Buying a property

Congratulations on taking the first step to buying your new home. We work hard to make your experience as enjoyable and trouble free as possible. It is very rewarding to help our clients find the perfect place to hang their hats.

Working together:

Buying a house is a team effort. The team is you and your sales person.

Make a “wish list”. Get your families input on this. Put items in order of importance. For example, if you have 3 teenagers, a second bathroom will probably be more important than a fireplace, especially when you can always add a fireplace later.

  1. Arrange your financing. This way you will know exactly how much you can afford. It’s very disappointing to put an offer on a home only to find that you can’t qualify for the mortgage. We have professionals who can help you.
  2. Be brutally honest. When you see a home, don’t be afraid to speak up about your like and dislikes. It really helps us when we find another home. If it has a feature that you just hate, we’ll stay away from it and spend our time showing you homes that we know you’ll like.

Performance Warranty for Buyers

Very few sales representatives offer this guarantee for people selling their home in our region. We're proud to say that we were the first. When you sign a Buyer's Agency agreement with us and if we can't make you happy with our service, we will gladly release you from the agreement. Buying a home is a partnership between the Realtor and the Buyers. We have to be able to work together to be successful.

Home buying process

Buying a home is exciting and exhausting all at the same time.

We try to make it fun. If it's to be your first home, it's the most important decision you'll ever make. But it will be very satisfying to know, that you will probably be paying out less money each month to pay your own mortgage, than you paid in your rent which paid your landlord's mortgage for him.

You will read about conditions as you go along. A condition just says that you want to do something and be happy with the results. If you're not happy, there is no deal.

For example, we make your purchase conditional upon you having a building inspection and liking what the inspector reports. If something is wrong, then you can back out of the offer.

Another common condition is that you get your financing approved. If a problem is discovered, then there's no deal.

Conditions are there to protect you, the buyer.

Other things you might find of interest.

Buyers Traps

The selling and buying of a house can be a stressful and confusing process. Not only is it very expensive to 'learn from your mistakes' but very few people move often enough to gain the needed experience. Although there is no substitute for doing your homework (start by asking your family and friends who have recently moved for their experiences), the following list of common pitfalls may be helpful.

  1. Looking for a house without getting pre-approved by a lender
    When you are pre-approved, you are effectively a cash buyer. This makes it much easier to negotiate with the seller. It also tells us what price range to look in when we're searching for your new home. Do not mistake pre-approval with pre-qualification which is only the first step in gaining pre-approval.
     
  2. Failing to check out the neighbourhood thoroughly before buying
    How do traffic patterns change depending on the day, or even the time of day? Are there any future developments in the works? Is that nice greenspace down the road actually zoned for high-rise development? Does your worst enemy live next door? Ask around - check it out first.
  3. Making an offer based upon the asking price, not the actual market value
    Listen to your Realtor. He/she can tell you what similar properties sold for in the immediate area? How long were they on the market? How does this one compare? Is it over-priced, under-priced, or fair value? There’s a lot of skill involved in deciding on what to offer. You want to get the best price possible but so does the owner. The trick is not to insult the owner. If you do, you will end up paying more for the house if you really want it.
     
  4. Listening to the wrong people
    You will get a lot of advice from very well-meaning people, many of whom love you a lot and want to protect you. The problem is that many of them haven’t bought a house in years and the whole process has changed immensely.

    The most common misinformation we hear is the following. Years ago, if the bank had to foreclose on a property, you could pick it up very cheap, usually for whatever was owing on it. Many old timers believe this is still so. THIS IS VERY WRONG. Now, the banks have to be able to prove that they have received the best price possible for the house. If it is bought for a low price, it's because it needs a lot of work. If you're prepared to sink a lot of time and money into it, you will be happy. But, you'll still pay fair market value for it. Also, there’s a huge difference in prices between cities, so out-of-towners will be way off. So, make sure you’re listening to people who are in the know.
     
  5. Letting "first impressions" affect your decision too much
    There are entire books written on how the first impression of a home is the single most decisive factor affecting many purchasers' decision to buy. Don't let bad decor or messy housekeeping scare you away from a structurally solid home that meets all your needs. Remember, you are buying the house, not the furnishings. Soap and paint can do wonders.

  6. Buying a home without a professional house inspection
    When buying a house, consider getting a professional to do a home inspection for you. Not only will you know what you are buying, but his fee may save you thousands of dollars in unexpected repairs. He will also give you tips on how to take care of your home, or fix a problem, or build an addition. He’s a walking encyclopedia. Arrive with questions. He’ll love it and you’ll learn a lot.

  7. Assuming that the Bank's quoted mortgage rates are written in stone
    Like many industries, banks are experiencing increased competition and are often willing to negotiate mortgage rates. You can avoid the headaches by dealing directly with a mortgage broker. They work for you, not the bank, and negotiate the best possible rate for you.
     
  8. Not shopping for home insurance until you are ready to move
    If you wait until the last minute, you will be rushed in finding insurance. Allow time to shop around and get the best deal. Also, insurance companies sometimes want to inspect the house. Allow time for this.
     
  9. Signing documents without reading them
    Do not wait until the last minute before reading the documents. Although your Realtor will go over it all with you when you put in your offer, there's a lot of info to remember especially when you're excited. Try to get copies of all documents early on in your home search so that you can peruse them at your leisure.
     
  10. Making verbal agreements
    Not only are they harder to enforce, but any written contract you sign will override a verbal agreement that you have made with the owner. Contract law says that verbal agreements are not enforceable when they deal with Real Property. Always get it in writing! Your Realtor can help with this by putting everything in your offer. Mark Twain said that an oral agreement isn’t worth the paper it’s written on. So true.

Home Inspections and Home Inspectors

Why do I need a home inspection?

You need an inspection so you know what you’re buying! Clients don’t often know about the wiring, insulation, or age of the furnace etc. If there’s a problem, you need to know about it ahead of time. Then, you can decide whether or not you will go forward with the sale.

Sometimes the owner will decide to repair a problem. Sometimes the Buyer decides it’s not a big deal. Either way, you need all the information on that property that you can get, so you can make an informed decision.

And, if your inspector finds a major problem, he can save you thousands of dollars.

What does a home inspector do?

A properly trained home inspector will inspect everything in the house.

They usually start on the outside looking at the brick or siding, the roof, and the basement walls, eavestroughs, and how the lot is graded away from the house.

On the inside he will inspect the wiring, including the plugs & light switches. In older homes he’s especially careful to look for any knob & tube wiring (which is the old cloth covered wiring sometimes found in older homes) which could impact on your house insurance.

They’ll look at the plumbing throughout the home with an eye out for galvanized steel pipes which most insurance companies will want replaced.

They’ll check the furnace & air conditioning and the ductwork.

They’ll check the inside basement walls to make sure the building is structurally sound.

They’ll go in the attic to check the inside of the roof and for insulation. 

They’ll also look at flooring, windows ( including the age and condition), cupboards etc. He can tell you if anything needs to be replaced or repaired and give you an estimate of the costs involved.

They will want you there to accompany him as they work so they can explain as the inspection progresses. This is also a good time to ask questions. Bring a list with you. If you want to remove a wall, they can advise you if it can be done. Often, they’ll tell you how to do it. They’ll enjoy your questions and you will learn a lot.

An inspection for a 165 to 205 m2 (1800 to 2200 sq. ft.) home typically takes about three hours and costs around $320. Following the inspection, the buyer is presented with a written report, with all the details of the inspection and the inspector will explain the limitations of the inspection to avoid misunderstandings.

You’re Realtor should also be there with you.

Why Use a Realtor When Buying

    • REALTORS have considerable knowledge of market values, the properties available in your price range and homes that will match your individual needs. A REALTOR can tell you about financing and property taxes, as well as schools, places of worship and services in the neighbourhood. When you work with a REALTOR, you have direct access to a vast library of information and experience. More specifically, the REALTOR will:
      • Review your list of needs and wants in a home, and help you determine the price range of homes you can consider.
      • Answer your questions about the market you're interested in, and help you compare homes from one neighbourhood to the next.
      • Introduce you to a broad range of possible homes. REALTORS have direct access to the Multiple Listing Service (MLS), which provides details on a wide variety of properties in the markets you're exploring.
      • Preview properties so you're shown only those homes that fit your budget and match the list of needs and wants you've prepared.
      • Make the appointments to show your candidate homes.
      • Explain the various financing alternatives available and provide up to date information on interest rates and mortgage options.
      • Act a mediator to head off potential conflicts between you and the seller, draw up a legally binding contract and assist you with all the details required to complete the transaction successfully.
         
    • If you plan to buy a condominium
      It's often said that buying a condominium is buying a lifestyle. What does that mean? Condominium living is different from owning or renting a single dwelling, town house or apartment, because condos have a dual nature. Condominium owners hold title to their units and share responsibility for the operating costs of the balance of the property (common elements such as lobbies) that makes up the condominium. There are many advantages to condominium ownership. It may be less expensive than other types of home ownership. It can provide an "instant" sense of community. While someone else is shoveling the snow, you can participate in community decision-making. But condominiums are not everyone's cup of tea. Condominium corporations may set restrictions on such things as owning pets, or having an outdoor barbeque.
       
    • Ontario's new Condominium Act provides better protection for consumers. It provides stronger protection for purchasers by setting out information (e.g. whether the developer intends to lease some of the units) to be provided when they buy a unit. It makes sure owners have a say in the way the corporation is run. It also establishes new types of condominiums. If you want to change your mind and cancel the contract, the legislation gives you a 10-day "cooling off" period from the time you receive a copy of the signed purchase and sale agreement or the disclosure statement (whichever comes later). In some circumstances you may have additional time to cancel the contract if there has been a material change as defined in the Act.
       
    • Making the fine print clear
      Some new condo owners say they didn't know what they were getting when they bought a condominium. The developer must provide a table of contents as part of the disclosure statement. The table of contents will help the purchaser find information quickly and easily in the declaration, bylaws, rules or disclosure statement about such things as whether a building on the property has been converted from a previous use and or any restrictions on pets. Purchasers will want to look closely at the types of facilities and services that are offered. The Ontario Human Rights Commission has ruled that adult-only buildings discriminate against families. However, some condos do aim to meet the specialized needs of families with small children, for example, by providing playgrounds. Others may be built with seniors in mind.. How is the condominium run?

      The condominium corporation is run by a board of directors elected by the owners. The board’s function is to manage the corporation. A new requirement will apply once the developer turns over control of the board to the owners. A new requirement will ensure that if at least 15 per cent of the units are owner-occupied, one position on the board will be is reserved for election by owner-occupants. In this way owner-occupants are assured representation on the board. Major decisions are voted on at owners’ meetings. Under the new Act, annual general meetings must be held within six months of the end of the condo corporation's fiscal year to ensure that unit-owners have an opportunity to review the financial statements in a timely manner. Participation in community decision-making is a benefit of condominium living.

All about Wells and Septic

If you are buying a country property, it would be foolish not to have a septic inspection. It will cost between $150. and $300. and could save you up to $20,000 if it isn't working properly or needs to be replaced. In fact the most common reason for lawsuits after a sale is a faulty septic.

Any of the companies that do septic pumping can do this for you. They will give you a certificate stating its condition.

This should be a condition in your offer. This way if the septic fails the inspection, you do not have to buy the property.

If your drinking water will be coming from a well, we always need a water test to prove that the drinking water is safe to drink. The banks require this.

There are other tests that can be done to measure for sulphur etc. or for how much water the well can supply for your household.

Using your RRSP for down payment

Although this program does not fall under CMHC's jurisdiction, as a first time buyer you can take advantage of Revenue Canada's permission of tax free withdrawal from a Registered Retirement Savings Plan for the down payment on a home.

The guidelines are as follows: Only purchasers who meet the definition of a first time home buyer qualify. If only one of the purchasers qualifies, only they may cash in their RRSP for down payment purposes under this program.

Each purchaser may borrow up to $20,000.00 from their RRSP to use as a down payment on a qualifying home. (i.e. two purchasers may use $20,000 each) Revenue Canada considers these withdrawals to be a loan you are making to yourself. You must make repayments to your RRSP of equal amounts over the next 15 years.

If the amount is not repaid in a year, that year's amount will be taken into income and taxed. It is acceptable to repay more than 1 / 15th of the funds per year.If less than 1/15th is repaid in one year the difference is taken into income for that year and taxed.

In order for a home to qualify, it must be located in Canada and intended to be used as your principal residence.

To receive RRSP funds for a down payment one must complete form T1036 (download now or get it at a local Revenue Canada office) and take it to the financial institution that holds the RRSP.

Example of RRSP for down payment repayment schedule

Purchase price

$175,000.00

5% RRSP down payment

$8,750.00

Mortgage

$166,250.00

Insurer premium

$4,488.75

8% Ontario PST on premium

$359.10

Mortgage Payment

$1,017.46

Payback of

RRSP required

$48.61

Total

$1,066.07

Note: Payments are monthly

Closing Costs

Now that you know what you can afford, the next step is to determine the additional costs of the home-buying process. According to CMHC and GE Capital, you should have, in addition to the down payment, at least 1.5% of the purchase price for closing costs (we say 2%, just to be on the safe side). The costs vary across provinces, and for that matter, cities. Below you will find a brief explanation of these costs, it may not include all items required specific to your property, or the area in which you have purchased. This is a guideline.

Closing Adjustments:

The items known as “closing adjustments” include the following which are the most common:

      • Your share of the property tax. If the owner has paid the taxes for the year & you buy in June, then you owe him for 6 months taxes.
      • If the home has an oil tank, the owner is required to fill the tank, then you pay him for a full tank of oil.

Legal Costs and Disbursements:

A lawyer or notary will charge a fee for their professional services involved in drafting the title deed, preparing the mortgage, and conducting the various searches. Shop around. All lawyers don’t charge the same amount. It should be about $600. The disbursements, on the other hand, are out-of-pocket expenses incurred, such as registrations, searches, supplies, etc., plus G.S.T.

Land Transfer Tax:

Most provinces charge a land transfer tax, payable by the purchaser, and the amount varies from province to province. This tax is based on the purchase price . In Ontario, first time home buyers who purchase a newly constructed home get a refund up to $1725.

The Land Transfer tax is calculated as follows:

.5% of the first $55,000. plus

1% of everything between $55,000 and $250,000.

1.5% of any amount over $250,000.

If you need a mortgage for $150,000 the tax would be as follows:

$275.00 ( .5% 0f $55,000) plus

$950.00 ( 1% of $95,000 )

$1225.00 total taxes

Other Costs

Appraisal Fee:

The appraisal provides the lenders with a professional opinion of the market value of the property. This cost is normally the borrower's responsibility and it ranges as low as $150 for a drive-by appraisal to as much as $240 for a full appraisal, and the average being $175, plus G.S.T. Occasionally, the costs could be slightly higher for larger, custom-built homes, or homes in remote parts.

Home Inspection Fee:

A professional inspection of the home, top to bottom, and is for the benefit of the buyer, therefore, that's who absorbs the cost. A typical home inspection can cost anywhere from $250-$350, but our opinion is that they are well worth the investment. When hiring a home inspector, make sure the inspector has liability insurance, just in case a mistake is made.

Fire Insurance:

All mortgage lenders will require a certificate of fire insurance to be in place from the time you take possession of the home. The amount required is generally at least the amount of the mortgage or the replacement cost of the home. This cost can vary on the property size and extras being insured, as well as the insurance company and the municipality. The cost can vary anywhere from $250-$600 for most properties.

Provincial Sales Tax of 8% (P.S.T.):

If your mortgage is CMHC or GE Capital insured (less than 25% down payment), there is P.S.T. of 8% in Ontario, payable at closing. While the insurance premium can be added to the mortgage amount, the P.S.T. must be paid at closing.

Land Survey Fee Or Title Insurance Fee:

A recent Survey of the property is usually not required by the lender. It normally costs anywhere from $600-$900 for a new survey. In lieu of Survey, most lenders today will accept Title Insurance, as a much lower price of approximately $225. Mortgage Application and Processing Fee:

On a high-ratio insured mortgage (mortgages above 75% of the purchase price), the mortgage insurer (CMHC or GE Capital) charges a fee of $165-$185 for applying and processing the file, as well as appraising the property. On new homes, this fee drops to $75.

G.S.T.:

On the purchase of a newly constructed home, GST is payable, but make sure you know who pays this, you or the builder. Therefore, on the offer, the purchase price will say "Plus GST" or "GST Included", and who gets the GST new home rebate. A lot of builders have included this cost into the purchase price so that the buyer does not have to come up with that at closing. (As well, this tax is also charged on all professional fees)