So you’re thinking of buying a home?
Fantastic! It may be your first home, or perhaps your fifth but no matter how many times you’ve been through the process, one thing remains the same: it’s a big job involving a great deal of time, effort and of course, money.
Every buyer has unique needs but the questions they ask are very similar:
How do I know how much I can afford?
Do I need an agent or should I got at it alone?
What’s the best area to buy in?
How do I negotiate the best possible price?
The best approach to buying a home is to be informed. This guide will help you answer those basic questions, outline what to expect in the key steps ahead, and boost your confidence in finding the right home for you.
Are you ready?
FIRST - do you have the financial resources? You should have 5% of the purchase price of a home for the down payment, but ideally even more.
SECOND - do you expect to stay in your new home for some time? Moving can be expensive and you will want to build some equity before having to relocate.
Benefits of Home Ownership
Pride of Ownership
Pride of ownership is the number one reason why Canadians desire their own home. There is no landlord looking over your shoulder. You are able to make improvements knowing that any appreciation that results will be to your benefit. Home ownership gives you and your family a sense of stability and security. It’s making an investment in your future.
Each month, part of your monthly payment is applied to the principal balance of your loan, which builds your equity. You can borrow against a home’s equity for a variety of reasons such as home improvement, sending your kids to university or college or starting a new business. Homeowners accumulate wealth for the future while enjoying the benefits of a shelter.
In Canada, especially in the last few years, homes have appreciated considerably and in doing so have added substantially to owners’ net worth. Unlike stocks and bonds, you get to live in your investment. Also, in Canada your principal residence is exempt from capital gains.
8 Steps to Purchasing
Deciding what you want
Select a Real Estate Advisor
Offer & Negotiations
Prepare for closing
8. Move In
1. Deciding What You Want
The first step to finding the right home is to determine what you’re actually looking for. There are a lot of homes on the market at any one time, and looking at them all is not the best way to spend your time. To make your home search more efficient, ask yourself these three focus questions:
1. Where Do I Want to Live?
What communities or neighbourhoods do you want to consider? Is it important to be near schools, shopping centres, recreation facilities or other amenities?
2. What Type of Home Do I Want?
What style of home is best for you? What is your ideal lot size? Does the age of the home matter to you?
3. What are my must-haves and deal-breakers?
What are the most important features for you in a home? A basement? A garage? A pool or a fireplace? How many bathrooms? Bedrooms? What do you absolutely not want in a home? These are all important questions to ask yourself when deciding what you want.
2. Get Pre-Approved
When it comes to buying a home, getting pre-approved for a mortgage is a very important step. It helps you understand how much you can afford to spend on a home. Also, it often allows you to lock in an interest rate for a period of time - this could save you thousands of dollars! The process requires 4 simple steps:
1. Talk to a mortgage specialist
Talk to someone with expertise who can help you choose the right option. Our team will be happy to put you in contact with one of our recommended mortgage specialists.
2. Complete an application to find out how much you qualify for
There are many factors that go into determining your eligibility for a mortgage. This will help you determine how much you can comfortably afford to spend based on your income and other financial obligations.
3. Gather your financial information to finalize pre-approval
Your bank or mortgage professional will require documentation to support your application to finalize the pre-approval process.
4. Get a copy of your pre-approval
This is a powerful negotiating tool. It’s extremely frustrating for sellers to lose a sale because of financing. Even though many offers are conditional on financing, the seller of your dream home will see you as a more attractive buyer when they know you are pre-approved.
3. Select a Real Estate Advisor
Most buyers today work with a real estate agent rather than go at it alone for many reasons. In most cases, your home is your most valuable asset, and it makes sense to use a professional. A great real estate agent will provide key market insights, sound advice and save you endless hours of time and money - all while helping you reduce the stress of a large purchase so you can truly enjoy the experience of buying your dream home.
Top 5 reasons to work with a REALTOR
1. It’s Free
In most cases, the commission is paid by the seller so having an agent working for you is essentially free.
2. Avoid overpaying for a home
If you’re like most buyers, you want to know, with certainty, that you are paying a fair price. A real estate agent will educate you on the price of current competitive properties, as well as similar homes that have been recently sold to help you make an informed decision on how much to offer your dream home.
3. Negotiate the best price and terms of your most valuable asset
Negotiating requires expertise and skill. A real estate agent is a masterful communicator with expert negotiating skills whose job is to help you decide what to offer, what to include, what to give up and most importantly, when to walk away if reasonable terms cannot be reached.
4. Manage the countless details and mountainous paperwork
From the moment of engagement, your agent will ensure smooth sailing and guide you effortlessly through any obstacles along the way.
5. Represent and protect your interests as a buyer
In any transaction, it’s important to understand that the seller’s agent is bound by contract to work in the best interests of his/her sellers. As a buyer, you also need representation, someone to work exclusively in your best interests. Engaging the services of a real estate agent to assist you in the home buying process means you now have someone to work solely in your best interests to provide you with:
- Confidential advice that addresses your needs first
- Loyal and diligent “full disclosure” care, FREE from any conflicts of interest
- Access to all listings including MLS, bank-owned properties, distress and estate sales, even homes that were previously on the market where the seller might still be interested in selling
- Expert advice on useful clauses such as home inspections and financing to protect you fully
- Expert negotiation of the offer to purchase, to achieve the best possible price and terms
- Expert advice on market value, inclusions, location, and when you should walk away
- Discovery and disclosure of all information about the property including liens, warranties, disclosures, seller’s purchase price, market and planning activity in the area.
For most buyers, a real estate agent is key to finding the right home. They give you access to listings you wouldn’t have otherwise known about, including:
1. Homes in Hot Markets That Haven’t Made it Online Yet
These are desirable homes in great areas, at great prices that often get sold before the property listing is even loaded online. The only way to know about them is through an agent.
2. Expired Listings or Private Sales Not Found on MLS
A savvy real estate professional is on the pulse of all potential homes for sale, listed and unlisted.
3. Insight and An Insider’s Edge
An agent not only has access to more data than what is available online, but he or she brings expertise and a wealth of knowledge so you can be confident knowing you have a complete picture of each property you are considering.
5. Offer and Negotiations
Here’s how the offer process typically works:
1. Decide On Price, Terms And Conditions
Your agent will conduct a Comparative Market Analysis (CMA), complete with comparable active and expired listings, recent solds and other historical data to determine the market value or the home. You also need to decide on a closing date and if there will be any conditions to the offer.
2. Prepare The Offer
Your agent will create a legal document (Contract of Purchase and Sale) that protects you, follows your instructions, and matches your schedule and needs.
3. Review The Offer
Your agent explains the details and terms of the offer, and suggests options for specialty clauses.
4. Present The Offer
Your agent will present and negotiate the offer on your behalf.
5. What Happens Next?
The seller accepts your offer
The seller rejects your offer
The seller countersigns (changes the terms of the offer and presents the offer back to you)
Important Contract Dates
Subject Removal Date & Deposit Date
This is the date when the subjects of your offer are removed and the deal is considered firm. On this date, you must also pay the deposit, which is typically 5% of the purchase price and is in the form of a bank draft. Once the deal is firm, you are legally obligated to go ahead with the purchase.
This is the date that legal ownership and monies are exchanged between the old owner and you. You are now on title, which means you are the legal owner of the property.
This is the date on which the buyer assumes full responsibility for property taxes, strata fees where applicable, hydro and gas bills, etc. The lawyer or notary also use this date to split the costs proportionally between the buyer and seller. Notably, the Adjustment Date is typically the same day as the Possession Date.
This is the date you get the keys and gain possession of the property. This is usually the same day as the Completion Date, or 1 to 3 days after.
6. Remove Subjects
Here’s how the subject removal process typically works:
1. Subjects or Conditions
You have agreed on the price and terms and now have a firm or a conditional offer in place. If you have a conditional offer, this means that there are subjects contained in the offer to purchase. The purpose of a subject is to set out a specific condition which must be fulfilled BEFORE the sale can go through. However, the contract is still legally binding once it’s signed by both parties.
2. Subject Removal
If you have subjects, now is the time to start the process of satisfying them in order to meet the deadline and firm up your purchase. Once you are satisfied and wish to commit to purchasing the home, a real estate agent will prepare a subject removal document for you to sign. Once all the subjects are moved, you have a firm deal.
3. Subject Extension
Sometimes a buyer or seller may wish to have more time to fulfill a subject, and will request to extend the date. This process requires an addendum, which should be prepared for you by your agent.
Once all of the subjects are satisfied and removed, the deposit must be paid within a certain time limit. The deposit amount and time limit will be outlined in the Contract of Purchase and Sale.
7. Prepare For Closing
Typically you will have anywhere from 30 to 90 days before closing day. The closing date can be the same as your move-in date, however, this is not always possible. Check with your lawyer or agent to find out when your keys will be available. Remember, this is an exciting time! Being organized well in advance will pave the way for much more enjoyable journey. Here are a few details to take care of before your closing date:
Legal Stuff and Paperwork
You and your agent will need to provide your lawyer with all the necessary documentation for your purchase. Your agent usually takes care of the agreement, waivers, survey and any other purchase documents. However, you may need to provide your lawyer with some additional information: insurance, down payment information, adjustment payments and other signed documents your lawyer may request.
Down Payment and Closing Costs
Make the necessary arrangements to have these funds available a week prior to closing or when the lawyer has requested funds.
Moving Arrangements & Change of Address
Whether you are using professional movers or renting a truck, plan and organize it early.
Arrange for home insurance before closing and request a proof of insurance at your financial institution in advance. The insurance should be arranged to start from the Completion Date, not the Possession Date. This is because you become liable for the property after title is transferred, which occurs on the Completion Date. Also, provide your insurance agent with the listing information and details such as age of the house, pool or no pool, type and condition of the roof, condition of the furnace, electrical and type of exterior.
Contact the local utilities company to coordinate the change of billing on closing. Including phone, internet, cable, gas, electricity, water and any rental agreements. Don’t forget to cancel the services at your old address.
Inform your children’s old and new schools about the move and arrange any necessary record transfers.
8. Move In