Buying a home can be an intimidating and overwhelming process if you haven’t done it in a while, but with some guidance from our years of experience, you can rest assured knowing that your best interests will be looked after. There are 7 essential steps to buying real estate, which are outlined here.
Are you ready to buy?
- Do you have a down payment readily available? In Canada, a minimum of 5% is required as a down payment
- You will also need cash available for a deposit. A deposit of $5,000-$20,000 is typical for homes under $500,000 in the GTA market. This amount will be held in trust when an offer is accepted and will be credited towards the purchase price.
What kind of home do you want?
- Where do you want to live? What lifestyle do you want to lead?
- What type of home do you want to live in?
- Do you own a home that you need to sell?
Assemble your team
It’s a great idea to meet with your mortgage broker and go through the pre-approval process to see just how much you can afford.
Realtors are a great resource for you. Along with their knowledge and contacts, they can provide you with great advice to help you purchase the new home of your dreams.
You will want to work with a REALTOR® that can serve your best interests and
Find an experienced real estate lawyer by asking your REALTOR®, friends, family or co-workers.
Your lawyer will take care of the legal steps required to transfer the ownership of the property you are purchasing.
What can you afford?
It’s important to know just how much you can afford before you go any further. There are a lot of expenses that go along with the purchase of a new home as well as recurring monthly expenses. With the purchase of a home you can expect costs such as a down payment, legal feels, title insurance, home inspection fees, property transfer and taxes. Of course, your monthly expenses will include your mortgage payment, utilities, regular maintenance, property insurance and property taxes.
- When you do apply for a mortgage there are some important things you need to bring along with you:
- Letter of employment
- List of your assets
- List of your liabilities (loans, credit card debt, car payments, etc)
- Social Insurance Number
- Chequing account number
- Your lawyer’s contact information
- Pre-approved for financing
- Time to start looking at homes.
If you do not have a mortgage professional already, Click here to view our list of preferred mortgage Brokers in the local area
Once you have your financing in order, it’s time to put a plan together. You will want to review the following:
Your housing wants/needs
- Price point (max budget)
- # of bedrooms required
- # of bathrooms required
- Preferred neighbourhoods/communities
- Best to be as focused as possible
- If you need assistance researching the local communities, click here to review our local communities
Your timing to move in. When will you be able to move?
Create a custom strategy for you
- Discuss your unique position and determine the best course of action
- DO you need to Sell before buying? Yes or No?
- Determine what will be the best times to view properties for you
Darcy Toombs’ unique offering – Create a Buyer Listing
- Much like we market and advertise our property listings, we market and advertise our Buyers to the neighbourhoods and communities in which they want to live.
- Designed to give our Buyer clients a leg up on others in a competitive market.
- For more on our Buyer listings, Click Here to visit the Buyer Listing Page
It’s time to start viewing houses.
- We can find homes that meet your criteria by searching the MLS System & Toronto Real Estate Board (TREB) listings
- Check out real estate ads in your local paper, if you see one you are interested in, let us know and we will do more research on it.
- Go to open houses. When viewing open houses, advise the hosting agent you are working with the Toombs Team to avoid them from trying to sign you up as a buyer client of theirs.
- Go through listings on REALTOR.ca.
- When you see a home you are interested in, send us the MLS number. They will then do some further research on the property to ensure it meets your needs. If it is suitable, we will book a private showing for you to go through the property together.
- If there is a property that you really like, you may want to go back for a second look.
You have found the home that meets your needs. We can now help you successfully purchase this home by preparing the offer to purchase for you. We will present your offer along with your deposit to the seller and his broker.
Below are the 10 important Elements of an Offer:
- Agency Description: Every offer must have a clear description of the Agency relationships that exist in the transaction. Agency is described in the offer process with either the ‘Confirmation of Cooperation and Representation’ or the ‘Seller Customer Service Agreement – For Properties not listed’. See the bottom on the page for a plain language version of each.
- Price: The amount The Buyer will pay to the Seller for the property.
- Deposit: A deposit will be required to show ‘consideration’ in the transaction. That is just a legal term, but could be as little as $1, or as much as the full purchase price. Typically, the larger the deposit, the stronger the offer, which is why in multiple offers, a deposit of 5-10% of the purchase price is common. This amount will be credited towards the purchase price and is usually fully refundable if something is discovered in the ‘conditional period’ (see below) which causes you to not want to pursue the property any further. A deposit can be submitted ‘herewith’ the offer, or ‘upon acceptance’ of the Terms. In most cases, the Buyer must submit their deposit within 24 hours of the acceptance… Make sure you have your deposit ready!
- Irrevocability: (Clause #1 of the ‘Agreement of Purchase and Sale’ [APS])This is the time period which the offer is valid and IRREVOCABLE (or ‘not revokable’ – You cannot take back your offer once it has been submitted) by the party signing the offer. The initial offer will almost always be first irrevocable by the Buyer, but if there is negotiations the Seller may ‘sign back’ the offer to the Buyer, in which case the irrevocability changes from Buyer to Seller.
- Completion Date: (Clause #2 of the APS) aka, the ‘Closing Date’. This is the date which The Buyer gets the keys and take possession of the property. This day must be a day which the land registry office is open, and therefore must be on a weekday, which is not considered a holiday in the province of Ontario
- Title Search: (Clause #8 of the APS) There is a clause in all standard offers in Ontario which allows for the Buyers Real Estate Lawyer to check and review the title of the property to ensure there are no liens registered against the property or any other encumbrance which could effect the Buyers ownership of the property.
- Chattels Included: (Clause #4 of the APS) Chattels are the items which will be sold with the house, that are not considered to be permanently affixed. This might include appliances, window coverings, or rugs. How we view chattels is like this. If you were to flip the house upside down and shake it, any items which falls out would be considered a Chattel.
- Fixtures Excluded: (Clause #5 of the APS) If the Seller really wants to remove an item which is affixed to the property, such as a family heirloom dining room chandelier, it needs to be mentioned in the Agreement, otherwise it will be included in the sale as the wording in the Agreement states that the ‘Seller agrees to convey Fixtures’
- Rental Items: (Clause #6 of APS) If there are rental items in the property which will remain apart of the real property, the rental items need to be mentioned here. Such items could be, but are not limited to: Hot Water Tank rentals; Water Softener Rentals; Furnace/AC rental; any other equipment which the Seller currently has a rental contract on. A Buyer may cancel or pay out any rental contract which they like.
- Signatures: (Clause #28 of the APS) All parties to the Agreement must place their signature on the offer to make it valid. If the home is a matrimonial home in one spouses name, then the Spouse whose name is not on title (or the Agreement) must sign the “Spousal Consent” for the Agreement to be valid.
- Conditions & Other Clauses: (Schedule ‘A’ of the APS) Schedule A is where you will see all the other terms and conditions to an APS. Items like Seller financing requests, additional deposits to be submitted, Any and All conditions will be in the schedule ‘A’ (such as Conditions on: Financing; Inspection of the Property, Water tests, just to name a few). Every transaction can be conditional upon just about anything.
If the Terms or conditions of the Agreement are not 100% acceptable to the Seller, the Seller may make counter offer, in which they will make an Irrevocable offer back to the Buyer. This process can go back and forth until an Agreement is made.
Once an Agreement is made, the Buyer must submit their deposit
See below for a copy of a ‘Plain Language’ Agreement of Purchase and Sale
Once an offer is Accepted, which has 1 or more conditions in it, there will be an agreed upon time period to allow the conditions to be carried out.
Conditions are not required in the sale of real estate, but certainly are recommended to avoid unforeseen costs and to avoid any liability. Conditions can be either ‘Waived’ by way of a “Waiver” or removed in an “Amendment to the Agreement” or they can be ‘Fulfilled’ by way of a “Notice of Fulfillment”. Notice of fulfillment is only used when the elements of the condition were carried out and the Buyer is satisfied. A Waiver is used if the condition is being removed without carrying out the element of the condition (ie. Chose not to do a Home Inspection, even though the Agreement was conditional upon an inspection)
It should however be noted that in competitive offer situations, where there are more than 1 buyer making an offer on the same property, that it is typically the offer which has the least amount of conditions that will be successful… even if it is for less money.
Typical conditions and their usual conditional periods:
- Buyer Financing: Typically 1-2 weeks. Time period to allow the Buyers Lender the opportunity to ensure the property is worth what the Buyer is offering. Problems can arise if the property does not appraise for what the offer is. If you do not have a mortgage professional already, Click here to view our list of preferred mortgage Brokers in the local area
- Home Inspection: Typically 1 week. This is a time period for the buyer to do their due diligence of the property they are offering on. While inspections are typically visual in nature, bringing a professional into do a thorough inspection can help eliminate unforeseen problems that might not have been obvious during the Property viewings. typical cost can range from $300-$1000+ depending the size of the property/house and the scope of the inspection. Click here to view our recommended list of Home Inspectors
- Well Water Testing: typically 1-2 weeks. When buying a property which is on a private well (not municipal water), it is a good idea to have the water quality tested to ensure there is not any bacteriological contamination. A water test can be submitted to the Ontario Ministry of Health and results can be returned between 2-5 business days. FREE!
- Buyer or Seller Lawyer review of the Agreement: Typically 2-3 business day after the acceptance. This is very common in estate sales, or in transactions which are very complex. Once all the primary terms and conditions are agreed upon, the accepted APS is sent to the Buyer’s/Seller’s lawyer for review and comments. Your lawyer may charge a nominal fee, or include this as a free bonus for using them to close the transaction.
- Sale of Purchasers Property (SPP): The length of time is really Market dependant. Strong Sellers Market: 3-5 weeks. Strong Buyers Market: 5-8 weeks. This condition is included to allow the Buyer an opportunity to sell their property before making their offer unconditional. Most offers which are conditional upon the Buyer selling their property will have an “escape clause”, which allows the Seller to continue to market the property to other Buyers. In the event the Seller receives another offer, which is acceptable to them, the Seller will provide the first Buyer with notice to remove the condition, or release the Seller from the Agreement. The time period to do so is agreed upon during the initial negotiations. It should be noted that in the event the second offer is acceptable, the First Buyer will not have to match it. The terms of the original Agreement will remain intact.
Once all conditions are removed or fulfilled, the Agreement becomes FIRM. In Ontario a FIRM Agreement is a binding contract that carries liability on both the Buyers and Sellers to ensure the contract/sale is completed. If either party tries to break the Agreement, or is unable to fulfill their obligations to close, a legal lawsuit may occur to recover any damages/costs which the other party suffered from. These costs can be extensive and very expensive. in the end, no one really wins and a lot of time and effort is wasted… therefore, make sure you can close before removing your conditions!!!
The unconditional period begins as soon as all conditions have been removed or fulfilled form the Agreement.
It is during this time that the Buyer will prepare for the upcoming closing. If a re-visit is negotiated in the contract, then the Buyer and their REALTOR(R) will book an appointment to come back to the home for a variety of reasons, such as:
- Taking measurements for new furniture
- Obtaining quotations from contractors
- Ensuring the property does not have any unforeseen damage
Also during the unconditional period there are a verity of things a Buyer will be required to arrange to prepare for the closing. Below is a Checklist of typical items a Buyer will need to arrange to ensure a smooth closing:
- Home Insurance. Without it, your lender will not advance the funds to your lawyer to complete the transaction. Most Important!!!
- Change of Address with Credit Cards, Banks, Employer, etc.
- Book a mover, or arrange the rental of a truck
- Notify the Utility companies. If you do not have credit history with a utility provider, they may require a deposit to ensure service. Some that may apply: Gas, Electricity, Oil, etc…
- Arrange to meet with your real estate lawyer prior to closing to sign all required documents
After the agreement has become FIRM, the Buyers REALTOR(R)’s office will send a copy of the Agreement to their clients real estate lawyer to start to prepare the title transfer and communicate with the Sellers Real Estate lawyer to ensure a smooth transfer.
This process happens mostly at the lawyers offices.
The Buyers lawyer will advise the buyer to bring a certified cheque into their office, a few days prior to the closing, for the remainder of the downpayment + applicable legal fees. This will be held in the lawyers trust account pending the closing.
The Buyer and Seller’s lawyers prepare the transfer of deed and registration paperwork to take to the land titles office, or ready the title transfer via online Land Titles System. The Seller’s lawyer usually send a package to the Buyers lawyer with title info as well as the property keys.
The buyer’s mortgage lender, once it is satisfied that the Buyer has fulfilled all of it’s mortgage requirements (i.e.. arranged home insurance, paid off any credit card debt required to be paid off, or any other conditions for approval), will transfer the mortgage amount to the Lawyers trust account. Once the Buyers lawyer has the mortgage money from the bank, they will have the total amount which will be forwarded to the Sellers lawyer to complete the sale.
On the day of closing the Buyer and Sellers lawyers transfer the title to the Buyer and the cash to the Seller*. Once this has been completed, the ownership of the property is officially the Buyers!
The Buyers lawyer will generally call the Buyer to advised that the deal has closed at that they can come pick up the keys from their office.
Time to move in!
* This assumes that there is no vendor financing in the Agreement of Purchase and Sale.