Buying Basics

Its easy for Realtors to sometimes forget to explain the basics during the excitement of buying a home.  I think this happens in many professions actually, doing whatever it is over and over to the point that the process becomes second nature.  I remember what it was like being a first time home buyer…a bit confusing, a bit overwhelming, maybe a bit stressful trying to understand all the lingo, but at the same time so very exciting! Whether you are thinking about buying your first home or its been a few years since you have gone through the process, here is a little re-fresher.

Pre approval- find out what you can afford

Seek out a mortgage professional and get ‘pre approved’  Find out what payments you can afford, the down payment you will need to come up with and what your closing costs  (legal fees, taxes may be)

Choose a realtor- you only need one

There are likely 100’s of realtors in your area to choose from.  With the MLS ( multiple listing service) you only need to choose 1 realtor.  Gone are the days of skimming through newspaper ads and calling up each realtor one at a time asking for details about the homes they have for sale.  Once you choose a realtor they can email you all the homes in your price range.  You can also view homes at http://www.realtor.ca/  Previewing pictures and details online and doing actual 'drivebys' is a great way to narrow down which homes you actually want to take the time to go in and see.  Your Realtor can show you any listing, it doesn’t matter which company has the actual listing.  Some people don’t want to ‘commit’ to a realtor, they want to go it on their own, touring open houses and watching the papers until they find the right house. This may work, but there is a risk of missing a new listing.  If you have a realtor actively working for you hopefully you will get a phone call or better yet they will have you set up to receive an automatic email when a listing comes up that fits your criteria.  The most interesting homes and best buys often sell within days of being listed, long before they hit the newspapers and the general public is even aware they are for sale. 

Making appointments- best to give your realtor the list of homes you want to see with at least a day or 2 notice.  Some homes require 24hours notice to view.  Your realtor will make the actual appointments to view each home for you. 

Making the offer- Your realtor will prepare the necessary paperwork, including the contract of purchase and sale which contains the offer price, deposit, terms/subjects to the sale, included and excluded items and closing/possession dates. 

The deposit which is often confused with the down payment shows ‘good faith’ when making an offer.  The deposit is usually held in a trust account in the real estate office and is then applied against the purchase when the sale closes.  Later on in the process the lender requires a down payment on the mortgage.  Your deposit already held in trust can go towards this down payment.  The subjects/terms are typically ‘subject to financing’ subject to a home inspection. Each subject has a deadline or subject removal date.

Here is an example of a typical timeline.

October 1 -view the home and submit an offer, its accepted by the sellers.  Deposit is paid.

On or before October 14 ‘remove subjects’

During this period the buyer will work to remove the subjects.  Getting the financing approved, home inspection done.

If the buyer is satisfied the next step is to sign a subject removal form and the sale becomes ‘unconditional’ The deposit is now non refundable and the sold signs go up!

A typical possession/completion date would be somewhere between October 31-November 15 (could be longer if both parties agree)  This is the date the money actually changes hands and you get the keys to your new home.

A few days before the completion date the buyer would sign final papers at a notary or lawyers office and make arrangements for the bank/mortgage broker to get the down payment.

  

Some MISC and MYTHS

I have heard this one a few times recently.

“ The More You Pay for a House, The More an Agent Makes”. Well I guess its correct to a degree, but the truth is the difference between $300,000 and $305,000 is about $50 and that is before we pay office splits, expenses and taxes!

WHO PAYS?

When you buy a house listed for sale the seller pays the commission to any realtors involved in the sale.

Typically the mortgage broker gets paid by the bank/lender 

The buyer usually pays for any home inspections, chimney inspections etc.
The buyer may also have to pay legal fees, insurance, HST and property transfer tax ( some exemptions apply) 

Hopefully I covered all the basics here.  If you want more complete details of the process just let me know and I can email you more info.