Buying

Step 1: Financing

Unless you are able to pay cash for your Real Estate purchase, you will require financing.  Prior to looking at homes, you will want to know how much you are qualified to borrow to ensure you are looking in the right price range.   Buying a home is likely to be the most expensive purchase you will ever make and choosing the right mortgage can save you thousands of dollars.  But how to choose?  Banks, Credit Unions, Finance companies and private lenders offer a vast array of mortgage products.   You can speak to individual lenders on your own to learn about their products or you can use the services of a mortgage broker.  Mortgage brokers work for their clients rather than for a specific financial institution, and in most cases their fee is paid by the lending institution where the mortgage is placed, so there is no cost to the client.  In addition, the lenders offer Mortgage Brokers discounted rates and these discounts are passed on to the client.  A lender or Mortgage Broker can have you pre-approved for a mortgage and offer you an interest rate hold for up to 120 days.  Your lender or Mortgage Broker will discuss the type of documentation require from you to verify your income and the availability of funds for your down payment and closing costs.

Step 2: Estimating Your Closing Costs

In a Real Estate transaction, the bulk of the costs are paid by the Buyer.  These costs include but are not limited to the following:

• Legal Fees
• Property Appraisal
• Property Transfer Tax
• Survey
• Title Insurance
• Fire Insurance
• Property Inspection
• Property Tax Adjustment
• Utility hook- up fees

To show you have sufficient funds available, financial Institutions use a “Rule of Thumb” of 1.5% of your purchase price.  This is the amount they want to see over and above your down payment.  It is important to know that this is just a rough estimate and your actual costs may be more or less.

Step 3: What Are Your Needs?

Once you have a price range in mind, the next step is to think about what you are looking for in a property.  If you are purchasing land only, your major consideration is location.

If you are purchasing a home, you will need to think about many more details.  How many bedrooms do you need?  How many bathrooms?  Are you looking for a home you can make improvements to or are you looking for something that is move-in ready?  What are your parking requirements?  What type of floor plan do you prefer?  Do you want to live in Town or do you prefer living on Rural property?  The more information you can give your Realtor, the easier it will be to narrow your search.

Step 4: Working with a Realtor

Your Realtor is the most important professional you will rely on when purchasing a home.  She will show you available houses, help you with the negotiation process, refer you to other professionals (such as lenders/mortgage brokers, appraisers, home inspectors, insurance agents and lawyers), and guide you through the entire home buying experience.  A good Realtor will explain each step of the process to you and be there to answer any questions you may have.

Step 5: House Shopping

Based on your desired purchase price and your housing needs, your Realtor will arrange for you to view  available homes.   It is best to wear comfortable, slip-on shoes as you may be repeatedly removing them.  It is a good idea to take notes while viewing, as it is easy to forget what you liked about a property, or what you might like to have included, when looking at multiple homes.  The first visit to a home may only last ten or fifteen minutes.  If you are interested in a particular home, ask your Realtor to schedule another viewing appointment to spend more time there.

Step 6: The Offer

Once you have decided on a particular home, it is time to draw up and sign a Contract of Purchase and Sale.  The most important components of the contract are:

-Purchase price.  This is the amount you wish to offer to pay for the property.

-Inclusions.  These are the things you would like included with your purchase like appliances and window coverings.

• Dates.  When do you want to take over ownership of the property?
• Conditions.  Usually you will make an offer “subject to” arranging things like financing, home inspection, home insurance, etc.  Your Realtor will ensure that you are protected by including the conditions  applicable to your situation and the property (such as a subject for a water potability test on a rural property).
• Deposit.  You will be asked to pay a deposit within a specific time frame of having an accepted offer.  This deposit is a show of good faith, and will be held in the Real Estate Company’s Trust account until your completion date.  You can think of these funds as being  part of your down payment.  They will show up at your lawyer’s office on the Statement of Adjustments.

After your offer is written, it will be presented to the Seller.  The Seller has the option of accepting your offer, signing a counter-offer with changes, or rejecting your offer outright.  Your Realtor will guide you through this process and keep you informed.  It is common for offers to go back and forth several times, perhaps over several days, before terms are agreed upon.

Step 7: The Accepted Offer

Once you have an accepted offer, (both the Buyer and Seller have agreed on all terms of the contract), it is time to deal with any conditions or “subjects”.   Normally, a contract is written with “subjects” to be removed within a short time frame, often ten to fourteen days.  Some “subjects” are for a longer duration, such as “subject to the sale of another home”.

The accepted offer also triggers the time frame to pay the deposit money to your Real Estate Company’s Trust account.  You can pay with cash or a cheque.  Please be aware that your cheque will usually be deposited the same business day it is received.

If you require financing, this is the time to take your Contract of Purchase and Sale to your lender or mortgage broker.  Previously, you were looking for pre-approval.  Now you are looking for full mortgage approval.  At this point your lender will ask you for income and down payment verifications.  They will also require a copy of your accepted Contract along with a feature sheet for the home.  If a lender requires an appraisal, they will order it at this time.  Once your lender/mortgage broker has your mortgage unconditionally approved, she will let you know that it is okay for you to remove your “subject to financing” clause.

Your home insurance clause should be fairly easy to satisfy.  If the home is already occupied, it is likely already insured.  Your Realtor may be able to arrange to have the existing homeowner contact his/her Insurance Broker to have the house details made available.

The next step will be to arrange your home inspection.  Again, your Realtor can give you the contact information of licensed, reputable Home Inspectors in your area.  An inspector will generally spend 3-4 hours inspecting the home and then arrange to have you meet him there with your Realtor for a walk-through.  At the walk-through he will point out any deficiencies he has discovered.  He will provide you with photos and a binder full of great information to assist you with home maintenance.

Any other subjects should be dealt with as quickly as possible.  Your Realtor can give you advice here.

Once all your subjects have been removed, you have a firm and binding contract.  A “Sold” sign will be placed on the property and no more showings will take place.  Congratulations, you have purchased a home!

Step 8: Completion

Once all conditions have been met and your subjects have been removed, your Realtor will send appropriate documentation to your lawyer.  Your lawyer will prepare the necessary paperwork to transfer the property into your name and, if applicable, have the lender’s mortgage registered on title.  When the documents are ready, you will receive a phone call to arrange for an appointment to sign.  The lawyer will also prepare a Statement of Adjustments.  The statement has a debit side showing your purchase price, legal fees, taxes and adjustments.  It also has a credit side showing the amount received from your lender, your deposit, and any credits for taxes or other adjustments.  The bottom line will show the amount you are required to pay to complete the transaction.  Your lawyer will ask you to bring in a certified cheque or bank draft for this amount.

On your possession date, your Realtor will hand you the keys to your new home!