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Essential Real Estate Terminology for Home Buyers

Purchasing a home represents a significant commitment and ranks among the most substantial financial decisions you'll encounter. If this is your first time diving into the real estate realm, brace yourself for a flood of industry terms and jargon that could easily overwhelm. Your RE/MAX agent serves as your compass in this journey, yet for those eager to dive deep before venturing out, here's a compilation of typical real estate terminology. By acquainting yourself with these fundamental concepts of home buying, you'll empower yourself to make informed choices and secure a prudent investment.

Home Buyer’s Glossary: Real Estate Terms You Should Know

Amortization

The length of time allotted to paying off a loan – in home-buying terms, the mortgage. Most maximum amortization periods in Canada are 25 years.

Assessed Value

The dollar value assigned to a property by a public tax assessor for taxation. This valuation forms the basis for determining property taxes owed by the owner.

Balanced Market

In a balanced market, there is an equal balance of buyers and sellers, which means sellers often accept reasonable offers, homes sell within a good amount of time, and prices remain stable.

Bridge Financing

A short-term loan designed to “bridge” the gap for homebuyers who have purchased their new home before selling their existing home. This type of financing is common in a seller’s market, allowing homebuyers to purchase without having to sell first.

Buyer’s Agent

The buyer’s agent represents the homebuyers and their interests in the transaction. On the other side of the transaction, the listing agent represents the seller and their interests.

Buyer’s Market

In a buyer’s market, there are more homes on the market than there are buyers, giving the limited number of buyers more choice and greater negotiating power. Homes may stay on the market longer, and prices can be stable or dropping.

Closing

This is the last step of the real estate transaction, once all the offer conditions outlined in the Agreement of Purchase and Sale have been met and ownership of the property is transferred to the buyer. Once the closing period has passed, the keys are exchanged on the closing date outlined in the offer.

Closing Costs

The costs associated with “closing” the purchase deal. These costs can include legal and administrative fees related to the home purchase. Closing costs are additional to the purchase price of the home.

Condominium Ownership

A form of ownership whereby you own your unit and are interested in common elements such as the lobby, elevators, halls, parking garage and building exterior. The condominium association is responsible for building and common elements maintenance and collects a monthly condo fee from each owner based on their proportionate share of the building. Condos often have guidelines regarding noise, use of common areas and allowable renovations within the units.

Contingency

A condition or clause in a real estate contract that specifies certain events must occur or certain conditions must be met before the contract is legally binding.

Curb Appeal

The visual attractiveness of a property when viewed from the street or sidewalk. It’s often the first impression potential buyers have of a home and can significantly impact their perception of its value.

Debt-to-Income Ratio (DTI)

A financial metric used by lenders to evaluate a borrower’s ability to manage monthly payments and repay borrowed money. It is calculated by dividing an individual’s total monthly debt payments by their gross monthly income, often expressed as a percentage. A lower DTI suggests that the borrower has a good balance between debt and income, making them a less risky loan candidate.

Deposit

An up-front payment is made by the buyer to the seller at the time the offer is accepted. The deposit shows the seller that the buyer is serious about the purchase. This amount will be held in trust by the agent or lawyer until the deal closes, at which point it is applied to the purchase price.

Down Payment

The down payment is the amount of money paid upfront for a home to secure a mortgage. The minimum down payment in Canada is five percent of the home’s total purchase price. Down payments of less than 20 percent of a home’s purchase price require mortgage loan insurance. The mortgage loan amount is the selling price minus the deposit and down payment.

Dual Agency

Dual agency is when one real estate agent (or real estate brokerage) represents both the homebuyer and the seller in a real estate transaction. There are limitations and requirements around dual agency, which differ by province.

Equity

The difference between a home’s market value and the amount owing on the mortgage. This is the portion of the house that has been paid for and is officially “owned.”

Fixed-Rate Mortgage

A fixed-rate mortgage guarantees your interest rate for a pre-determined amount of time, typically five years. When the term expires, you can stay with the same lender or switch to a different one.

Freehold Ownership

A form of ownership whereby you own the property and assume responsibility for everything inside and outside the home.

Foreclosure

The legal process through which a lender takes control of a property due to the owner’s failure to make mortgage payments. Initiated after a series of missed payments, foreclosure ultimately results in the sale of the property, usually at a public auction, to recoup the lender’s losses.

Gross Debt Service

The percentage of your total monthly income that goes toward housing costs. Canada Mortgage and Housing Corp. recommends your GDS remains at or below 39%. Check out CMHC’s Gross Debt Service calculator.

High-Ratio Mortgage

A high-ratio mortgage is a mortgage where the borrower has less than 20% of the home’s purchase price to make as the down payment. A high-ratio mortgage with a down payment between 5% and 19% of the purchase price requires mortgage loan insurance. In Canada, 5 percent is the minimum amount required for the down payment.

Home Appraisal

A qualified professional provides a market value assessment of a home based on several factors such as property size, location, age of the house, etc. This is used to satisfy mortgage requirements, giving mortgage financing companies confirmation of the mortgaged property’s value.

Home Buyers’ Amount

This is a $5,000 non-refundable federal income tax credit on a qualifying home, providing up to $750 in tax relief to assist first-time buyers with purchase-related costs.

Home Buyers’ Plan

A federal program that allows first-time homebuyers to withdraw up to $35,000 interest-free from their Registered Retirement Savings Plan (RRSP) to help purchase or build a qualifying home. The borrowed amount must be repaid within 15 years to avoid paying a penalty.

Home Inspection

The home inspection is performed to identify any existing or potential underlying problems in a home. This protects the buyer from risk and gives the buyer leverage when negotiating a reduced selling price.

Home Warranty

A warranty that protects the homeowners against future problems with the home for a determined period of time. New home builders are required to offer warranty protection to homebuyers, such as Tarion in Ontario. Home warranty requirements and providers differ by province. Home warranty programs also exist for resale homes.

Land Survey

A land survey will identify the property lines. This is not required to purchase a home, but it is recommended and may be required by the mortgage lender to clarify where the owner has jurisdiction over the property. This is important if issues arise between neighbours or the municipality, should the owner wish to make changes in the future, such as installing a pool, fence or other renovations involving property lines.

Land Transfer Tax

This is the tax payable by the buyer to the province in which the transaction occurred upon transferring land. The amount varies depending on the municipality, land size, and other factors. Most provinces have Land Transfer Tax, though it may have a slightly different name (such as property purchases tax). If you are a first-time homebuyer, you may be eligible to receive a rebate, typically processed at the same time as the land registration, to offset the costs.

Low-Ball Offer

An offer on a home that is significantly below its market value or the asking price set by the seller. In a buyer’s market where supply exceeds demand, you might have more leeway to make a lower offer. When demand exceeds supply in a seller’s market, making a low-ball offer is generally not advisable as sellers have the upper hand.

Multiple Listing Service (MLS)

A database where real estate agents list properties available for sale or rent. It is a centralized platform allowing agents to share comprehensive information about listings, including photos, features, and prices. The MLS is often considered the most accurate and up-to-date source for real estate listings, and it provides the data for many consumer-facing real estate websites.

Mortgage Loan Insurance

If your down payment is less than 20 percent of the home’s purchase price, mortgage loan insurance is required. It protects the lender in case of payment default. Premiums are calculated as a percentage of the down payment, changing at the 5%, 10% and 15% thresholds.

Mortgage Pre-approval

A mortgage pre-approval helps buyers understand how much they can borrow before going through the mortgage application process. It allows you to make an immediate offer when you find a home since you know how much you’ll be approved for that lender and locks in the current interest rate for a period of time, insulating you against near-term rate increases.

Offer

An offer is a legal agreement to purchase a home. An offer can be conditional on several factors, the most common being financing and a home inspection. If the conditions are not met, the buyer can cancel their offer.

Porting

Transferring your mortgage (and the existing interest rate and terms) from one property to another.

Refinancing

Replacing an existing loan with a new one, typically to secure more favourable terms such as a lower interest rate. Homeowners often refinance their mortgage to reduce monthly payments, shorten the loan term, or access equity for home improvements or debt consolidation.

Seller’s Market

In a seller’s market, there are more buyers than there are homes for sale. With fewer homes on the market and more buyers, homes sell quickly in a seller’s market. Prices of homes are likely to increase, and there are more likely to be multiple offers on a home. Multiple offers give the seller negotiating power; conditional offers may be rejected.

Title Insurance

Title insurance is not mandatory in Canada, but it is highly recommended to protect both the buyer and the mortgage lender against losses related to the property title or ownership, such as unknown title defects, existing liens against the property’s title, encroachment issues, title fraud, errors in surveys and public records, and title-related issues that could prevent you from selling, leasing or obtaining a mortgage. Your lawyer can advise you on this.

Underwriting

The process by which financial institutions like banks and insurers assess the risk associated with a loan, insurance policy, or investment. Underwriters evaluate a borrower’s creditworthiness, the property’s value, and other factors to determine loan eligibility and terms. This risk determines whether the loan should be approved, and if so, at what interest rate and down payment requirements.

Variable Rate Mortgage

A variable rate mortgage fluctuates with the prime rate. Your monthly payments remain the same, but the proportion of your payment going toward principal versus interest can change.

Virtual Deals

The home-buying process completed using technology in place of face-to-face contact. Some common technology tools include 360 home tours and video showings, video conference calls, e-documents, e-signatures, and e-transfers.

Gaining proficiency in Canadian real estate language and comprehending its intricacies are pivotal for individuals engaged in property buying, selling, or investing. Whether you're deciphering Bank of Canada's mortgage rates or parsing through property listings, a strong command of these terms equips you to make informed choices and navigate Canada's real estate scene with assurance.

Call me today at 780-906-7866 for Home Buying Guidance. Let’s get you home together!

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New property listed in Zone 55, Edmonton

I have listed a new property at 2215 Price Lane LANE in Edmonton. See details here

This beautiful well-maintained half duplex has everything you've been searching for. Boasting 3 bedrooms, 2.5 bathrooms, and a double detached garage, it offers both comfort and convenience; bright and open floor plan, perfect for family gatherings and entertaining guests. The front of the home faces a serene green space and walking trails, providing a peaceful ambiance and plenty of outdoor activities for the family. One of the highlights of this home is the private deck and yard adorned with beautiful perennial flowers and plants, creating a picturesque setting during spring and throughout the summer months. The double detached garage ensures your vehicles are protected year-round, and there's ample storage space for your outdoor gear and tools.Located in a family-friendly neighborhood with excellent schools, parks, and amenities nearby, this home truly offers everything a family needs.

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New property listed in Zone 29, Edmonton

I have listed a new property at 1699 Lakewood RD S in Edmonton. See details here

Welcome to your dream townhouse! This beautifully updated unit boasts 3 bedrooms plus a basement den convertible into a full bedroom. The kitchen features a Chinese hood fan for culinary enthusiasts. Enjoy the convenience of 2 assigned parking stalls right in front, plus ample roadside parking. A spacious yard beckons kids to play freely. With a newer water hot tank, worry less about maintenance. Located near schools, hospitals, shopping centers, and parks, your daily essentials are a stone's throw away. Costco is just minutes away for added convenience. Easy access to Whitemud and Henday ensures seamless commuting. With 1420 sq ft of total living space, this townhouse is your ticket to homeownership. Say goodbye to renting and hello to your forever home!

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Real Estate Agent vs. REALTOR® : What’s the difference?


When it comes to navigating the world of real estate, two terms that often surface are "Real Estate Agent" and "REALTOR®." While they may sound similar, there are distinct differences between these roles that can impact your buying or selling experience.

Real Estate Agent:

A real estate agent is a licensed professional who has completed the necessary coursework and passed a state exam to obtain their license. Agents are well-versed in local real estate laws, regulations, and market trends. They act as intermediaries between buyers and sellers, helping clients through property transactions.

Agents can work in various areas of real estate, including residential, commercial, or industrial properties. They assist clients in listing properties for sale, finding suitable properties for purchase, negotiating deals, and facilitating the closing process. Their goal is to ensure a smooth transaction for their clients while representing their best interests.

REALTOR®:

On the other hand, a REALTOR® is a real estate agent who is a member of the National Association of REALTORS® (NAR). Being a REALTOR® is a professional designation that sets these agents apart due to their commitment to a strict code of ethics and standards of practice. The NAR's Code of Ethics outlines professional responsibilities and conduct, emphasizing honesty, integrity, and fair treatment of all parties involved in a transaction.

By becoming a member of the NAR, a real estate agent gains access to valuable resources, continuing education opportunities, and a network of professionals within the industry. This membership also signifies a dedication to professionalism and ongoing education in the field of real estate.

Key Differences:

  1. Code of Ethics: The primary difference between a real estate agent and a REALTOR® is the latter's commitment to adhere to the NAR's Code of Ethics and professional standards. This distinction reflects a higher level of accountability and integrity in their practice.

  2. Membership Benefits: REALTORS® have access to a broader network of industry professionals, updated market information, specialized training, and resources that can enhance their ability to serve clients effectively.

  3. Designation: While all REALTORS® are real estate agents, not all real estate agents are REALTORS®. The term "REALTOR®" is a trademarked title reserved for members of the National Association of REALTORS®.

In summary, while both real estate agents and REALTORS® are licensed professionals capable of assisting clients in property transactions, the distinction lies in the commitment to ethics, standards, and ongoing professional development that come with being a REALTOR®.

Whether you're buying or selling a property, understanding these differences can help you choose the right professional to guide you through the complexities of the real estate market.


Pia Liberty | Liberty Realty
REALTOR®,  ABR® (The Accredited Buyer's Representative)
RE/MAX River City

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What should you consider when planning to buy a house?

Buying a house is a significant financial and lifestyle decision. Here are several important factors to consider when planning to buy a house:

  1. Budget:

    • Determine how much you can afford, taking into account your income, expenses, and any existing debts.

    • Consider additional costs such as property taxes, homeowner's insurance, maintenance, and utilities.

  2. Location:

    • Evaluate the neighborhood and its amenities, such as schools, parks, shopping centers, and proximity to your workplace.

    • Research the safety and crime rates in the area.

  3. Type of House:

    • Decide on the type of house that suits your needs, whether it's a single-family home, townhouse, condominium, or apartment.

    • Consider factors like the number of bedrooms and bathrooms, layout, and overall size.

  4. Condition of the Property:

    • Have the property inspected for any potential issues or needed repairs.

    • Consider the age of the house and the condition of its major systems, such as plumbing, electrical, and HVAC.

  5. Resale Value:

    • Assess the potential for the property's value to appreciate over time.

    • Research the historical performance of the real estate market in the area.

  6. Financing:

    • Explore different mortgage options and interest rates.

    • Get pre-approved for a mortgage to strengthen your position as a buyer.

  7. Future Plans:

    • Consider your long-term plans, such as whether the house meets your needs for the foreseeable future or if you might outgrow it.

  8. Negotiation:

    • Be prepared to negotiate the price and terms of the sale.

    • Research comparable sales in the area to have a realistic understanding of the property's value.

  9. Legal Aspects:

    • Hire a real estate attorney to help with the legal aspects of the transaction.

    • Review all contracts and documents thoroughly before signing.

  10. Homeowners Association (HOA):

    • If the property is part of an HOA, understand its rules, fees, and any restrictions it imposes.

  11. Home Insurance:

    • Research and obtain homeowner's insurance to protect your investment.

  12. Closing Costs:

    • Be aware of the closing costs associated with the purchase and ensure that you have the necessary funds.

  13. Market Conditions:

    • Understand the current real estate market conditions, as they can impact pricing and availability.

  14. Home Inspection:

    • Conduct a thorough home inspection to identify any hidden issues before finalizing the purchase.

Taking the time to carefully consider these factors can help you make an informed decision when buying a house. It's often beneficial to work with professionals such as real estate agents, inspectors, and attorneys to guide you through the process.


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Why do we need to hire a REALTOR® when buying a property and what are the benefits?


Hiring a REALTOR® (a registered trademark of the Canadian Real Estate Association) when buying a property can offer several benefits:

Market Knowledge:
REALTORS® have access to a wide range of resources and databases that can provide up-to-date information on the local real estate market. They can help you understand current market conditions, trends, and property values, allowing you to make informed decisions.

Negotiation Skills:
REALTORS® are experienced negotiators. They can help you get the best possible deal by negotiating on your behalf with the seller, the seller's agent, and other parties involved in the transaction.

Paperwork and Legal Assistance:
The process of buying a home involves a significant amount of paperwork, including contracts, disclosures, and various legal documents. REALTORS® are familiar with these documents and can help ensure that everything is filled out correctly and in compliance with local laws.

Network of Professionals:
REALTORS® often have a network of professionals, such as mortgage brokers, home inspectors, and real estate attorneys, whom they can recommend. This can streamline the process and help ensure you work with reputable professionals.

Property Access:
REALTORS® have access to the Multiple Listing Service (MLS), a database of properties for sale. This gives them the ability to find homes that meet your criteria quickly and efficiently.

Guidance and Advice:
Buying a home can be a complex process, and it's often one of the most significant financial transactions in a person's life. REALTORS® can provide guidance and advice based on their experience, helping you navigate the complexities of the real estate market.

In terms of payment, as a home buyer, you typically do not directly pay your REALTOR®. In most cases, the seller pays the commission for both the buyer's and seller's agents. The commission is usually a percentage of the sale price and is negotiated as part of the listing agreement between the seller and their agent. However, it's essential to clarify the terms of payment with your REALTOR® before entering into any agreement.

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How much down payment needed when buying a home in Edmonton, Alberta?

The down payment requirement when buying a house in Edmonton, like in the rest of Canada, depends on the purchase price of the home. As of my last knowledge update in January 2022, the minimum down payment requirements for buying a home in Canada were as follows:

  1. For homes priced at $500,000 or less:

    • Minimum down payment: 5% of the purchase price
  2. For homes priced between $500,001 and $999,999:

    • Minimum down payment: 5% of the first $500,000 and 10% of the remaining amount above $500,000
  3. For homes priced at $1,000,000 or more:

    • Minimum down payment: 20% of the purchase price

Keep in mind that these requirements are subject to change, and it's essential to check with a mortgage lender or a financial institution for the most up-to-date information. Additionally, mortgage rules and regulations can vary, and specific circumstances may affect your down payment requirements, so it's a good idea to consult with a mortgage broker for personalized advice.

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Copyright 2024 by the REALTORS® Association of Edmonton. All Rights Reserved.
Data is deemed reliable but is not guaranteed accurate by the REALTORS® Association of Edmonton.
The trademarks REALTOR®, REALTORS® and the REALTOR® logo are controlled by The Canadian Real Estate Association (CREA) and identify real estate professionals who are members of CREA. The trademarks MLS®, Multiple Listing Service® and the associated logos are owned by CREA and identify the quality of services provided by real estate professionals who are members of CREA.