Buyers Guide SellBuyOwner.ca
HOW TO PURCHASE A HOME
Buying a home will probably be the largest purchase you will ever make in your life. The purchase of your new home will be a very exciting experience, as well as one full of anxiety and anticipation. As a buyer you will want to determine how much you can afford to pay for a house and how much financing a bank or lending institution will make available to you. This process is known as a "pre-approved mortgage". Most banks and lending institutions have applications available to apply for a pre-approved mortgage; this service is free and will determine the price range of the homes you will look at when searching for the home you want.
Once you have become pre-approved for a mortgage, you should start searching for the home you want to buy. You will no doubt be informed of the properties that are available privately through our advertising, as well as some real estate listings. Your REST can assist you in buying a home and can set you up to receive the latest MLS listings, with your criteria, on your email. Working with your REST allows you to look at properties that are listed with agents and also at private sale listings hassle free.
HOW THE BUYING PROCESS WORKS
AGREEMENT OF PURCHASE AND SALE
The Agreement of Purchase and Sale is a legally binding contract which is entered into between yourself and the people who are selling the property. The Agreement will set out all of the terms of the contract including the purchase price and deposit amount, the closing date, and should also include certain conditions, such as financing and a building inspection. Before signing any Agreement, you have the right to contact your lawyer to review your agreement to ensure that all of your legal rights are addressed. Also, he/she will be able to advise you of the "hidden costs" involved in your transaction. Remember to list any conditions that apply. For example, Purchase subject to financing, Purchase subject to an appraisal, Purchase subject to Home Inspection, Purchase subject to appliances & window coverings included in sale, Purchase subject to seller providing real property report and survey.
When presenting the offer to the seller a deposit is required. This deposit is to be held in a registered Trust Account and is refundable if all conditions are not met, or if the seller declines the offer.
WHAT ARE HIDDEN COSTS?
Although you agree to purchase your new home for a fixed amount, there are many additional costs which will be payable.
The following are the usual costs involved:
- If you are obtaining a mortgage for more than 80% of your purchase price, your lender will require your mortgage will be insured through a mortgage insurance company. If you are financing at 95% (in other words, you are putting 5% down), then the insurance premium charged to you will be 4.00% of the principal amount of your mortgage. Fortunately, this amount may either be paid up front or it may be added to the principal of the mortgage. This amount together with administration/processing fee of will be payable on the closing date and is usually deducted from the monies provided by the mortgage company. When applying for your mortgage, you should ensure that your mortgage representative clearly explains all of these costs in detail.
- There are fees which are payable to your lawyer; Legal Fees for acting on your behalf in purchasing your new home. Legal services will include: drafting or reviewing the Agreement of Purchase and Sale; preliminary discussions with you; reviewing the title search; writing for zoning compliance, tax and utility certificates; preparation of the purchase documents and mortgage documents; meeting with you; closing the transaction and certifying title to yourself and the mortgage company.
- Disbursements are "out-of-pocket expenses" Disbursements which would include obtaining all of the above certificates, registration of your Deed and Mortgage, and office expenses such as couriers and photocopies.
- If the vendor does not have an up-to-date Survey, you may be required to obtain a new survey or title insurance. The current cost for a new survey is approximately $700.00 to $900; a new Surveyor's Real Property Report is approximately $350.00 to $450; and title insurance is approximately $170.00 to $250.00.
- When you have agreed on a purchase Price, there will still be adjustment(s) to this amount. The most common adjustment is for property and water taxes. If the vendor has paid all of the property taxes for the year, and you are closing your transaction in July, you will be required to reimburse the vendor for your portion of the taxes. You would then only be responsible for taxes in the following year. As well, if your home is heated by oil/propane you may be required to pay the vendor for any remaining oil/propane on the property.
I'VE SIGNED THE AGREEMENT, NOW WHAT SHOULD I BE DOING?
In most cases, the Agreement of Purchase and Sale is conditional upon financing and/or a building inspection. You will only have a certain number of days in order to satisfy yourself and "waive" your conditions. Once you have an "accepted offer", you should immediately take a copy of the Agreement to your financial institution in order to arrange a mortgage with terms that are satisfactory to you. If your agreement is subject to a home inspection, you should also contact a certified home inspector in order to set up an appointment for an inspection of the premises. Once you have waived all of your conditions, your lawyer will proceed to search the legal title to the property to ensure that there are no liens and title is free and clear. Once your lawyer has obtained the search, he will contact you to discuss how title will be held on the deed. You will be required to obtain fire insurance coverage on your property effective the date of closing and your policy must name your mortgage company as a lien holder.
Once all of the costs are determined, the amounts required from you are calculated by your lawyer. You will review these figures on a scheduled appointment usually a day or two before the closing date at which time you will to execute the closing documents with your lawyer.
You will be required to make arrangements to transfer the water, hydro and gas accounts to your name on closing. You should contact your cable, phone, and post office in order to transfer these accounts to your new home.
On closing, the vendors lawyer and your lawyer will arrange to exchange documents and register your Deed and Mortgage. Once registered, you are the new owner, and keys may be picked up at the lawyers office at this time. Usually, they are able to guarantee that keys will be available before 5:00 on your closing day.
I'M BUYING A CONDOMINIUM - HOW IS THIS DIFFERENT FROM A SINGLE HOME?
When you purchase a condominium unit (either an apartment or a townhouse), you are technically the owner of your unit and a joint owner with all of the unit owners of the "common areas". These areas may include hallways and lobbies, or parking lots and walkways. In some cases you have an "exclusive use" of the common areas. This may include your balcony/backyard or a parking space. As a unit owner, you will be required to pay monthly condominium fees to the corporation, to cover costs for building the reserve fund, maintenance of the common areas, and in some cases, utilities. When entering into an Agreement of Purchase of Sale you should insert a condition allowing you to review the condominium corporation’s documents. These documents include an "Estoppel Certificate", financial statement, budget, rules and regulations, bylaws, management and insurance agreements. The Estoppel Certificate will provide you with specific information relating to your unit and other financial information relating to the condominium. Your lawyer will review the Estoppel Certificate and provide you with his/her opinion.
See your Lawyer on these issues...
- Contract of Purchase and Sale
- Counter Offer
- Legal Fees
- Terms and conditions of sale (contingencies)
- Property/Water Tax Adjustments
- Title Search
- Title Insurance
- Disbursements and Expenses
- Sheriffs Certificate
- Warranty Deed
- Property Zoning
See your Banker on these issues...
- Mortgage Pre-Approval
- Down Payment
- Mortgage Payments
- Interest Rates
- Mortgage Insurance Fee (where applicable)
- Interest Adjustments
See your Appraiser on these issues...
- Pricing your home
- Appraised Value of your Home
See your Home Inspector on these issues...
- Overall condition of your home
- Ways to improve deficiencies
- Structural Condition
See your Insurance Broker on these issues...
- Replacement value of property to insure
- Content Insurance
- Cost of Insurance
- Payment Options
- Liability Insurance
- Home security systems (may bring cost of insurance)
See your Surveyor on these issues...
See your Energy Supplier on these issues...
- Average Cost of heating the home over 2-3 year average
- Inspections on Furnaces and heating equipment
- Alternative heating measures
- Efficiency options
- Heating Equipment Insurance