Buying
Buying a home can be a stressful event due in part to the magnitude of the commitment as well as the seeming complexity of it. This page will help alleviate some of that stress by outlining the steps and clarifying the buying process. At the end of this page we also have a list of the typical closing costs associated with buying a home.
To start with, it's important to understand that as your buying agent I work exclusively for you, but at no cost to you. I get paid out of the commission package that the seller pays.
At this point we would like address the issue of working with one realtor only. Some people feel that if they use more than one realtor to help them find a home they will be more successful. This does not happen. Like any other relationship, honesty, loyalty, and integrity are paramount. Without them the relationship suffers. The buyer that is working several realtors at one time starts getting less and less service from each realtor and ends up frustrated and dissappointed with the whole experience. Don't let that happen to you.
Once you have chosen which realtor team to work with, it is important that you know we are legally and morally bound to:
Give you undivided loyalty in any negotiations
Obey all lawful instructions
Keep confidences
Exercise care and skill
Account for all money and property
So now that we have our relationship clear, it's time to move onto the home buying process. I like to think of the buying process consisting of five stages:
1. PRE-APPROVAL
2. HOME SEARCH
3. THE OFFER
4. SUBJECT REMOVAL
5. CONVEYANCE WITH TYPICAL CLOSING COSTS
The stages can have different time frames associated with them but the order of the process doesn't change.
1. PRE-APPROVAL
Pre-approval of a mortgage allows you to know exactly how much you qualify for based on your income and other fixed debt payments. However, it is important to note there is a big difference between a lender giving you an estimate of what you qualify for based on your income, and a pre-approval done with all the actual information and full credit checks. The former estimate has led to some major disappointments over the years while the latter enables us to shop only within your budget along with a guaranteed interest rate hold for a period of 60 - 120 days, depending on the lending institution. For most people the pre-approval process can now be done easily over the phone with the results coming back very quickly. Finally, going through this process early on gives you more leverage when offering on a home because the Seller will have greater confidence in your ability to complete on your financing and in a fast pace market that can be the difference between getting or losing your choice. Please see my links/info page for a list of mortgage brokers.
Special RRSP Note:
If you are a first time home buyer and this will be your principal residence you are able to use up to $20,000 per person of your RRSP for your down payment.
2. THE HOME SEARCH
To me, this is the best part of all. I truly enjoy working with people and have a great ability of understanding what my customers want. Initially I will provide you with a list of homes (detailing all the particulars) that are within your price range and preferred areas. From this list, you choose the properties that you would like to view and then I book the viewings. I like to book a number of homes on our first time out and get as much feedback as possible on your thoughts. This helps me get a clear idea of your likes and dislikes thereby streamlining the process.
3. THE OFFER
Once I find you the perfect home we will then prepare an offer. After reviewing recent activity in the neighbourhood and looking at all the comparables we prepare the offer with offer price, date of possession, the appropriate subjects and a deadline for acceptance. I will then present it on your behalf. The offer will be accepted, rejected or seller will make changes and present a counter-offer that can then be accepted or rejected by you. This negotiating is where my years in realestate are invaluable!
4. SUBJECT REMOVAL
The above mentioned subjects are like legal conditions that have to be met before the contract becomes binding. They are placed in the contract to protect you. There are many types of subjects, but there three of the most common in a contract are financing, home inspections, and relevent documents, each of which I will discuss further below. There is always a set amount of time attached to the subjects and each party has a legal duty to give their best effort to meet the subjects within the specified time frame.
Common Subjects:
Financing
Although you are pre-approved, the bank still has to do their own due diligence before they will authorize the loan. That usually entails their own appraisal of the property, and the paper work involved. It is my job to get the documents to the finance person of your choice so they can begin and complete their work in time for me to remove that subject.
Documents
The most common documents are the Title search which determines ownership and any encumbrances affecting the property, and the Property Condition Disclosure Statement, which is signed by the current owner and states, to the best of their knowledge, all that they know about the property. If you are buying a condo we will also request 2 years worth of strata council minutes, bylaws, strata plans, financial statements and a Form B (another disclosure statement) which is supplied by the Property Management Company for you to review. These documents have to be delivered to you so you can read them and be satisfied with the contents in time to remove the subjects.
Home Inspections
The reason for the home inspection is to get a thorough and unbiased assessment of the integrity of the property. I've been in the business for 10 years and I still can't identify moisture in the walls or the condition of the foundation, but the inspector can, and he works only for you, providing you with a full report of his findings. So if there is nothing too problematic within the report then I can remove that subject. Please see my links/info page for list of home inspectors.
Once those subjects are removed in writing the agreed deposit amount in the contract is payable by certified cheque, money order or bank draft. Your Realtors office usually holds this deposit in a trust account until the time of completion. This amount is eventually included in the down payment. The most common amount is 5% of the purchase price but it can vary.
5. THE CONVEYANCE
If things go well and all of the subjects are removed I send the documents to the conveyancer of your choice. A conveyance may be done by a notary or a lawyer. Their job is to make sure that all the monies are paid out and the land title is transferred accordingly. Below is list of typical closing cost associated with purchasing a home. Some of the cost will be borne outright by you while others will be added to the mortgage amount. The conveyancer will make sure it is all done properly. Please see my links/info page for list of conveyancers.
TYPICAL CLOSING COSTS
Purchase Price Varies
Home Inspection $250 - $350
A home inspection usually takes a few hours after which time he will sit down with you and go through the report with you in detail. You pay this fee up front.
Legal Fees $650 - $1200
Once the offer is accepted we get the paperwork to the notary or lawyer of your choice to begin the process of drawing up and registering your mortgage. You will be required to go into the office just prior to completing on your property to sign documents.
Mortgage Appraisal Fees $150 - $350
Lending institutions require an appraisal of the property. Sometimes they cover the cost but not always.
Land Survey Fee $150 - $350
May be required by you lender.
Mortgage Processing Fee $85 - $150
This is just an institutional fee that can't be avoided
CMHC Loan Insurance Varies + $185
When you pay less than 25% as a down payment you are required to buy loan insurance from CMHC. The amount works on a sliding scale from a 5% down payment costing 3.75% of mortgage amount, to a 35% down payment costing only 0.50% of mortgage amount. CMHC also has an application fee of $185
Property Purchase Tax Varies
The tax is based on 1% of the first $200,000 of the purchase price and 2% on the balance. You may be exempt from this tax if you are a first time home buyer.
GST Varies
This 6% tax is payable on new homes or any home that has been substantially renovated. In most cases, if the owner occupies the home and it is less than $450,000 you are eligible for a rebate and usually pay only 4.48%.