ca

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