There are many questions and issues that are raised once you make the decision to purchase a home. We've tried to include some good basic information here and we encourage you to contact us for more detailed responses to these and other questions that may arise. We've broken the questions down into 5 categories:
CAN I AFFORD IT?
1. How does buying a home compare to renting?
Owning a home offers you the security of building a financial future for yourself and your family; it's a place you can truly call your own. You have the control of making any changes or renovations and with today's interest rates, it makes the cost extremely reasonable, often comparable to what you may pay in rent except you will be paying your own mortgage instead of someone else's.
2. What do I need to consider when preparing to buy a home?
The most important factors to consider are: the amount you can afford, the area in which you want to live, the features of a home you "must have" and "would like to have", and who to select as an agent. Then you need to ask yourself, "If I can't get what I want in my first choice of neighbourhoods, am I willing to look elsewhere or perhaps at smaller homes?" Your real estate agent can suggest other options available to you thereby enabling you to make an informed and intelligent decision.
3. What are the advantages of using a real estate agent?
A reputable real estate agent is highly skilled and trained in the areas of current real estate markets and trends, negotiation, and consultation with their buyers or sellers to determine their needs and the best course of action for them. This knowledge translates into you making an intelligent, informed and profitable decision because you are able to make use of their assistance and guidance throughout the process of buying or selling a home.
4. What should I expect from my real estate agent?
A real estate agent should be knowledgeable, experienced, honest, a good communicator and negotiator. They will have the ability to listen, discover and understand your needs and respond to those needs and concerns.
5. Who pays my realtor's commission?
The seller pays the commission for both his/her own agent and the buyer's agent. However, there are rare cases where the buyer pays under a different type of agency.
6. How much can I afford?
It is recommended that you speak to your mortgage consultant or banking officer to determine the exact amount you can afford, but the general guidelines used by financial institutions are as follows:
- GDS (Gross Debt Service) recommends allowing 30-35% of your gross annual income toward your mortgage principal, interest and tax payments.
- TDS (Total Debt Service) recommends allowing 40-42% of your gross annual income towards your mortgage principal, interest and tax payments as well as including any other financial liabilities such as loans, lines of credit, car payments, support payments, etc.
7. How do I arrange a mortgage?
You have two options: through an independent mortgage consultant or a bank/trust company. A mortgage consultant can usually offer you a better interest rate because he will shop around at various financial institutions to offer you the best available rate. There is no charge for using the services of a mortgage consultant and there is often no personal meeting required. A bank will offer you their mortgage rates and nothing else. Your real estate agent can recommend you to a respected mortgage consultant.
8. Should I get a pre-approved mortgage?
Yes, it will guarantee you a specific interest rate at the time of closing even if rates increase between the time you are pre-approved and your closing date. It will also clarify exactly how much you can afford to pay for your new home, giving you some negotiating power with your offer.
HOW DO I FIND MY NEW HOME?
1. Where do I begin the process of looking for a home?
There are many options available to you. The internet offers a wide variety of information including homes available for sale, prices, market conditions, city/neighbourhood information, etc. Books and magazines may be helpful in determining the style of home that interests you the most. Your real estate agent will also be able to answer any questions you may have about the real estate industry and can provide you with a list of available homes once your search criteria has been established. Your agent will also arrange appointments for you to visit properties.
2. What is the best way to search for homes?
Your agent can email you a detailed list of homes every day that match your criteria saving you the time and frustration of searching various websites, newspapers or calling For Sale signs - none of which offer much information.
3. Can I preview homes myself before viewing them with my agent?
Yes, a successful real estate agent can email you detailed listings (including addresses) of homes matching your search criteria allowing you to take a 'drive by' preview of the home. You can then determine the curb appeal of the home and the street or neighbourhood before viewing the home with your agent. If the home does appeal to you, your agent can then arrange an appointment for you to inspect the home.
4. Can I preview homes in another city before actually visiting them?
Yes, the Internet has proven to be extremely advantageous in this area. Often, a realtor can provide you with numerous photos or a virtual tour of a home, allowing you to view the interior of the home before actually visiting it. The Internet can often also provide you with neighbourhood information, amenities and various other city statistics. A realtor in your current neighbourhood should be able to refer you to a reputable realtor in another city, who will also be able to provide you with information about the city.
5. What should I pay attention to when I am looking at homes?
You should pay close attention to the things you cannot change easily or at all. This includes the space, layout, location, style, parking, roof, windows, yard, kitchen, washrooms, taxes and price. These items will help you determine if it suits your needs. Do not worry too much about the mechanical structure, as a home inspection will report any problems. Remember to keep an open mind. There will not be a home that is 100% perfect.
6. What are the most important factors to consider in my home purchase?
A home purchase is a package with many different factors including location, size, style, condition, etc., in relation to its asking price. It is most important to ensure the home meets your needs and wants in relation to the price. A skilled realtor can assist you in determining if the home is right for you.
7. What should I tell my agent about the homes I see?
You should feel comfortable to be completely honest with your agent about the homes you see. You need to tell your agent about your likes and dislikes of every home you see. Your feedback is critical in the buying process. It helps both yourself and your agent determine exactly what you're looking for and can save time and frustration by eliminating unsuitable homes that you may have otherwise visited.
8. How many homes should I look at before I am ready to buy?
There aren't a certain number of homes you should see before you buy one. The first one you see may be "The One" or it may take longer, depending on availability and your understanding of the market. Trust your instincts. You will know it's the right one when you see it.
THE PROCESS OF BUYING
1. What are the major elements of an offer?
The major elements of an offer are pricing, your deposit amount, arranging conditions such as financing, inspection and obtaining a copy of the survey before the deal is considered firm, inclusions & exclusions (i.e. are the vendors including the appliances, window coverings, and other fixtures in the house?), arranging further visits to the home before closing, and the closing date. Your agent will discuss all of these elements in detail with you before presenting an offer.
2. How much deposit do I need?
There is not a legal minimum or maximum deposit required, however, the standard is 5-10% of the purchase price. The deposit is due when your offer is accepted.
3. How do I present an offer?
After all the terms and conditions of the Offer to Purchase (the legal document explaining all the details of your offer) have been determined, your agent will present it to the seller and their agent on your behalf. They may accept the offer, or they may present a counter offer back to you. There could be a few counter offers from you or the seller before an agreement has been reached. It is essential during this period to work with an experienced, skilled real estate agent who can negotiate your best possible price and terms. Once an agreement has been reached, all parties involved will sign the agreement, which will then be considered executed.
4. How do I get the best price for a home?
You will obtain the best price by having a good understanding of the market and knowing what the home is worth, being reasonable with your offer - you don't want to offend the seller by offering a lower price than what the home is worth, and hiring an expert negotiator to present your offer on your behalf.
5. What is the best strategy to proceed with when a seller has more than one offer on their home?
This is a complex situation with many different factors associated with it. A common recommendation is to present an offer with no conditions allowing the deal to be firm immediately upon acceptance. However, an experienced & skilled negotiator can recommend what your best course of action would be, based on your situation.
6. How do I determine my offer price?
Your realtor will provide you with a list of recent sales of similar homes in that neighbourhood. This will give you a good understanding of the home's current market value. Through discussions with your realtor, you will then determine a fair offer price based on the market value and the condition and the features of that particular home.
PROTECTING MYSELF
1. Why should I have an inspection?
It gives you peace of mind of knowing you will not have any surprise repair expenses or liabilities in the future. Your real estate agent should be able to recommend you to a reputable home inspector.
2. What happens during an inspection?
The inspection will last about three hours as every aspect of the home, both exterior and interior are inspected. This includes everything from the basement to the attic, foundations, drainage, ventilation, heating, cooling, plumbing and electrical systems, the lot, landscaping, driveway and walks, walls, floors, windows, etc. The inspection will cost approximately $300.
3. Should I be present during an inspection?
Yes, the home inspector will comment on the state of the home as he inspects each area. You will gain a better understanding of the home, the state of the workmanship, the mechanical systems, and any deficiencies the home may have and how to rectify them. The inspector can predict major repairs that may be necessary several years from now, so you will know what to expect in the future and how to plan for it.
4. Are there any other inspections that need to be done on a home, other than the standard home inspection?
Yes, you may want to have the home inspected for termites. Gas, oil or asbestos inspections can be done but are rare and a retrofit inspection may be necessary for income properties.
5. Do I need to arrange home insurance?
Yes, insurance does need to be arranged to become effective on the closing date. Your real estate agent should be able to recommend you to a reputable insurance agent.
6. Can I protect myself against emergency repair bills in my new home?
Yes, a home warranty plan can offer you protection against many potentially costly problems that may not be covered by your home insurance. These warranties can save you thousands of dollars should you experience a major mechanical breakdown in your new home.
7. Do I need a lawyer?
Yes, once an offer has been accepted, your lawyer will search the title of the property ensuring it is free of encumbrances, review status certificates for condo buyers, register your mortgage, and collect the keys to your new home on the closing date, among various other tasks.
THE CLOSING PROCESS
1. What are my closing costs?
Your closing costs will depend on the complexity of your offer and whether or not your quote includes legal disbursements such as searches, photocopies, couriers and mortgage arranging fees. You can expect to pay between $600 and $1200 plus disbursements.
2. What happens on the closing date?
Your lawyer will transfer the deed and cheque at the registry office and collect the keys from the seller's lawyer. You can pick up the keys from your lawyer in the middle of the afternoon (confirm the exact time with your lawyer). You will be able to move into your new home after collecting the keys.
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