REAL ESTATE GlOSSARY AND FAQ'S

Amortization is a term used when setting up your mortgage. It refers to the repayment schedule over a period of time and outlines how much of your payment will go to the principal you are borrowing and how much will go to the interest on the balance. Simply put, amortization is the process of gradually paying off a loan through scheduled payments that cover both principal and interest over time.

In real estate, assessed value refers to the dollar value assigned to a property by a municipal or provincial tax authority for the purpose of calculating property taxes. It is typically based on factors like the property’s location, size, and market conditions, but it may not reflect the property’s current market value or sale price.

A bridge loan in real estate is a short-term financing option used to bridge the gap between buying a new property and selling an existing one. It provides immediate funds for a down payment or closing costs, allowing homeowners to secure their new property before completing the sale of their current one. These loans typically have higher interest rates and are intended for temporary use until longer-term financing is secured or the sale of the existing property is finalized.

The BRRRR Method—Buy, Rehab, Rent, Refinance, Repeat—is a real estate investment strategy where an investor purchases a property, renovates it to increase its value, rents it out for steady income, refinances to recover initial capital, and repeats the process. This method benefits real estate investors looking to build a portfolio with limited upfront cash by leveraging equity from each property to fund future investments. It's particularly effective for those focused on long-term wealth building through rental income and property appreciation.

Cap rate (capitalization rate) is a real estate metric used to estimate the return on investment for income-generating properties. It’s calculated by dividing a property’s annual net operating income (NOI) by its current market value or purchase price. For example, a property with an NOI of $50,000 and a value of $1,000,000 has a cap rate of 5%. Investors use cap rates to compare the profitability of properties and assess potential risks, with higher cap rates indicating higher returns but often with increased risk.

A cash deal or cash offer in real estate is when a buyer purchases a property outright without financing, using readily available funds. This type of offer often appeals to sellers because it eliminates the need for mortgage approval, reduces the risk of delays, and typically leads to a faster closing process. Cash deals are common among investors or buyers looking to make competitive offers in a hot market.

Chattels are movable personal property items that are not permanently attached to a home or land. Examples include furniture, appliances, and tools. In real estate transactions, chattels are typically excluded from the sale unless explicitly included in the purchase agreement.

A Comparative Market Analysis (CMA) is an estimate of a property’s market value based on recent sales of similar properties. CMAs are prepared by real estate agents to help sellers price their homes and buyers assess fair offers. Originally intended as a marketing tool for agents, CMAs are typically offered for free. While helpful, they are not as detailed or legally recognized as a real estate appraisal, which is conducted by licensed appraisers for precise valuations.

A conditional sale in real estate means that the purchase agreement is subject to specific conditions being met before the sale becomes final. Common conditions include the buyer securing financing, completing a satisfactory home inspection, or selling their current property. If the conditions are not fulfilled within the agreed timeframe, the deal may be canceled without penalties to the parties involved.

Conditions in real estate are specific requirements outlined in a purchase agreement that must be met for the transaction to proceed. Common conditions include financing approval, home inspections, or property appraisals. They are important because they protect both buyers and sellers by ensuring that key aspects of the deal are satisfied before the sale becomes binding, reducing risks and potential disputes. The typical time frame for conditions to be met in a real estate transaction is 5 to 10 business days, though it can vary depending on the market and the specific conditions. For example, financing and home inspection conditions often fall within this range, while more complex conditions, like selling an existing property, may require a longer period. The exact time frame is negotiated between the buyer and seller and outlined in the purchase agreement.

A condo fee is a monthly payment made by condo owners to cover shared building expenses like maintenance, utilities, and amenities. When purchasing a condo, be aware of the fee amount, what it includes, and any potential increases. Review the condo corporation’s financial health, reserve fund, and bylaws to ensure there are no hidden costs or upcoming special assessments that could affect your budget.

A condominium is a type of property ownership where individuals own their unit while sharing ownership of common areas like hallways, amenities, and grounds. Condominiums can include residential condos (apartments, townhouses), commercial condos (office or retail spaces), and detached condos, where standalone homes share communal amenities. Each type is governed by a condo corporation and specific bylaws, offering a mix of private and shared living or working spaces.

The Canadian Real Estate Association (CREA) is a national organization representing real estate professionals across Canada. CREA owns trademarks like MLS® and Realtor®, which ensure standardized practices and protect the integrity of the real estate industry. They provide resources, advocacy, and tools like the MLS® System, enabling members to deliver professional services and consumers to access reliable property listings.

Days on Market (DOM) refers to the number of days a property is listed for sale on the MLS® System before being sold or removed. It helps buyers and sellers gauge a property's demand and market activity. While DOM can be reset by re-listing a property, such manipulation may mislead buyers, making transparency key in real estate transactions.

Dual agency occurs when a real estate agent or brokerage represents both the buyer and the seller in the same transaction. To mitigate conflicts of interest, most provinces require formal disclosure and written consent from both parties:

• British Columbia: Highly restricted, only allowed in remote areas where no alternative representation is available. Written disclosure and consent are required.

• Ontario: Requires a Written Disclosure of Multiple Representation form explaining the potential conflicts of interest before proceeding.

• Alberta: Mandates a Written Agreement on Designated Agency or Transaction Brokerage to ensure both parties acknowledge the limitations of representation.

• Quebec: Allows dual agency but requires written disclosure and acknowledgment through a specific OACIQ form.

An escalation clause in real estate is a contract provision that automatically increases a buyer’s offer if competing bids are higher, up to a set maximum. It’s useful in competitive markets where multiple offers are expected, helping buyers stay competitive without overbidding initially. A well-drafted escalation clause ensures transparency and protects the buyer by capping the amount they’re willing to pay.

FINTRAC (Financial Transactions and Reports Analysis Centre of Canada) is Canada’s financial intelligence agency responsible for detecting and preventing money laundering and terrorist financing. In real estate, FINTRAC compliance is necessary during transactions to verify client identities and report large cash payments or suspicious activities. It ensures transparency and safeguards the industry from financial crimes.

Freehold land refers to property ownership where the owner holds full rights to the land and any structures on it indefinitely. In real estate, there are different types of freehold ownership, such as single-family homes, rural properties, and commercial land. Unlike leasehold properties, freehold land gives owners greater control but comes with full responsibility for maintenance and taxes.

FSBO stands for For Sale By Owner, where a property owner sells their home without hiring a real estate agent. People sell FSBO to save on commission fees and maintain control over the sale process, while buyers may find unique opportunities or lower prices. FSBO is legal in Canada and the U.S., but sellers must follow local regulations and handle tasks like marketing, pricing, and legal paperwork independently.

Home equity is the portion of a property’s value that the owner fully owns, calculated by subtracting any outstanding mortgage balance from the home’s market value. It’s important because it represents financial stability, can be used as collateral for loans, and grows as you pay down your mortgage or as property values increase. Home equity is a key asset for wealth-building and funding future investments.

A Home Equity Line of Credit (HELOC) is a revolving credit line secured by your home’s equity, allowing you to borrow as needed. It’s beneficial for large expenses like renovations or emergencies due to its flexibility and lower interest rates compared to unsecured loans. To qualify, you need sufficient home equity, good credit, and stable income. HELOCs are offered by banks and financial institutions, often alongside your mortgage provider.

In Alberta, the land transfer fee is a cost paid when registering a property’s title with the Land Titles Office after purchase. It includes a base fee plus a calculated amount based on the property’s value and mortgage amount. Buyers must pay it at closing, with costs varying depending on the property price but generally lower than in other provinces.

Land Title Registration Fee:

• $50 base fee plus $2 for every $5,000 (or portion thereof) of the property’s value.

Mortgage Registration Fee:

• $50 base fee plus $1.50 for every $5,000 (or portion thereof) of the mortgage amount.

Both fees are combined and paid to the Land Titles Office during the property registration process. For example, on a $500,000 property with a $400,000 mortgage, the total fee would include the registration costs for both the property value and the mortgage. Up to date information and fees can be found on the alberta.ca website.

A land transfer tax is a provincial or municipal tax paid when purchasing property, calculated as a percentage of the property's purchase price. Unlike Alberta’s land transfer fee, which is a smaller administrative cost for title registration, land transfer taxes are often significantly higher and vary by province. Alberta does not have a land transfer tax, making its property purchase costs lower than most other provinces.

Leased land refers to property where you own the building but lease the land it sits on from another party, such as a government or private owner. Benefits include lower purchase prices and access to unique locations. However, disadvantages include ongoing lease payments, limited property appreciation, and potential lease non-renewal risks. It’s important to review lease terms carefully before purchasing.

Mortgage insurance protects lenders against default when buyers make a down payment of less than 20% of the property’s value. It’s necessary for high-ratio mortgages and ensures access to homeownership with smaller upfront costs. The premium, typically 2.8–4% of the loan amount, is added to monthly payments. While it doesn’t protect buyers, it enables lower down payments and mitigates lender risk.

In Alberta, mortgage insurance is typically obtained through one of three primary providers approved by lenders:

1. Canada Mortgage and Housing Corporation (CMHC): A federal agency offering mortgage insurance for high-ratio mortgages across Canada.

2. Sagen (formerly Genworth Canada): A private mortgage insurance provider offering flexible options for homebuyers.

3. Canada Guaranty: Another private insurer providing mortgage default insurance with competitive terms.

Your lender will arrange mortgage insurance on your behalf when you apply for a high-ratio mortgage, so you don’t need to apply for it directly.

Mortgage insurance is mandatory in Canada, including Alberta, for high-ratio mortgages, where the down payment is less than 20% of the property’s purchase price. It protects lenders in case the borrower defaults on the loan. However, for conventional mortgages with a down payment of 20% or more, mortgage insurance is not usually required.

A real estate appraisal is a licensed appraiser's formal evaluation of a property's market value, often required for mortgages, refinancing, or legal purposes. It’s important because it provides an unbiased, detailed, and legally recognized valuation. Unlike a Comparative Market Analysis (CMA), which estimates value based on market trends and comparable sales, an appraisal is more comprehensive and credible, offering greater accuracy and reliability for financial decisions.

Real estate conveyance is the legal process of transferring property ownership from the seller to the buyer. It includes preparing, verifying, and registering documents like the title transfer and ensuring all financial obligations, such as taxes and fees, are settled. This process is typically handled by real estate lawyers or conveyancers to ensure accuracy and compliance with local laws.

A Real Property Report (RPR) is a legal document prepared by a surveyor that outlines a property’s boundaries, structures, and compliance with local bylaws. While not always mandatory, it is often required in Alberta when selling a property to confirm that the structures comply with municipal regulations. An RPR is important because it provides clarity and protects both buyers and sellers by identifying any encroachments or boundary issues before the transaction is completed.

Properties that have been sold before may already have a Real Property Report (RPR). However, the existing RPR must be up-to-date and reflect all current structures and improvements on the property to remain valid. If changes like new decks, fences, or additions have been made since the last RPR, a new or updated RPR will be required for the sale to ensure compliance with municipal regulations. Sellers should confirm the RPR’s accuracy and provide it to buyers during the transaction.

The cost of a Real Property Report (RPR) in Alberta typically ranges from $500 to $1,500, depending on the property’s size, location, and complexity. To obtain an RPR, you must hire a licensed land surveyor, often found through recommendations from real estate agents, lawyers, or professional directories like the Alberta Land Surveyors’ Association (ALSA). Ensure the RPR is up-to-date and reflects all existing structures on the property.

A reserve fund is a savings account maintained by condominium corporations to cover major repairs and replacements for shared property elements, like roofs or elevators. When buying a condo, review the reserve fund’s balance, recent contributions, and the reserve fund study to ensure it’s adequately funded. A healthy reserve fund is crucial to avoid unexpected special assessments and maintain the property’s long-term value.

In Canada, a real estate restrictive covenant is a legal condition written into a property’s title or deed that limits how the property can be used. It is typically put in place by a developer, municipality, or previous owner and is legally enforceable by the courts.

For buyers, it means you must follow specific rules—such as building style, property use, or land subdivision limits—which could affect your future plans. For sellers, it can impact resale value and the pool of potential buyers if the restrictions are seen as too limiting. For investors, it affects development potential, rental use, and long-term property value, making due diligence essential before purchase.

Restrictive covenants in Canada vary by province and territory because property law is governed at the provincial/territorial level.

• Always review the property’s title for restrictive covenants before purchase.

• In most provinces/territories, removal requires court involvement, which can be costly and time-consuming.

• Rules differ for Indigenous or Crown lands, especially in the territories and northern provinces.

ROI, or Return on Investment, measures the profitability of an investment by comparing the net profit to the initial cost. It’s expressed as a percentage and helps evaluate how effectively an investment generates returns.

Return on Investment (ROI) in real estate is calculated by dividing the net profit from a property by the total investment cost, then multiplying by 100 to express it as a percentage. For example, if a property earns $10,000 in profit on a $100,000 investment, the ROI is 10%. It’s important because it helps investors compare profitability across properties and make informed decisions about where to allocate funds for maximum returns.

A Seller Property Information Statement (SPIS) is a disclosure form completed by the seller, detailing a property's condition and any known issues. It’s important because it promotes transparency, helping buyers make informed decisions and protecting sellers from future liability by disclosing defects upfront.

A Seller Property Information Statement (SPIS) is not legally required in any Canadian province. However, sellers are legally obligated to disclose known material defects that could affect the property's value or safety. The SPIS is a voluntary tool used to document such disclosures, but it must be completed honestly to avoid potential legal disputes. Its use varies by region and is often encouraged by real estate professionals to promote transparency.

The Smith Maneuver is a Canadian personal finance strategy that converts the interest on a mortgage into a tax-deductible expense by using a re-advanceable mortgage to invest in income-generating assets, thereby increasing wealth and reducing tax liability over time.

The "special" type of loan used in the Smith Maneuver is a re-advanceable mortgage. This combines a traditional mortgage with a home equity line of credit (HELOC). As you pay down the principal on your mortgage, the HELOC limit increases, allowing you to borrow that amount to invest.

A Title Search Report is a document that provides details about a property's legal ownership, any registered encumbrances (such as mortgages, liens, or easements), and title history. It is typically required during a real estate transaction to verify the property's legal status.

Wholesale real estate involves assigning a property contract from a seller to a buyer for a fee, without purchasing the property. It’s legal in Canada, including Alberta, when done transparently and in compliance with local laws. Sellers benefit by quickly offloading properties, buyers gain access to off-market deals, and investors can profit with minimal upfront costs. Proper contracts and disclosures are essential for all parties.

The key difference between cap rate and ROI lies in their purpose and calculation:

• Cap Rate measures the annual return on an investment property based on its net operating income (NOI) relative to the current market value or purchase price. It’s primarily used to evaluate the property’s profitability, independent of financing. Formula: Cap Rate = NOI ÷ Property Value × 100

• ROI (Return on Investment) considers the total profit relative to the total investment, including costs like financing, renovations, and operating expenses. It evaluates the overall performance of the investment. Formula: ROI = Net Profit ÷ Total Investment × 100

In short, cap rate focuses on property performance, while ROI reflects the investor's overall return, including financing and other variables.

The mortgage stress test is a built-in safety check. When you apply for a mortgage, the lender must confirm you can still afford the payments at a higher “qualifying rate”—whichever is greater of:

• Your actual mortgage rate + 2%, or

• The federal Minimum Qualifying Rate (MQR).

Why it exists: to make sure you could handle payment increases if interest rates rise or your finances change.

Who it applies to: most new mortgages (insured and uninsured) and refinances at federally regulated lenders. If you renew with the same lender, you typically don’t need to re-pass the test; switching to a new lender usually means you do.

Quick example: If your offered rate is 4.25%, you’ll be tested at 6.25% (or the MQR if it’s higher). If you qualify at that higher rate, you can proceed with your actual 4.25% mortgage.

OSFI (Office of the Superintendent of Financial Institutions) is Canada’s federal prudential regulator. It supervises the financial soundness of federally regulated banks, insurers, trust and loan companies, and federally regulated private pension plans. Its job is to protect depositors, policyholders, and pension plan members and to maintain confidence in Canada’s financial system.

What OSFI does:

• Sets and enforces safety rules for lenders (capital, liquidity, risk controls).

• Issues mortgage-related guidance (e.g., Guideline B-20 on residential mortgage underwriting) and portfolio limits (e.g., caps on the share of uninsured mortgages above 4.5× income).

• Examines institutions and can take action if risks aren’t controlled.

What OSFI does not do:

• Doesn’t set interest rates (that’s the Bank of Canada).

• Doesn’t handle consumer complaints or disclosure rules (that’s the Financial Consumer Agency of Canada—FCAC).

• Doesn’t regulate credit unions (they’re regulated provincially).

Why this matters to homebuyers and owners: OSFI’s rules influence how lenders approve mortgages (e.g., underwriting standards, stress-testing for uninsured loans) and how much risk lenders can take—affecting product availability, qualification, and sometimes pricing.

A First Home Savings Account is a Canadian account that helps first-time buyers save a down payment with three tax perks:

• You get a tax deduction for money you put in (like an RRSP).

• Your savings grow tax-free while they’re in the account.

• You can take the money out tax-free when you buy your first home in Canada (like a TFSA).

Quick basics

• Who can open one: Canadian resident, 18+, and a first-time buyer (you—and your spouse/partner—haven’t owned and lived in a home in the year you open the account or the previous 4 calendar years).

• How much you can add: Up to $8,000 per year, $40,000 lifetime. If you don’t use the full $8,000 one year, you can carry forward up to $8,000 (only after the account is opened).

• How long it can stay open: Up to 15 years, or until Dec 31 of the year after your first qualifying withdrawal, or the year you turn 71—whichever comes first.

• If you don’t buy a home: You can transfer the balance to your RRSP/RRIF tax-free (it doesn’t use up your RRSP contribution room).

• Can I combine it with the HBP? Yes—you can use the FHSA and the Home Buyers’ Plan on the same purchase if you qualify.

• Heads-up: Over-contributions are penalized, and withdrawals must meet the CRA’s rules for a qualifying home and timing.

• Insured (high-ratio): You put less than 20% down and must buy mortgage default insurance (CMHC/Sagen/Canada Guaranty).
  

  • Often lower interest rates, but a one-time insurance premium is added.

  • Amortization typically up to 25 years (up to 30 years only for eligible first-time buyers of new builds).

• Uninsured (conventional): You put 20% or more down; no insurance premium.
  

  • Rates are often slightly higher than insured, but total cost can be lower without the premium.

  • Amortization often up to 30 years (lender/product dependent).

Applies to both: You must pass the mortgage stress test. Refinances are typically capped at 80% loan-to-value (LTV). Quick example:

• $500,000 home with 10% down → Insured (premium applies).

• $500,000 home with 20% down → Uninsured (no premium).

LTV is the share of a home’s value that you’re borrowing. Lenders use it to judge risk and set terms.

• Formula: LTV = (Mortgage Amount ÷ Property Value) × 100% In Canada, “property value” is the lesser of the purchase price or the appraised value.

Why it matters

• ≤ 80% LTV: usually a conventional (uninsured) mortgage — no borrower-paid default insurance.

• > 80% to 95% LTV: a high-ratio (insured) mortgage — default insurance (CMHC/Sagen/Canada Guaranty) is required.

• Refinancing: standard refis are typically capped at 80% LTV.

Quick examples

• Purchase: Price $600,000, down payment $60,000 → loan $540,000 LTV = 540,000 ÷ 600,000 = 90% → insured mortgage.

• Refinance: Home value $600,000 → typical max new loan $480,000 (80% LTV).

Impact on your deal

Higher LTV = more lender risk → can mean higher rate, an insurance premium, and tighter approval. Lower LTV = less risk → can mean better pricing and more flexibility.