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Your home will likely be your most expensive purchase. That is why you should have all the facts before you make the decision to buy a new home. This report explains the 10 most important tips to consider when purchasing a home.
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Before you buy:
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1. Try to get Pre-Approved |
| A pre-approved mortgage can be easily obtained and saves you time and energy when placing an offer. With a pre-approved mortgage, you can shop with freedom, confidence and security because you know the money will be there to purchase the home you choose. |
2. Determine What You Need |
| Determine what you are looking for in a home. Buyers often get swept up in the emotion and excitement of the buying process and purchase the wrong home. Take the time upfront to clearly define your wants and needs. Put it in writing and measure every home you look at with it. |
3. Do Your Research |
| Be sure to research the market and the neighbourhood so that you have a good understanding of what you should be paying for your new home. This way you can determine how to bid on a home and when you’re getting a good deal. If you fail to research the market, making your offer would be like bidding blind. Without knowledge of the market, you could easily make a bad bid. |
When you find the right home: |
4. Do a Thorough Inspection |
| Don’t expect the seller to confess all the problems with the home. You need to be inquisitive and investigate for yourself to be sure that the home really is a good buy and that you are getting a good deal. Be sure to conduct proper home inspections early on, so that any problems that are detected can be solved prior to closing. You may consider hiring an inspector to examine the home. Make sure you make the contract contingent upon approval from the inspector. |
5. Property Surveys are a Must |
| As part of your purchase offer, you should add a property survey. This will help you determine where your property begins and ends and will help you determine how to use it. Current surveys should show all structural changes to the home. |
6. Visit After Signing |
| Have a clause added to your contract that allows you a couple of visits to the home before closing with one of them taking place 24 hours before closing. Many owners begin neglecting the home once they know it is sold. By visiting before closing, you can identify if there is a problem and put a stop to it. |
7. Think about the Hidden Costs |
| Make a list of all the fees you may incur in closing the home so that you know exactly what you will be paying. Having unexpected expenses when moving is something you’ll want to avoid. Sit down with your Realtor if need be, and ask them what you should be considering. This way you will know what to expect and will be prepared. |
8. Consider Breach of Contract |
| Always take into consideration the “what if” case. It is always possible for the other party to fail to fulfill the contract fully or to attempt to change some of the terms. When drafting the contract always agree ahead of time on a dollar amount to cover the items specified in case the seller fails to comply. In this case, you can get the cash from the seller and complete whatever is needed to be done. |
9. Check the Title |
| Before you close, make sure that the house will be yours free and clear. Often times there are tax liens, easements, undisclosed owners or other circumstances which could cause major issues in the purchasing of your home. Be sure that you are making the right decision. Hire a legal professional. |
10. Take Your Time on Closing |
| People can get excited when closing and may rush through the paperwork. Don’t make this mistake. Take your time and review everything before signing it. Make sure that all the conditions in the contract have been fulfilled and that there is nothing outstanding. Make sure the documentation reflects the transaction and that nothing has been added or subtracted. |
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THINGS TO BE ON THE LOOKOUT WHEN THINKING ABOUT BUYING A CONDO |  |
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Many types of rules affect condominiums. Should you be concerned about what specific rules are imposed by the Condominium Corporation in which the unit you are thinking of purchasing is located, make sure your representative, yourself or your lawyer speaks with the property management office.
Some of the types of rules that may affect you include:
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- No internal changes to unit or changes to common areas without written consent of management.
- Mandatory carpeting on various types of floors to reduce sound transmission, or restrictions against hardwood floors.
- No barbequing on balconies and no enclosing of balconies.
- No satellite dishes or antennae.
- No parking of commercial or recreational vehicles.
- Rules regarding the use of elevators. The moving of furniture using elevators may be restricted to specific hours, require reservations and/or security deposits. If you are purchasing a condominium where an elevator or a loading area must be used for your move, contact the management office as soon as possible to book your moving date.
- No office business or commercial uses within condominium units.
- Specific pet restrictions.
- Mandatory types and colour of window coverings (usually white or off-white) that can seen from exterior of building.
- Restrictions on planting and other uses of exterior patios.
- Unit owner's liability for damaged exterior doors, including garage doors and/or added items such as central air, fireplaces, etc.(particularly in townhouses).
- No noise generated by musical instruments.
- Short term rental restrictions and other tenancy requirements.
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| If you do not comply with a specific rule affecting your condominium, the Corporation has the right to get a court order directing compliance and ordering payment of legal costs by the unit owner. If you intend to rent your unit after completing a purchase, insert a clause in the tenancy agreement that the tenant will comply with all rules and by-laws of the Condominium Corporation. |
THE BUYER REPRESENTATION AGREEMENT | |
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| In real estate, there are different possible forms of agency representation. A real estate brokerage representing a buyer must do what is best for the buyer. A written contract, called a buyer representation agreement, creates an agency relationship between the buyer and the brokerage, and establishes buyer representation. It also explains services the brokerage will provide, establishes a fee arrangement for the REALTOR’s services and specifies what obligations a buyer may have. |
| Typically, buyers will be obliged to work exclusively with that brokerage for a period of time. Confidences a buyer shares with the buyer’s agent must be kept confidential. Although confidential information about the buyer cannot be disclosed, a seller working with a buyer’s agent can expect to be treated fairly and honestly. |
Dual representation |
Occasionally a real estate brokerage will represent both the buyer and the seller. The buyer and seller must consent to this arrangement in writing. Under this dual representation arrangement, the brokerage must do what is best for both the buyer and the seller. Since the brokerage’s loyalty is divided between the buyer and the seller who have conflicting interests, it is absolutely essential that a dual representation relationship be properly documented. Representation agreements specifically describe the rights and duties of everyone involved and any limitations to those rights and duties. |
Customer service |
| A real estate brokerage may provide services to buyers and sellers without creating buyer or seller representation. This is called “customer service.” Under this arrangement, the brokerage can provide many valuable services in a fair and honest manner. This relationship can be set out in a buyer or seller customer service agreement. Real estate negotiations are often complex and a brokerage may be providing representation and/or customer service to more than one seller or buyer. The brokerage will disclose these relationships to each buyer and seller. |
Who's working for you? |
It is important that you understand who the REALTOR is working for. For example, both the seller and the buyer may have their own agent which means they each have a REALTOR who is representing them. Or, some buyers choose to contact the seller's agent directly. Under this arrangement the REALTOR is representing the seller, and must do what is best for the seller, but may provide many valuable customer services to the buyer. A REALTOR working with a buyer may even be a “sub-agent” of the seller. Under sub-agency, both the listing brokerage and the co-operating brokerage must do what is best for the seller even though the sub-agent may provide many valuable customer services to the buyer. |
| If the brokerage represents both the seller and the buyer, this is dual representation. |
THE AGREEMENT OF PURCHASE AND SALE | |
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| The Agreement of Purchase and Sale represents the most complex document used in residential real estate. The agreement contains an intricate interplay of legislative requirements, common law principles and generally accepted practices. |
| Some of the major elements are: |
| PRICE | depends on the market and you, the buyer, but generally the price offered is different from the asking price. | | DEPOSIT | the deposit shows your good faith and will be applied against the purchase price of the home when the sale closes. | | TERMS | includes the total price you, the buyer are offering as well as financing details. You may be arranging your own financing or you may ask to assume the seller’s existing mortgage if he or she has an attractive rate. | | CONDITIONS | these might include “subject to home inspection”, “subject to obtaining financing or “subject to the sale of the purchaser’s property” or in the case of a condominium, “subject to your lawyer obtaining a Status Certificate” and appropriate condominium documentation and finding all the foregoing satisfactory. | INCLUSIONS/
EXCLUSIONS | these might include appliances and certain fixtures or decorative items such as window coverings. | | CLOSING DATE | the day the title of the property is transferred to you, the buyer and funds are received by the seller. |
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| When it comes time, the real estate professional representing you will communicate your offer to the seller’s agent. Sometimes, there may be more than one offer on the property. These offers can be firm or conditional. The seller has the option of accepting, rejecting or submitting a counter offer. In this case, you, as a prospective buyer may decide to change terms in reference to the price, the closing date or any conditions based on the seller’s input. The offers will go back and forth until both parties have agreed or one of the parties ends the negotiations. Your realtor will offer you counsel throughout this negotiating phase. |
BUYER’S COSTS | |
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| A number of costs are associated with buying a property. As a buyer, you are responsible for: |
- Your Legal Fees: real estate fees vary, but for a purchase file with one mortgage, they are approximately $650 to $850 plus disbursements such as Registry Office searches, deed registration, mortgage registration etc., which can range from $600 to $700. The actual fee will depend on the purchase price and the particular transaction itself. In addition, GST must be added on all of these. Your real estate lawyer will provide you with details.
- Provincial Land Transfer Tax: a tax imposed on real property typically calculated on the value of the property being registered in the land registration office. The following formula applies for residential properties:
0.5% on the first $55,000 of the purchase price plus
1.0% on the amount exceeding $55,000 up to and including $250,000 plus
1.5% on the amount exceeding $250,000 up to and including $400,000 plus
2.0% on the amount over $400,000 - Toronto Land Transfer Tax: Last Fall, Toronto City Council approved a new municipal land transfer tax that will be levied on top of the provincial land transfer tax. This Toronto land transfer tax only applies to transactions within the City of Toronto and goes into full effect as of February 1st, 2008. The following formula applies for residential properties:
0.5% of the amount of the purchase price up to and including $55,000 plus
1% of the amount of the purchase price between $55,000 and $400,000plus
2% of the amount of the purchase price above $400,000 - Survey: in the case of a detached, semi, link and/or freehold property, the Seller usually has an existing survey and makes it available to the Buyer. Most financial institutions will accept an existing survey if it accurately depicts the location of the buildings on the lot. If the survey is out of date, it is the responsibility of the Buyer (unless the Agreement provides otherwise) to obtain a new survey prior to closing, the approximate cost is $700 to $1,000. For condos, a survey is not needed since condo plan surveys are always on file in the land registry system and are usually too bulky for dealing with copies for processing a sale transaction.
- Title Insurance: a less expensive alternative to obtaining a new survey which is acceptable to most financial institutions is a product called title insurance. The cost of title insurance to the Buyer is a one time fee of $270 and is arranged for by the Buyer's lawyer. This insurance policy insures both the lender and Buyer against any actual losses suffered by the lender or Buyer as a consequence of it being determined at some future date that the house and other structures in existence at the time of purchase are improperly located on the lot.
- Adjustments: refers to those items requiring apportionment as of the date of closing of the transaction. These include: fuel, insurance, interest on assumed mortgages, rent, taxes/local improvements, and water/utilities.
- Home Inspection: if an inspection is required, it will cost approximately $300 to $500.
- Arranging a Mortgage: appraisal and administration fees that may be incurred depending on the lender.
- Your Move: the cost will vary based on the moving company and extent of service chosen.
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| In the case of a condominium, the buyer may be responsible for the cost of obtaining a Status Certificate from the management company. The cost is $100 inclusive of GST. |
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| Your home is likely your most expensive asset. That is why when you sell your home you should make sure you understand all the terms and conditions involved to ensure you end up on top. These tips were compiled to help sellers like yourself understand the key points to watch over and to help you better understand the home selling process. |
Before Selling: |
1. Select a Realtor |
| A professional Realtor knows the market and your area and can provide you with information on past sales, current listings and develop a marketing plan for your home. Make sure you see multiple candidates before making your decision. Evaluate each candidate carefully on the basis of their experience, qualifications, enthusiasm and personality. Always choose somebody you can trust and somebody that you have confidence in. If you choose to sell on your own, you can still talk to a Realtor. They can often help with paperwork, contracts, etc. By being in touch with a Realtor if problems arise, you will have an experienced individual that you can readily call upon. |
2. Shop the Market |
| To learn how to make your home look better, you can visit other homes on sale and see what you like and don’t like. Chances are other buyers will feel the same way and this can help you identify the do’s and don’ts for your home. A particularly important thing to note is not just the asking prices but the selling prices as well. You don’t want to price higher than your neighbours or it could end up taking you a long time to sell. |
3. Make Sure You Know Why You Are Selling |
| Make sure you have a clear understanding of why you want to sell your house and what are the key things you are looking for in return. Some people put price above all else, while others are more concerned about dates and conditions. Be sure you know what is important to you so that you can define your approach and stick to it. Depending on your goals, your approach can become very different. |
Setting an Asking Price: |
4. Get an Appraisal |
| Sometimes a good appraisal can give you a good indication of how to price. An appraisal is a good way to let prospective buyers know that your home can be financed. An appraisal does cost money, has a limited life, and there’s no guarantee you’ll like the value given to you. |
5. Remember Tax Assessments Aren’t Always Accurate |
| Many consider tax assessments as a way to determine the value of a home. Unfortunately, they do not always serve that purpose. Tax assessments are based on criteria that may not be related to the value of your property and thus may not indicate the real value of your home. |
6. Research before You Price |
| Price is key in selling your home. Pricing can indicate to potential buyers that your house is over priced or under valued. In either case, this can have a negative impact and can reduce the number of potential interested buyers. You also want to see what other homes have gone for in your area and the prices of homes you would be competing against. If you start out by pricing too high you run the risk of not being taken seriously by buyers and their agents. If you are pricing too low it can result in selling for much less than you were hoping for. |
Preparing your home: |
7. First Impressions Do Matter! |
| The look and feel of a home can be the difference between a bidding war and an offer-less home. When people come to see your home, the first impression they get will determine whether or not they believe it is worth pursuing. The look and feel of your home will generate an emotional response from buyers and help them feel at home. Prospective buyers react to what they see, hear, feel, and smell even though you may have priced your home to sell. Wash, wax, dust, clean up, repair and do whatever else you need to do to make your home look like the day you bought it. Even the smallest mistake can be costly in attracting a discriminating buyer. Remember, you're competing with brand-new homes as well. |
8. Odors Can Drive Buyers Away |
| Pets, smoke and food smells can be deal killers in real estate. Even the tiniest odor can make buyers uncomfortable. It is your job as the seller to hide these odors and make sure signs of smoking and pets are not visible. Buyers assume that homes owned by smokers or homes that have pets will not be in the same condition. |
9. Let Buyers Envision Themselves Living in Your Home |
| You want to make potential buyers feel like they can envision themselves living in your home. It is important to make the home look welcoming yet neutral so that the buyer is not forced to think of the home in a particular way. They can use their imagination to arrange items in the home and make it comfortable for them. Remember, if a buyer can’t see themselves living in your home, why would they even consider buying it? Remember, it is more difficult to sell a home when it is empty. Buyers see the home as forgotten, unwanted and unwelcoming. Try to sell your home before you move to make your home more marketable to potential buyers. |
During Negotiations: |
10. Always Counter Submitted Offers |
| Even if an offer is ridiculously lower than you were asking, always counter it. You never know how flexible a buyer may be, or how high they may actually be willing to go. If you walk away from a low offer, you may be walking away from a sale. |
11 Don’t Tell Buyers Why You Are Selling |
| Why you are selling your home can affect the way you negotiate and market it. Keeping these ideas to yourself gives you the upper hand in negotiations with potential buyers. If you are asked, simply say that you need something different from what you currently have. |
12. Disclose facts about your home |
| Be open with your buyers. Answer questions and volunteer information. Buyers will feel more comfortable purchasing a house from someone they can trust. This can also reduce liability and prevent lawsuits later on. |
13. Don’t Let Emotions Get in the Way |
| Approach selling your home as a business deal. Even though you may have years and years of memories in the home, if you want to successfully sell the home, you will have to detach yourself and focus on the business aspects. You'll definitely have an advantage over those who get caught up emotionally in the situation. |
14. More Interested Buyers Can Bring Higher Prices |
| The better you are able to market your home, the more buyers you can attract. If you have multiple interested buyers this can give you the luxury of choosing the price and terms that fit what you want. You will have control over the sale and may even be able to create a bidding war to increase the price of your home. |
15. Determine when the Buyer Wants to Close |
| Quite often, when buyers would "like" to close is when they “need” to close. Knowledge of their deadlines for completing negotiations again creates a negotiating advantage for you and can help you get the closing date that you want. The better you know your buyers, the better you can use the negotiation process to your advantage. This allows you to control the pace and duration of the process. |
16. Be Sure Your Contract Is Secure |
| To avoid problems, ensure that all terms, costs and responsibilities are spelled out clearly in the contract. By having a good Realtor by your side, they can help you through these details. Make sure it includes items such as the date it was made, names of parties involved, address of property being sold, purchase price, where deposit monies will be held, date for loan approval, date and place of closing, type of deed, including any contingencies that remain to be settled and what personal property is included (or not) in the sale. |
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17. Consider the Risks of Buying a New Home without Selling Your Current One |
| Beware of closing on your new home while you're still making payments on the old one. This could land you in a sticky situation and may force you to sell quickly and not get the value you deserve for your home. |
SIGNING A LISTING AGREEMENT | |
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| The first step in marketing your house is to enter into a listing agreement with a brokerage. The listing agreement is a contract that grants authority by the seller to the brokerage for a designated period of time to sell, lease or exchange a property based on the owner’s stated terms, and under which the owner agrees to pay the brokerage a fee. |
| This written contract creates an agency relationship between the seller and the brokerage and establishes seller representation. |
| Occasionally, a real estate brokerage will represent both the buyer and the seller. This scenario is called dual representation. The buyer and seller must consent to this arrangement in writing. In this case, the brokerage must do what is best for both the buyer and the seller. |
| Since the brokerage’s loyalty is divided between the buyer and the seller who have conflicting interests, a dual representation relationship must be properly documented. Representation agreements specifically describe the rights and duties of everyone involved and any limitations to those rights and duties. |
YOUR RESPONSIBILITY |
| Your Sales Representative needs to obtain a number of documents in order to complete the listing agreement and to properly assist you in the selling process. These include: |
- Copy of and existing Survey: A survey of your property which outlines the lot, size and location of building as well as details encroachments from neighbouring properties. This may be required in certain areas to complete the sale of your home. Your legal professional may recommend that you obtain a survey especially if significant changes have been made to your property.
- Property Tax Receipts: Copy of your property’s tax bill and most recent assessment.
- Mortgage Verification: Few homeowners know the exact balance on their mortgage. You will be asked to authorize your mortgage lender to provide the figures required.
- Deed or Title Search: This document is a legal description of your property and proof that you own it.
- Other documentation such as (1) list of improvements made to the property during your ownership; (2) a list of inclusions and exclusions (window coverings etc.); (3) a list of rental items (hot water tank, alarm system etc.); (4) current maintenance fees and utility costs; (5) number of parking spaces and locker number (if applicable); (6) summertime photos of the garden, if available and (7) extra set of keys.
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PREPARING A MARKETING PLAN | |
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| Your property is not something you sell everyday. In fact, for many of us, it is our largest asset. Once a listing agreement has been signed, a marketing plan needs to be devised containing all the activities intended to market your property. This plan should include timing and details for: |
- Preparing a feature sheet
- Placement of a For Sale sign on the lawn
- Entering of the property on the MLS system, if agreed to
- Investigating the proper use of classified advertising
- Arranging real estate agent open houses as soon as the home is listed so realtors can preview it for their clients
- Agreeing to hold public open houses on weekends
- Direct Mail campaign if appropriate (Just listed cards)
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Other marketing tools that should also be discussed include: |
- whether a need exist for a staging company to be involved in order to present the space in the best possible light;
- whether a pre housing inspection is necessary to identify areas that could be problematic and possibly repair some problems that can be easily addressed and add value to your property;
- the feasibility of a virtual reality tour of the home;
- strategies surrounding accepting offers etc.
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PREPARING YOUR HOME TO SHOW POTENTIAL BUYERS | |
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FIRST IMPRESSIONS - House exterior in good repair
- House number easy to see
- Eaves troughs and downspouts painted and in good repair
- Garage clean and tidy
- Cracked or broken window panes replaced
- Litter picked up
- Lawn cut and raked; hedges and shrubs trimmed; garden weeded and edged
- Leaves raked; walk swept; deck and patio cleared of leaves and debris
- Snow and ice cleared; walkway sanded or salted
AT THE FRONT DOOR - Doorbell and door hardware in working order
- Porch and foyer clean and tidy
INTERIOR MAINTENANCE - Chipped and paint touched-up and repaired
- Doors and cupboards properly closed
- Door knobs and cupboard latches tight
- Furnace wiped down and cleaned
- Burned out light bulbs replaced
- Squeaky doors oiled
BATHROOMS - Mirrors, fixtures and taps cleaned and polished
- Leaky taps and toilets repaired
- Seals around tubs and basins in good repair
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- Floors cleaned, waste paper baskets emptied
- Inside of cupboards and cabinets clean and tidy
- Towels clean and matching
- Clutter put away
- Fresh flowers displayed
KITCHEN - Sink and taps cleaned and polished
- Appliances cleaned and organized
- Countertops neat and polished
- Inside of cupboards, cabinets, pantry clean and tidy
- Floors cleaned, garbage containers emptied
- Small appliances put away
- Clutter put away
- Fresh basket of fruits and vegetables
CREATING AN OVERALL
WARM ATMOSPHERE - All lights turned on
- Air conditioner turned on in warm weather; heating at the right level in cold weather
- Fireplace lit in cooler weather
- Closets neat and tidy
- Halls and stairs cleared of clutter
- Drapes opened during daylight
- Carpets freshly vacuumed
- Background music played softly
- Fresh flowers throughout the house
- Personal objects such as photos out of sight
- Jewellery and valuable locked away
- Pets absent where possible or contained and litter boxes clean
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SELLER’S COSTS | |
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| A number of costs are associated with selling a property. As a seller, you are responsible for: |
- Your legal fees: ranging in the same vicinity as yours plus disbursements and GST. The disbursements are usually a little lower on a sale, depending on the number of mortgages that have to be discharged.
- Real Estate Commission: the fee you agreed to in the listing agreement plus GST.
- Discharge of Mortgage: a discharge of mortgage is provided by the lender and registered in the land titles office once a mortgage as either been paid in full or if it no longer stands as security.
- Your share of property taxes.
- Your move: the cost will vary based on the moving company and extent of service chosen.
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MOVING |
| Once your home is sold, here are a few tips to make your move a little easier: |
- Book your movers: The movers can pack everything, just the breakables or you can pack yourself. Make sure to obtain estimates from several different companies.
At your present home: - Arrange to have your gas and electric meters read on the closing date and have the bill forwarded to your new home.
- Disconnect your telephone, cable and water softener.
- Have the oil tank read and filled and provide a receipt that is has been done.
- If your water heater tank and/or furnace is rented, arrange for a transfer of the rental agreement to the purchaser.
At your new home: - Make arrangements for the gas, electric utilities, water softener, telephone and cable to be connected on the closing date.
- Get change of address cards and send them prior to your moving day. Have the post office forward your mail. Inform gardening, newspaper, magazines and other home services of your move. Change the address on your driver’s license and your health card.
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