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Who’s Who in the Alberta Real Estate Industry?

Raman Gakhal of Alberta Real Estate School explaining Who's Who in the Alberta Real Estate Industry.

Real Estate is a big market that encompasses the many facets of a real property, including development, appraisal, marketing, selling, leasing, renting and many more. The Alberta Real Estate Industry is no different.

Anyone planning to know the process of or become a Real Estate Professional in Alberta, must learn about the important institutions and government authorities that are involved in the process. Let’s understand who’s who in the Alberta Real Estate Industry and what role does each of the member’s play.

Real Estate in Canada

In Canada, Real Estate Agents are represented at 3 levels:

  1. Locally by their Board/Association
  2. Provincially by their Provincial Association
  3. Federally by the Canadian Real Estate Association (CREA)

Canadian Real Estate Association (CREA)

Logo of The Canadian Real Estate Association (CREA).

The Canadian Real Estate Association (CREA) is the Federal Canadian Real Estate Board and is one of Canada’s largest single-industry Associations. Our membership includes more than 150,000 Real Estate Brokers, Agents, and Salespeople, working through 78 Real Estate Boards and Associations across Canada.

REALTOR® – The Code

The Realtor trademark for Real Estate Agents in Canada.

CREA has coined the two primary national trademarks for Real Estate Professionals in Canada – MLS® and REALTOR®. CREA protects and promotes the two trademarks with legal discrepancies.

Not just anyone can call themselves a REALTOR®. To do so, real estate professionals must either be direct members of their association or be members of both their local real estate board and CREA, depending on the province. As well, they must abide by the ethical standards laid out in the REALTOR® Code.

They are also the operator of realtor.ca.

Role of CREA in the Real Estate Industry

  1. Assists Real Estate Agents to serve their clients better.
  2. Enhances professionalism and ethics in the Canadian Real Estate Industry.
  3. Produces accurate, up-to-date information and analysis on Canadian Real Estate.

Real Estate in Alberta

Alberta is a vast province with a number of territories, cities and towns that take up the land in Alberta.

Alberta Real Estate Association (AREA)

Logo of Alberta Real Estate Association (AREA).

Alberta Real Estate Association (AREA) is the Professional Provincial Body of Real Estate in Alberta. It represents the interests and concerns of more than 11,000 Alberta REALTORS®, from the 10 Local Real Estate Boards/Associations. They provide strategic leadership and advancement in the Real Estate Profession in Alberta through member-centric services, advocacy, and professional development.

Real Estate Boards in Alberta

Alberta is a big province comprising of 19 cities, 2 urban service areas and 10 towns. Real Estate in Alberta is distributed among 10 Local Real Estate Boards that manage the Real Estate functioning in their own designated areas. Below is a detailed list with area specifications as shown in the Alberta Map.

Map of Alberta province.
List of 10 Real Estate Boards in Alberta.

The 10 Local Real Estate Boards of Alberta

  1. Western Alberta – Alberta West REALTORS® Association (AWRA)
  2. Central Alberta – Central Alberta REALTORS® Association (CARA)
  3. South-Central Alberta – REALTORS® Association of South-Central Alberta (RASCA)
  4. Edmonton – REALTORS® Association of Edmonton (RAE)
  5. Calgary – Calgary Real Estate Board (CREB)
  6. Lloydminster – REALTORS® Association of Lloydminster & District (RALD)
  7. Medicine Hat – Medicine Hat Real Estate Board Co-op (MHREB)
  8. Lethbridge – Lethbridge & District Association of REALTORS® (LDAR)
  9. Grand Prairie – Grande Prairie & Area Association of REALTORS® (GPAAR)
  10. Fort McMurray – Fort McMurray REALTORS® (FMREB)

Real Estate Licensing Education in Alberta

Real Estate Licensing Education is handled by the Real Estate Council of Alberta (RECA).

Real Estate Council of Alberta (RECA)

Logo of RECA - Real Estate Council of Alberta.

Real Estate Council of Alberta (RECA) is the governing authority for Real Estate Licensing in Alberta. It sets, regulates, and enforces standards for all branches of Real Estate, Property Management, Condominium Management, & Mortgage Brokerage licensees in Alberta. RECA is responsible for issuing, renewing and debarring licenses for Real Estate and Mortgage Brokerage Professionals in Alberta.

As of now, RECA is issuing licensing Education Courses for Real Estate and Mortgage Brokerage in Alberta. You have to get registered with RECA in order to apply for licensing courses for both the industries. They have set eligibility parameters based on documentation, education and English proficiency requirements that need to be fulfilled in order to be approved for the same. Once registered, they provide education materials through their myRECA.ca portal.

International Education Assessment for Real Estate

If you have received international education or are an immigrant to Canada who wants to apply for Real Estate pre-licensing courses, then there are certain assessment institutions available. They are appointed and approved by the Canadian Government that help you to assess your international education as well as English language requirements.

RECA recommends using IQAS (International Qualification Assessment Service) by the Alberta Government. IQAS can assess international education of immigrants or international students who want to apply for Real Estate pre-licensing courses with RECA. For the convenience of its applicants, it coordinates the results with RECA without involving the applicants in the process.

ICES (International Credential Evaluation Service) is another credential evaluation service provider for international education of immigrants with English language assessment. It is an initiative by BCIT (British Columbia Institute of Technology) in British Columbia (BC), Canada. It is recommended by RECA if you did not English as a subject as well as the language of instruction in your high-school diploma equivalent institution in your home foreign country (any country other than Canada where the applicant has received his/her high school education).

Insurance for Real Estate Agents in Alberta

As Real Estate Agents, you have to take insurance for your real estate business and license. It is useful for us as Realtors® as it helps us protect our license against odds and unexpected events while performing real estate practice.

Logo of REIX (The Real Estate Insurance Exchange)

REIX (The Real Estate Insurance Exchange) is the one and only Real Estate Insurance Exchange for Real Estate Professionals in Alberta and Saskatchewan. It Provides Mandatory Professional Liability Insurance Coverage to all Real Estate Industry Professionals. Its participants are called “Subscribers”.

It offers the mandatory Errors and Omissions (E&O) Insurance Program. The premiums paid to REIX by the Real Estate Agents are used to pay the costs of defending claims and surplus funds are used to keep premiums low. REIX is a mandatory program which means that all real estate licensees in Alberta and Saskatchewan must be insured by them.

REIX provides cost-effective, financial protection for industry members in Alberta and Saskatchewan. They act on behalf of their subscribers to protect real estate professionals from losses that result from errors, omissions and negligent acts while performing their real estate duties.

Voluntary Foundation for Real Estate Agents in Alberta

Logo of r AREF (Alberta Real Estate Foundation)

AREF (Alberta Real Estate Foundation) A voluntary association for the Real Estate professionals of Alberta. It was created under the Real Estate Act to help educate and train Real Estate Professionals in Alberta.

It is the association who is responsible for creating the pre-licensing education for real estate courses in Alberta.

These are some of the important bodies of the Real Estate Industry in Alberta that you should know if you are planning to become a part of that industry. Hope this helps to draw an outline of the necessary institutions and learn about their basic features and responsibilities.

Now, it’s time for ARS – Alberta Real Estate School

Alberta Real Estate School Logo

Alberta Real Estate School helps you Pass your Real Estate Licensing Exams on the first attempt!

We are independent of RECA and offer Exclusive Real Estate Training Courses along with Focused Study Guides, Detailed Video Sessions which covers Exam Preparation Materials like Practice Exam Questions, Quiz, and our hand-picked Important Topics.

Hope you enjoyed the blog. Join Alberta Real Estate School for expert help with learning Real Estate & Mortgage Brokerage Courses.

Are you wondering How to Become a Real Estate Agent in Alberta now? Don’t worry, we have got that too!

Get our Focused Study Guides, Exclusive Video Courses and “In-demand” Tutoring Sessions to get you through the Real Estate Exams on the first attempt!

Get in touch with at 587.936.7779 or support@albertarealestateschool.com.

Happy Studying!

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How to Calculate Total Debt Service or TDS Ratio?

Raman Gakhal of Alberta Real Estate School explaining Who's Who in the Alberta Real Estate Industry.

Today, we will understand what Total Debt Service or TDS Ratio is and how to calculate the TDS Ratio in the mortgage application for a real estate property.

If you have ever applied for a Mortgage or have come across a Mortgage Professional, you must have heard of 2 main ratios – Gross Debt Service or GDS Ratio & Total Debt Service or TDS Ratio. Mortgage professionals use these 2 ratios to determine if borrowers can afford to pay off the mortgage for a specific real estate property that they are dealing with. TDS Ratio is thus, an essential indicator of mortgage affordability and approval.

If you are planning to become a Mortgage Professional, you need to understand what GDS and TDS are and how to calculate these ratios. For now, let’s understand the concept and calculation of TDS Ratio step-by-step.

First of all, let’s understand what are Debt Service Ratios?

So, what are Debt Service Ratios (DSRs)?

Debt Service Ratio (DSR) or Debt Service Coverage Ratio (DSCR) is used in the calculation of mortgage approval for a real estate property. It is a popular benchmark used in the measurement of an entity’s ability to produce enough cash to cover its debt payments, including repayment of principal and interest (on the mortgage) on both short-term and long-term debt. This ratio is often used when the entity applying for a mortgage has any borrowings on its account such as bonds, loans, or lines of credit.

It is also a commonly used ratio in a leveraged buyout transaction, to evaluate the debt capacity of the target company, along with other credit metrics such as total debt/EBITDA multiple, net debt/EBITDA multiple, interest coverage ratio, and fixed charge coverage ratio.

Thus, as we understood, there are 2 types of Debt Service Ratios:

  1. GDS (Gross Debt Service) Ratio
  2. TDS (Total Debt Service) Ratio

What is GDS Ratio?


GDS refers to Gross Debt Service Ratio. As we understood, it helps us determine whether a person or an entity is eligible for the intended amount of mortgage or not. GDS is the percentage of your monthly household income that covers your housing costs and not any other debts, unlike TDS. It includes housing costs like Principle (P), Interest (I), Property Taxes (T), and Heating Costs (H). It also includes 50% of the Condominium Fees, if the property is a Condominium.

What is TDS Ratio?


TDS refers to Total Debt Service Ratio. As we understood, it helps us determine whether a person or an entity is eligible for the intended amount of mortgage or not. TDS Ratio is the percentage of your income needed to cover all of your debts.

Thus, it is GDS (PITH) + Other Debt.

TDS Ratio limit in Canada

Secured and Unsecured Debt

Secured Debt

Secured Debt is debt which is backed by a security. The lender has a financial security over the debt he has offered to the borrower.

For instance, when a borrower applies for a mortgage for his property, the property is the security for the lender. If the borrower defaults in mortgage payments or runs bankrupt and seems unable to pay for the mortgage, the lender will take over the security, which is the property itself in this case and will recover his mortgage from that.

Examples of Secured Debt include: Mortgage on a property, Car Loan, Secured Line of Credit, etc.

Secured Debt Calculation in TDS Ratio –

For Secured Debts in TDS Ratio Calculation, we will include a Monthly Payment of 1% of the Outstanding Balance.

For Example: If $10,000 are outstanding on a Secured Line of Credit, then the payment included in the TDS Ratio Calculation will be:

$10,000 x 1% = $100

Unsecured Debt

Unsecured Debt , on the other hand is the debt which is not backed by a security. The lender does not have a financial security for the debt he has offered to the borrower.

For instance, when someone makes a payment from their Credit Card of a bank, the bank do not have strong financial security from the person who is using their credit card. If the borrower defaults in his credit card payments, they may charge him fees for late or non-payments, but they cannot get a hold of the person, if his account is nil or if he runs away to a different country.

Examples of Unsecured Debt include: Student Loans, Unsecured Line of Credit, Credit Card Payments, etc.

Unsecured Debt Calculation in TDS Ratio –

For Unsecured Debts in TDS Ratio Calculation, we will include a Monthly Payment of 3% of the Outstanding Balance.

For Example: If $10,000 are outstanding on an Unsecured Line of Credit, then the payment included in the TDS Ratio Calculation will be:

$10,000 x 3% = $300

Factors affecting TDS Ratio

The factors that affect GDS Ratio include:

  1. Principle Amount (P)
  2. Interest Rate (I)
  3. Taxes on the Property (T)
  4. Heating Costs (H)
  5. 50% Condominium Fees (C) – if the property is a Condominium
  6. Other Debt (O) – Secured or Unsecured

TDS Formula:

Formula for Calculating TDS Ratio

Now, let’s understand the calculation of TDS Ratio with some examples.

Sample Questions

Example 1

Merissa and David Smith wish to purchase a house subject to financing. Their yearly gross income is $72,000. Their monthly mortgage payment is $1,400 that includes the principal and interest. The property taxes are $4,200 for the year. The estimated monthly heating costs for the property they are interested in buying are $120.00. In addition to this, they had borrowed $12,000 from their secured line of credit to cover their wedding expenses last year.

Would Merissa and David qualify for the mortgage on the desired property?

The Variables are:

  1. Gross Household Monthly Income: $72,000 per year = 72,000 / 12 = $6000 per month
  2. Mortgage Installment (Principal + Interest): $1,400 per month
  3. Property Tax: $4,200 per year = 4,200 / 12 = $350 per month
  4. Heating Cost: $120 per month
  5. Secured Line of Credit: $12,000 x 1% (as it is unsecured debt) = $120 per month for TDS Calculation

Calculation:

  1. Step 1: Total Monthly Housing Expenses = PITHO = $1,400 + $350 + $120 + $120 = $1,990.00
  2. Step 2: TDS = PITHO / Gross Monthly Income = $1,990 / $6,000 = 0.3317
TDS Ratio for this example is 33.17%.

In this example, the TDS Ratio is less than 42%. Therefore, the couple qualifies for the mortgage when applying the TDS Calculation.

Example 2

Jonathan and Lia want to buy a condominium property in Calgary. They have applied for mortgage on that property. Their joint annual income is $150,0000. The purchase price of the property is $725,000 with a monthly payment of $3,000 including principal and interest. The property taxes for the property are $6000 per year. Other property expenses include monthly condominium fees of $300 and monthly heating cost estimated at $250.00. They also have a car payment of $400 and credit card debt of $15,000.

Would Jonathan and Lia qualify for the mortgage?

The Variables are:

  1. Gross Household Monthly Income: $150,000 per year = $150,000 / 12 = $12,500 per month
  2. Mortgage Installment (Principal + Interest): $3,000.00 per month
  3. Property Tax: $6,000 per year = $6,000 / 12 = $500 per month
  4. Condo Fees: $300 per month
  5. Heating Cost: $250 per month
  6. Car Payment: $400 per month
  7. Credit Card Payment: $15,000 per month x 3% (as it is unsecured debt) = $450 per month for TDS Calculation

Calculation:

  1. Step 1: Total Monthly Housing Expenses = PITHOC = $3,000 + $500 + $250 + $150 + $400 + $450 = $4,750.00
  2. Step 2: TDS = PITHOC / Gross Monthly Income = $4,750 / $12,500 = 0.38

In this example, the TDS Ratio is less than 42%. Therefore, the couple qualifies for the mortgage when applying the TDS Calculation.

So, this was TDS Calculation for you guys. Stick around for more of such calculations and mortgage related topics.

Are you wondering How to Calculate GDS now? Don’t worry, we have got that too!

Get our Focused Study Guides, Exclusive Video Courses and “In-demand” Tutoring Sessions to get you through the Real Estate Exams on the first attempt!

Get in touch with at 587.936.7779 or support@albertarealestateschool.com.

Happy Studying!

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How to Calculate Gross Debt Service or GDS Ratio?

Raman Gakhal of Alberta Real Estate School explaining the meaning, use and various components of a Gross Debt Service (GDS) Ratio and how we can calculate it for a Mortgage application in Canada.

Today, we will understand what Gross Debt Service or GDS Ratio is and how to calculate the GDS Ratio in a mortgage application for a real estate property.

If you have ever applied for a Mortgage or have come across a Mortgage Professional, you must have heard of 2 main ratios – Gross Debt Service or GDS Ratio & Total Debt Service or TDS Ratio. Mortgage professionals use these 2 ratios to determine if borrowers can afford to pay off the mortgage for a specific real estate property that they are dealing with. GDS Ratio is thus, an essential indicator of mortgage affordability and approval.

If you are planning to become a Mortgage Professional, you need to understand what GDS and TDS are and how to calculate these ratios. For now, let’s understand the concept and calculation of GDS Ratio step-by-step.

First of all, let’s understand what are Debt Service Ratios?

So, what are Debt Service Ratios?

Debt Service Ratio (DSR) or Debt Service Coverage Ratio (DSCR) is used in the calculation of mortgage approval for a real estate property. It is a popular benchmark used in the measurement of an entity’s ability to produce enough cash to cover its debt payments, including repayment of principal and interest (on the mortgage) on both short-term and long-term debt. This ratio is often used when the entity applying for a mortgage has any borrowings on its account such as bonds, loans, or lines of credit.

It is also a commonly used ratio in a leveraged buyout transaction, to evaluate the debt capacity of the target company, along with other credit metrics such as total debt/EBITDA multiple, net debt/EBITDA multiple, interest coverage ratio, and fixed charge coverage ratio.

Thus, as we understood, there are 2 types of Debt Service Ratios:

  1. GDS (Gross Debt Service) Ratio
  2. TDS (Total Debt Service) Ratio

What is GDS Ratio?


GDS refers to Gross Debt Service Ratio. As we understood, it helps us determine whether a person or an entity is eligible for the intended amount of mortgage or not. GDS is the percentage of your monthly household income that covers your housing costs and not any other debts (unlike TDS). 

Maximum GDS Ratio limit for Mortgage Affordability and Approval in Canada.

Factors affecting GDS Ratio

The factors that affect GDS Ratio include:

  1. Principle Amount (P)
  2. Interest Rate (I)
  3. Taxes on the Property (T)
  4. Heating Costs (H)
  5. 50% Condominium Fees (If the property is a Condominium)

GDS Formula:

Now, let’s understand the calculation of GDS Ratio with some examples.

Sample Questions

Example 1

Jen and Jason Smith wish to purchase a house subject to financing. Their combined yearly gross income is $84,000. Their monthly mortgage payment is $1,250.75 which includes principal and interest. Their property taxes are $1800.00 for the year and the monthly heating costs are estimated at $100.00. Would the Smiths qualify for the mortgage?

The Variables are:

  1. Gross Household Monthly Income: $84,000/year = 84000/12 = $7000/month
  2. Mortgage Installment (Principal + Interest): $1,250.75/month
  3. Property Tax: $1800/year = 1800/12 = $150/month
  4. Heating Cost: $100/month

Calculation:

  1. Step 1: Total Monthly Housing Expenses  = PITH = $1250.75 + $150 + $100 = $1500.75
  2. Step 2: GDS = PITH / Gross Monthly Income = 1500.75 / 7000 = 0.21
GDS Calculation answer = 21%

In this example, the GDS Ratio is less than 39%. Therefore, the couple qualifies for the mortgage when applying the GDS Calculation.

Example 2

Carol is interested in purchasing a condominium property as an investment. She is an investment banker and her income is $120,000 per year. Carol’s monthly payment for the mortgage is $1,050 including principal and interest. The property taxes for the condo are $1200 for the year. Her monthly condominium fees are $200 per month. The monthly heating costs are estimated at $75.00 per month. Would Carol qualify for the mortgage?

The Variables are:

  1. Gross Household Monthly Income: $120,000/year = 120,000/12 = $10,000/month
  2. Mortgage Installment (Principal + Interest): $1,050.00/month
  3. Property Tax: $1200/year = 1200/12 = $100/month
  4. Heating Cost: $200/month
  5. Condo Fees: $75.00/month

Calculation:

  1. Step 1: Total Monthly Housing Expenses  = PITH = $1050 + $100 + $75 + $100 = $1,325.00
  2. Step 2: GDS = PITH / Gross Monthly Income = $1325.00 / 10,000 = 0.1325
GDS Calculation answer = 13.25%

In this example, the GDS Ratio is less than 39%. Therefore, the couple qualifies for the mortgage when applying the GDS Calculation.

So, this was GDS Calculation for you guys. Stick around for more of such calculations and mortgage related topics.

We also have other important videos including where we share a glimpse of our Training Sessions. One of them is – How to Calculate Vacancy Rate and Occupancy Rate. Check it out here!

Get our Focused Study Guides, Exclusive Video Courses and “In-demand” Tutoring Sessions to get you through the Real Estate Exams on the first attempt!

Get in touch with at 587.936.7779 or support@albertarealestateschool.com.

Happy Studying!

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Dower Act and Dower Consent – With Example

Raman Gakhal of Alberta Real Estate School explaining the meaning, use and various components of a Dower Act in Alberta and highlights when can we use Dower Consent and Dower Release in Real Estate Practice.

Dower Act is one of the most important topics in real estate and is a crucial topic for someone who is looking to become a Real Estate Agent in Alberta.

Dower Act is the regulation by the Real Estate Board of Canada that safeguards the rights of the untitled spouse in a matrimonial home. Practically, Dower Consent is a section that you see in most Real Estate Agreements and Contracts. It gives the right to exercise dower act to the untitled spouse in a matrimonial home.

Let’s understand the concept of Dower Act and Dower Consent with reference to where we use it, how we use it and why we use it!

What is Dower Act?

We can define Dower Act as –

Dower Act protects the rights of the untitled spouse in a matrimonial home.

It means if there is one person on the title and that person is married, the rights of the other spouse that is not on the title will be protected with Dower Act. The titled spouse i.e., the person who is listed on the Certificate of Title of the property will not be able to dispose off the property. In other words, they will not be able to sell, mortgage, or lease the property without the consent of the untitled spouse.

Titled and Untitled Spouse


Titled and Untitled Spouse refers to married/common-law partners that are either titled in the property ownership document, otherwise known as the Certificate of Title.

When you are listed as an owner (or a co-owner) in the Certificate of Title, you are considered to be a Titled Spouse. An Untitled Spouse is the one who is not listed as an owner or a co-owner in the Certificate of Title document.

In case of married or common law partners, either both or anyone can be on the certificate of title. The law requires at least one of the names to be listed on the certificate of title.

Dower Consent and Dower Release

Dower Consent and Dower Release options under the Dower Act that allows you to exercise your dower rights in a matrimonial home.

Both of the options are used in many of the Written Service Agreements used in Real Estate transactions. The example shown in the video shows an example of a Seller Representation Agreement and a Purchase Contract where dower rights were exercised, and Dower Consent was used as there was only one owner in the Certificate of Title for the property.

Let’s understand the example again to see how the Dower Consent was used in the Seller Representation Agreement as well as in the Purchase Agreement with the situation explained in the video.

Hope this helps you to understand the concept of Dower Act and the use of Dower Consent in Real Estate transactions.

We also have other important videos including where we share a glimpse of our Training Sessions. One of them is – Understanding Seller Representation Agreement. Check it out here!

Get our Focused Study Guides, Exclusive Video Courses and “In-demand” Tutoring Sessions to get you through the Real Estate Exams on the first attempt!

Get in touch with at 587.936.7779 or support@albertarealestateschool.com.

Happy Studying!

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