Buying Real Estate: The Home Buying Process

Buying Real Estate: The Home Buying Process

 

Select a REALTOR®

To guide you through the process.

Arrange Pre-approval of financing to determine what you can afford

It is always good to understand your own current financial situation. In case you require financing, it is important for you to obtain a mortgage pre-approval as soon as possible. There are a few reason for this:

  • I. The interest rate is guaranteed for a number of days, even if interest rates go up. You can lock the interested rate for financing.
  • II. You know the mortgage amount that you can borrow to purchase your home. And this can help to narrow down the price range of properties that you are looking for.
  • III.Sellers are more interested in offers from buyers who have their financing already lined up.
  • IV. In some occasions, you may be in a better position when another buyer is competing in a multiple offers position for the properties you like.

Choose Your Neighbourhood

You can buy the right home in the wrong location. You can change the structure, remodel it or alter the layout but, ordinarily, you cannot move it. It’s attached to the land.
Choosing a home that is right for you means choosing a location that meets your lifestyle needs. For example, buyers with children may be concerned about their children’s education and often will pay more for a home that is located in a highly desirable school district.
When evaluating a neighborhood you should investigate local conditions. Depending on your own particular needs and tastes, some of the following factors may be more important considerations than others:

  • quality of schools
  • property values
  • traffic
  • crime rate
  • future construction
  • proximity to schools, employment, hospitals, shops, public transportation, prisons, freeways, airports, beaches, parks, stadiums and cultural activities such as museums, concerts and theaters.

Price

The first step in determining the price you are willing to offer is to look at the recent sales of similar homes. These are called “comparable sales.” Comparable sales are recent sales of homes that compare closely to the one you are looking to purchase. Specifically, you want to compare prices of homes that are similar in square footage, number of bedrooms and bathrooms, garage space, lot size, and type of construction.
Have your REALTOR® do a comparative market analysis for you. That will show you the fair market value of the property. The following factors are important and could affect your offer price:

  • a. Property condition
  • b. New home renovation
  • c. Market conditions (eg. buyer market or seller market)
  • d. Seller’s motivation
  • e. Any known issues

 

Making an offer

Making an Offer to Purchase

After you have found the home you want to buy, you need to give the vendor an Offer to Purchase (sometimes called an Agreement of Purchase and Sale). It is very helpful to work with a realtor (and/or a lawyer/notary) to prepare your offer. TheOffer to Purchase is a legal document and should be carefully prepared.
These items are typically included:

  • Names
  • Your legal name, the name of the vendor and the legal civic address of the property.
  • Price
  • The price you are offering to pay.
  • Things included
  • Any items in or around the home that you think are included in the sale should be specifically stated in your offer. Some examples might be window coverings and appliances.
  • Amount of your deposit
  • The closing day
  • The closing day is the date you take possession of the home. It is usually 30 – 60 days after the date of agreement. But, it can be 90 days, or even longer.
  • Request for a current land survey of the property.
  • Date the offer expires
  • After this date the offer becomes null and void — that means it’s no longer valid.
  • Other conditions
  • Other conditions may include a satisfactory home inspection report, a property appraisal, and lender approval of mortgage financing. This means that the contract will become final only when the conditions are met.

What Happens After You Make an Offer to Purchase?

Imagine that your realtor has helped you prepare an Offer to Purchase. This offer includes all the details of the sale. To be extra cautious (since you know an Offer to Purchase is legally binding) ask your lawyer to look at it before showing it to the vendor.

The realtor presents the offer to the vendor. What can you expect to happen next? There are three possible responses.

Response 1

The vendor accepts your offer. The deal is concluded and you move on to the next steps in the buying process.

Response 2

The vendor makes a counter-offer. The counter-offer might ask for a higher price, or different terms. You can sign the offer back to the vendor, offering a higher price than your original offer, but lower than the vendor’s counter-offer. If the vender accepts this counter-offer, the deal is concluded.

Response 3

The vendor makes a counter-offer, asking for a higher price or different terms. If a counter-offer is returned to you at a higher price, ensure that you know exactly how much you can afford before you start negotiating. You don’t want to get caught up in the heat of the moment with costs you can’t afford. You reject the counter-offer because the price is still too high, or you can’t agree to the conditions. The sale doesn’t go through, and your deposit is returned.

Getting a Mortgage

Once your Offer to Purchase has been accepted, go to see your lender. Your lender will verify (and update, if necessary) your financial information and put together what’s needed to complete the mortgage application. Your lender may ask you to get a property appraisal, a land survey, or both. You may also be asked to get title insurance. Your lender will tell you about the various types of mortgages,terms, interest rates, amortization periods and, payment schedules available.

Closing Day

Closing day is the day when you finally take legal possession and get to call the house your home. The final signing usually happens at the lawyer or notary’s office.

These are the things that happen on closing day:
Your lender will give the mortgage money to your lawyer/notary.
You must give the down payment (minus the deposit) to your lawyer/notary. You must also give the remaining closing costs.

  • I. Your lawyer/notary
  • II. Pays the vendor
  • III. Registers the home in your name
  • IV. Gives you the deed and the keys to your new home

Moving

Hiring a Mover

When planning your move, friends or relatives may be able to recommend a professional moving company. Don’t forget to ask the mover for references. Ask the mover for an estimate and outline of fees (Do they charge a flat rate or hourly fee?). Once you’ve chosen a mover, ask them to come to your home to see what will be moved in case the estimate needs to be changed.
You’ll want to ensure that your belongings are insured during the move. Your home or property insurance may cover goods in transit. Call your broker or insurance company to be sure. Ask if you are fully covered. Many moving companies offer additional insurance coverage. Be aware that professional movers are not responsible for items such as jewellery, money, or important papers. Move these yourself to keep them safe.
If you decide to do your own packing, keep in mind that you will need the proper materials, and that packing can take up a lot of time.

Moving Day

On moving day, go through the house with the van supervisor and give him (or her) any special instructions. The supervisor will note the condition of your goods on an inventory list. Go through the house with the supervisor to make sure the list is complete and accurate. When the van arrives at your new home, mark off the items on the mover’s list as they are unloaded. If you paid for the movers to unpack boxes and remove packing materials, remember that they will not put dishes or linens into cupboards.
Moving day is almost always tiring. But, planning ahead will make the transition as smooth as possible.

Moving Costs

The amount you spend depends on your decisions about many things. Here are some to think about:
Do you want to hire professional movers?
If so, will it be a large company, or a smaller local moving company?
Will you need to buy insurance to protect your items in transit?
If you plan to move yourself, will you rent a vehicle?
Will your current auto or home insurance policy cover your items during the move?
Will you have to pay utility companies a fee to connect their services in your new home? Are there other utility charges (such as a deposit)?

Post-Closing Costs

Changing the Locks
When you move into your new home you’ll want to change the exterior door locks for security. After all, you want only the people you choose to have the key to your new home. You can change the locks yourself, or call a locksmith to do the job.

Cleaning
Both your old home and your new home should be given a thorough cleaning at moving time. Whether you’re buying cleaning supplies and doing it yourself, or hiring someone to clean for you, the costs can really add up. Plan for this expense.

Decorating
You might want to re-paint, replace some light fixtures, refinish the floor, re-carpet, or do any number of other re-decorating tasks. Plan your budget, and consider postponing some projects for a period of time.

Appliances
If your offer to purchase didn’t include appliances, and if you don’t have your own, you will have to buy them when you move into your new home. Some appliances might have installation charges.

Tools and Equipment
When you own your own home, you can no longer call the landlord to do repairs. You’ll need to own some basic hand tools and possibly some gardening and snow clearing equipment.