Buyer's & Selling

Pre-Sale Considerations

Sooner or later most people face that big decision: "Should we continue to pay rent or should we buy our own home?" For many, the decision to buy a home is the largest and most important financial decision they will make.

Pre-Approval

For this reason, one of the first steps should be determining the price range that is comfortable for you. A professional REALTOR® can assist you in this process, or better yet, your financial institution can pre-approve you for a mortgage that fits your income and lifestyle. It is important to shop around, as each financial institution will have different options for you to consider, and interest rates do vary.

Selecting a REALTOR®

Once you have the financial considerations in place and a good idea of what you want in a home, your next task is choosing a REALTOR® who likes to work with buyers and is prepared to spend whatever time it takes to assist you in finding your new home. A good REALTOR® will spend enough time with you to find out what you really want and will then suggest homes that fit your criteria. Honest discussion ahead of time will save both you and the REALTOR® a great deal of useless home tours. As a Buyer's Agent, your REALTOR® has a clear and direct responsibility to act in your best interest, and to keep you informed of any information that could influence your decisions. Your REALTOR® must maintain the confidentiality of information discussed with you. This relationship is sometimes formalized through a written contract that commits you to work exclusively with the REALTOR® and commits the REALTOR® to work on behalf of you, the buyer.

What's Next?

You have defined what you wanted, and you have found the best home available in the time you had. Now you're ready to make the offer. Your REALTOR® will work with you to complete the proper documents. As soon as your offer is prepared and signed, your REALTOR® will contact the Listing Agent to arrange to present your offer to the current owner. Within the irrevocable time period you have specified, the seller can accept the offer as is, reject it, or modify it and send it back to you. This last option is called a counter offer. The process of offer and counter offer can go on any number of times until both parties agree or one party walks away from the transaction. Once the transaction has reached a successful conclusion, you will need to contact your lawyer, and your financial institution to arrange financing, which typically takes between five and ten business days. Many buyers also require a building inspection be completed, and if the home is not on a municipal water supply, a water test will have to be done at your expense.

Closing Costs

Aside from the down payment and mortgage, there are other costs to keep in mind when purchasing a home. Typical costs in purchasing a home and securing a mortgage may include:


* Inspection fee - $375+. A home inspection provides an independent evaluation of the state of the visible major physical components of the property.
* Land survey fee - $500+. All professional mortgage lenders will insist that there be a current survey of the property. Often a seller will have a survey certificate that can be used by the purchaser to secure financing. Title insurance is an alternative to having a survey done. Residential title insurance protects the insured against loss from title defects and defects that would have been revealed by an up-to-date survey/real property report or building location certificate.
* Appraisal fee - $250+. The lending institution will often require an independent appraisal of the property to verify its true market value.
* Mortgage insurance - 1.5 to 2% of the mortgage principal. Most lenders will insist on insurance if your mortgage is for more than 75% of the purchase price, which protects them against the chance of your defaulting on the loan. The cost of the mortgage insurance is usually added to the mortgage principal.
* Legal fees - $1,000+. These will include your lawyer's time, the cost of searching your deed or land title, land transfer tax (1/4 of 1% of the purchase price of the property), plus costs incurred and disbursements made on your behalf by your lawyer.
* Adjustments - Adjustments are made to compensate the seller for items they have paid for in advance such as property taxes, fuel and utilities.
* Insurance - Your property is the only security your mortgage lender has for their investment. The lender will require proof of fire and extended coverage insurance before they will advance funds at closing.

Closing the Deal & Moving In

The good news, once your offer is accepted, is that most of the hard work and tough decisions are behind you. There are still some things that you will need to do in the days and weeks ahead as you prepare to move into your new home.

Financing

Financing is always a condition of any offer, and your financial institution must confirm your mortgage arrangements, usually within five to ten business days of an accepted offer. Your lender will need a copy of your purchase and sale agreement and MLS® listing sheet. They will also require an independent appraisal of the property, at your expense. Normally, the lender will make arrangements and schedule the appraisal. As soon as your financing is firmed, they will forward a letter to your REALTOR® confirming your approval. Once this letter of approval is received, the financing condition in the offer is waived.

House Inspection

Many homebuyers will request that a house inspection be done. This is also usually done within five to ten business days of an accepted offer. You need to contact the inspector of your choice, and he will make arrangements with your REALTOR® to meet at the home. His inspection will probably take between three and four hours, and he will want to meet with you at the property after the inspection to review his report.

If the inspection does not identify any serious problems, your REALTOR® will prepare a waiver for you to sign that removes the inspection as a condition of the offer. If the inspection uncovers major items, you should review the written report as soon as possible with your REALTOR®. You have the option of walking away from the house deal at this point, and getting your deposit back. Alternatively, you can reopen negotiations to address the problem, usually by getting the seller to pay for fixing the problem(s) uncovered by the inspectors.

Water Test

If the property is not on a municipal water source, a water test must be done, at your expense, again within five to ten business days of an accepted offer. Your REALTOR® will make arrangements for this test. If the water supply does not meet acceptable Provincial standards, the seller must remedy the problem prior to closing, or your lender will not advance mortgage funds. Your REALTOR® will fax a copy of the water test to your lending institution and lawyer as soon as it becomes available.

Legal Documents

Once the conditions of your offer have been addressed, your REALTOR® will fax the offer documents to your lawyer so s/he can initiate the legal prerequisites that must be completed at the closing. You should call your lawyer and let him/her know to expect the documents. Alternatively, you can meet with your lawyer and deliver them a copy of the offer, and the other documents will be faxed as they become available. Under the new property registry guidelines, s/he will need copies of your birth certificates to register the property in your name. In addition to addressing all the legal issues on your behalf, your lawyer will co-ordinate delivery of your mortgage funds from your lender and arrange closing details with the seller's lawyer.

It is always a good idea to stay in contact with your lawyer and your mortgage lender to be sure that everything is proceeding according to plan and will be ready for the closing day. Your lawyer will ask you to sign all the legal documents a day or two prior to the closing. At the time specified in the offer, you will meet your REALTOR® at the home and do a final inspection to insure all of the chattels listed in the offer are present and accounted for, and the house is in the same condition as it was when it was viewed initially. If everything is in order, your lawyer will turn over the keys to you, along with copies of all legal documentation and a full accounting of the funds disbursed.

Insurance

Most mortgage lenders offer life and disability insurance. Mortgage insurance is essentially term insurance that pays off the mortgage at the death of the borrower. Some lenders will offer this policy with the premiums being added to your monthly payment. It may seem like a good deal, but always contact an independent life insurance agent to compare costs.

Your property is the only security your mortgage lender has for their investment. The lender will insist on proof of fire and extended coverage insurance before they will advance funds at closing. This insurance will also cover your personal property and will include a public liability section to protect you in the event that someone is injured on your property.

Other Services

Should any or all of the following service be applicable, you will need to make arrangements to have the electricity, telephones, internet, water, natural gas and/or cable hooked up in your name on the closing date. If you currently own or are renting another residence, you will want to have these services disconnected at your current residence on the closing date as well. If there is rental equipment on the property, such as a security system, furnace or propane tanks, you will need to make arrangements to have these items switched into your name, and confirm a delivery schedule with your fuel provider.