Buying a home is likely to be the biggest single financial transaction of your life. It can be a very exciting and emotional experience, but sound advice from your real estate professional will go a long way to making it a smooth and problem free process.
Typically, there are many steps involved in the process of buying a home, including:
- selecting a realtor
- determining your needs
- financing options
- looking at properties
- making an offer – the contract of purchase and sale
- completion and moving
- additional costs
While not every real estate transaction will involve all of these steps, we have provided information on each so you will know what to expect.
Let’s take a look at a brief outline of each of these steps.
- Selecting a realtor
As with all major financial decisions, seeking sound professional advice is certainly prudent. Selecting a competent realtor is an important part of this process. Our realtors are licensed real estate professionals adhering to a strict ethical code and committed to representing and promoting your best interests. - Determining your needs
What are you looking for? What do you need versus what you want? By determining your needs from the outset, this will provide a focus to make efficient use of both your time and your realtor’s time. Your Macdonald representative will help you put together a prioritized list of your requirements such as price, location, accommodation and other needs or preferences you may have. Your realtor will then bring his or her experience into play and counsel you with regard to your various options. - Financing options
Mortgage pre-qualification: what does this mean to you? Your mortgage broker or financial institution will discuss financing options and provide you with a mortgage amount and rate guaranteed for a certain period of time. Being pre-approved is advantageous for the following reasons:- it may help you refine your search parameters;
- the guaranteed interest rate lock in period protects you from interest rate fluctuations; and
- it will allow you to act more quickly when you find a property you would like to make an offer on.
- Looking at Properties
By now you should have your requirements and your financing in place. Now you’re ready to start looking at properties! Of course, you may have already been looking at homes advertised in the newspaper or on the internet. However, your realtor has access to the database of all properties for sale on the Multiple Listing Service ® and can provide you with specific information you may not have access to. Furthermore, they may also have access to listings on the MLS ® that may not have been advertised yet.
In many cases, once you’ve looked at some properties, it may be necessary to redefine your search criteria. Depending on availability and market value, your realtor will help you juggle your “wants” and “needs” and find you that perfect home! - Making an offer: the Contract of Purchase and Sale
So you’ve found the perfect home! This is when your realtor’s knowledge and training becomes invaluable – they will construct a legally enforceable contract containing terms that suit your needs and protect your interests. Part of this stage involves determining market value, ascertaining the condition of the property, stating how much you’re willing to pay, paying a deposit, suggesting a closing date, expiration of the offer, and a proposed set of conditions. Your realtor will:- negotiate on your behalf under the terms of the agency outlined in the contract;
- explain the whole legal process; and
- what you are committing to.Typical conditions may include a subject to financing, subject to inspection, subject to survey, subject to the sale of another property, and so on. Realtors are trained to use the appropriate legal terminology to suit the type of property you’re interested in purchasing. The issues can be complex – for example, knowledge of the Strata Properties Act as it pertains to strata-titled properties, oil tank issues relating to single-family homes, and so on.
The offering process often involves making or receiving counter-offers which your realtor negotiates on your behalf.
- Completion and Moving
Now it’s time to close the deal.
When an Offer has been accepted and all subject clauses removed, a deposit of at least 5% is normally held in Trust in accordance with the Real Estate Act. This amount forms part of the purchase price upon Completion. Completion may be any date in the future as stipulated in the contract, and is typically 60-90 days between Acceptance and Completion. As Completion approaches, you will need legal representation – your realtor can help you with this. Your legal representative will arrange to transfer title of the property from the seller to you, the mortgage financing will be transferred to your legal representative’s trust account, then to the seller, and the financial closing details will be recorded on a statement of adjustments. You then take possession of the property, normally a day or two later, as set out in the Contract of Purchase and Sale. - Additional Costs
In addition to the purchase price, you will need to take into account additional or extra closing costs that may be involved in the purchase.
For example:- property purchase tax of 1% on the first $200,000 and 2% on the balance will be applicable;
- G.S.T. is applicable on all new home purchases (which will be covered in your Contract of Purchase and Sale);
- if you have high ratio financing , a mortgage insurance premium of up to 2.5% may apply;
- moving expenses;
- home insurance;
- appraisal fees;
- surveying costs;
- your share of property taxes and utilities as outlined in the statement of adjustments; and
- legal costs and disbursements;
It is obviously prudent to cover all of these issues with your realtor as early as possible.
The above steps will vary from transaction to transaction, but in all cases, early consultation with a realtor will streamline the process and ensure a more pleasant home buying experience.
These comments are for information purposes only and do not constitute legal advice.