Appraisal - An estimate of a property’s value performed by a professional Appraiser.
Asking or List Price - The price placed on the property for sale by the seller.
Assessed Value - The value of a property, set and used by each municipality for the purposes of calculating property tax.
Attached Goods - An item which is attached to real property so as to form, in law, part of the land. Attached goods belong to the buyer and are also known as fixtures.
Buyer Brokerage Agreement - A written agreement between the buyer and the buyer's associate, outlining the agency relationship between the two parties and the manner in which the buyer's associate will be compensated. In Alberta, a buyer agency relationship arises automatically without a written agreement establishing the relationship.
Buyer’s Associate (also known as “Buyer’s Broker” or “Purchaser’s Associate”) - A person or firm representing the buyer. A buyer’s associate's primary allegiance is to the buyer. The buyer is the buyer associate's client.
Certificate of Compliance - A stamp issued by the municipality which states the improvements comply with the local building bylaws and requirements.
Closing Costs - Expenses in addition to the purchase price for buying and selling a property.
CMHC - Canada Mortgage and Housing Corporation. A Crown corporation providing information services and mortgage loan insurance.
Comparative Market Analysis (CMA) - The most widely used technique for REALTORS® to establishing the value of residential properties. It uses sales, competitive listings and expired listings to try to determine a probable selling price for the subject property. Used synonymously with Competitive Market Analysis.
Completion Day - The day from which all calculations of interest, tax adjustments, utility bill adjustments (if applicable), etc. are made to the credit of either the buyer or the seller. All legal and financial obligations are met on that day and the title to the property is transferred from the seller to the buyer. Completion day is usually (but not always) the same as the possession date.
Condition Precedent - A statement of a condition to be fulfilled before the contract will become firm and binding; must include a specific deadline for removal. May also be called a “subject to” clause.
Condominium Ownership - Shared ownership in a strata-titled property. Owners have title (ownership) to individual units and a proportionate share in the common property.
Conveyance - The term used to describe the process of transferring the seller's title to the buyer and indicates all the necessary steps to complete the transfer. A conveyance lawyer is a lawyer responsible for the conveyance process.
Counter Offer - An offer made by the seller back to the buyer altering one or several terms and/or conditions of the offer as originally written.
Down Payment - The difference between a property's purchase price and the amount financed.
Dual Associate - A real estate brokerage which acts as associate for both the seller and the buyer in the same transaction. Both buyer and seller are the brokerage's clients.
Easement - A legal right to use or cross (right-of-way) another person's land for limited purposes. A common example is a utility company's right to run wires or lay pipe across a property.
Encroachment - An intrusion onto an adjoining property. Common examples are a neighbour's fence, storage shed, or overhanging roof line which partially (or even fully) intrudes onto your property.
Encroachment Agreement - An agreement which allows the encroachment to remain. The owner of the development which encroaches onto the adjoining property is granted the right to enter onto that property to maintain or repair the construction.
Encumbrance - A restriction which is either a monetary claim against the land (such as a lien, mortgage or lease), or a non-monetary one (such as an easement).
Estoppel Certificate - A written statement of a condominium unit's current financial and legal status.
Fee Simple Estate - Ownership where the owner owns the land now and for all time in the future and the owner's rights are subject only to restrictions by the government.
Joint Tenancy - A form of ownership in which two or more individuals (often spouses) have an equal share in the ownership of a property. In the event of one owner's death, his or her share is automatically transferred to the surviving owner(s); and does not become part of the deceased's estate.
Lien - Any legal claim against a property, filed to ensure payment of a debt.
Mortgage - A contract between a borrower and a lender. The borrower pledges a property as security to guarantee repayment of the mortgage debt. Lenders consider both the property (security) and the financial worth of the borrower (covenant) in deciding on a mortgage loan. See below for more on mortgage terminology.
Property Taxes - The value of the property as determined by local municipalities affects this levy. Local government determines the rate of taxation. Property taxes are paid on an annual basis.
Purchase Contract - The document through which the prospective buyer sets out the price and conditions under which he or she will buy the property.
Real Property Report - The legal outline of the property and location of all buildings and improvements on the land (formerly called the Surveyor's certificate).
Rights of Way - Are indicated on title at the Land Title Office; often for use of utilities or city or municipality in order to make repairs to pipes, etc. No permanent structure may be built on a right of way.
Statements of Adjustments - Closing statements in a real estate transaction which set out the sources of funds which make up the purchase price, adjustments to and from the purchase price, the final amount required from the purchase and the amount due to the seller. Lawyers will prepare a statement for the seller and the buyer.
Tenancy in Common - The owners each own a part of a common land. If one owner dies, the interest goes to his or her heirs rather than the other owner(s).
Title - The legal evidence of ownership in a property.
Title Search - A detailed examination of the ownership documents to identify the owner and any liens or other encumbrances on the property.
Torrens System - Alberta's land registry system.
Transaction Brokerage Disclosure - The information which a dual associate must disclose and explain to both buyer or a seller when he or she is acting as a dual associate.
Unattached Goods - Moveable personal property that goes with the seller (also known as chattels).
Zoning - Land Use Bylaw specifies in great detail every aspect of how property within a particular area of the municipality may be used.
Amortization - The number of years it takes to repay the entire amount of the mortgage.
Appraisal Value - An estimate of a property's market value by a professional Appraiser; used by lenders in determining the amount of the mortgage.
Debt Service Ratio - The percentage of a borrower's income that can be used for housing costs.
Gross Debt Service (ADS) Ratio - Gross debt service divided by household income. A rule of thumb is that ADS should not exceed 30%. It is also referred to as PIT (Principal, Interest and Taxes) over income. Sometimes energy costs are added to the formula, producing BITE, which moves the rule of thumb ADS to 32%.
Total Debt Service (ADS) Ratio - is the maximum percentage of a borrower's income that a lender will consider for all debt repayment (other loans and credit cards, etc.) including a mortgage.
Equity - The difference between the price for which a property can be sold and the mortgage(s) on the property. Equity is the owner's stake in the property.
Foreclosure - A legal process by which the lender takes possession and ownership of a property when the borrower doesn't meet the mortgage obligations.
Mortgage - A contract between a borrower and a lender. The borrower pledges a property as security to guarantee repayment of the mortgage debt. Lenders consider both the property (security) and the financial worth of the borrower (covenant) in deciding on a mortgage loan.
Assumable Mortgage - A mortgage held on a property by the seller that can be taken over by the buyer, who then accepts responsibility for making the mortgage payments.
Conventional Mortgage - A mortgage loan which is 75 per cent or less of the loan-to-value ratio; and does not require insurance by CMHC or other private insurer.
First Mortgage - The first security registered on a property. Additional mortgages secured against the property are "secondary" to the first mortgage.
High-ratio Mortgage - A mortgage that exceeds 75 percent of the loan-to-value ratio; must be insured by either the Canada Mortgage and Housing Corporation (CMHC) or a private insurer to protect the lender against default by the borrower who has less equity invested in the property.
Open Mortgage - A mortgage that can be prepaid or renegotiated at any time and in any amount, without penalty.
Pre-Approved Mortgage - Tentatively approved by a financial institution for a specified amount, interest rate and monthly payment.
Second Mortgage - A second financing arrangement, in addition to the first mortgage, also secured by the property. Second mortgages are usually issued at a higher interest rate and for a shorter term than the first mortgage.
Term Mortgage - A non-amortizing mortgage under which the principal is paid in its entirety upon the maturity date. Sometimes called a straight loan.
Variable-rate Mortgage - A mortgage for which payments are fixed, but whose interest rate changes in relationship to fluctuating market interest rates. If mortgage rates go up, a larger portion of the payment goes to interest. If rates go down, a larger portion of the payment is applied to the principal.
Vendor Take-Back Mortgage - When sellers use their equity in a property to provide some or all of the mortgage financing in order to sell the property.
Mortgage Life Insurance - Insurance that pays off the mortgage debt should the insured borrower die.
Mortgage Payment - The regular installments made towards paying back the principal and interest on a mortgage.
Mortgagee - The person or financial institution lending the money, secured by a mortgage.
Mortgagor - The property owner borrowing the money, secured by a mortgage.
Mortgage Broker - A person or company having contacts with financial institutions or individuals wishing to invest in mortgages. The mortgagor pays the broker a fee for arranging the mortgage. Appraisal and legal services may or may not be included in the fee.
Mortgage Insurer - In Canada, high-ratio mortgages (those representing greater than 75% of the property value) must be insured against default by either CMHC or private insurers. The borrower must arrange and pay for the insurance, which protects the lender against default.
Mortgage Prepayment Penalty - Is a fee paid by the borrower to the lender in exchange for being permitted to break a contract (a mortgage agreement); usually three months' interest, but it can be a higher or it can be the equivalent of the loss of interest to the lender.
Portability - A mortgage feature that allows borrowers to take their mortgage with them without penalty when they sell their present home and buy another one.
Prepayment Clause - A clause inserted in a mortgage, which gives the mortgagor the privilege of paying all or part of the mortgage debt in advance of the maturity date.
Principal - The mortgage amount initially borrowed or the portion still owing on the mortgage. Interest is calculated on the principal amount.
Rate - (Interest) The return the lender receives for advancing the mortgage funds required by the borrower to purchase a property.
Refinancing - The process of obtaining a new mortgage, usually at a lower interest rate, to replace the existing mortgage.
Secondary Financing - Second, third, fourth, etc. mortgages, secured by a property "behind" the first mortgage.
Term - The actual life of a mortgage contract, from six months to ten years, at the end of which the mortgage becomes due and payable unless the lender renews the mortgage for another term (See Amortization).
Weekly Payments - Mortgage payments made weekly or 52 times per year.