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Comprehensive Buyers Guide - Everything You Need to Know
Common Pitfalls of Purchasing
Paying too much - Without the assistance of a Realtor, Buyers often pay far more than fair market value. It is not uncommon to hear horror stories where thousands of dollars were wasted because the market was unknown. Market areas differ - what you sold your last home for does not necessarily equate to equal pricing structures in your new neighborhood. We will know what is locally considered good value for your investment dollar.
Too much of a fixer-upper - You've heard the stories or maybe even made the comments yourself, "It's only superficial and It won't take too much money to fix that, we can renovate on the weekends. Nightmares happen when you take on more than you can handle! Purchasing a fixer-upper can equate to replacing everything and spending more than you would have if you had just bought a home in better condition in the first place.
Wrong neighborhood - Once you locate a home that appears to fit your needs, take a second look! If you originally viewed the property in the evening, drive by during the day. Make sure you like the local amenities - milk store, school, transit access. Consider your outdoor lifestyle. Do you hold family barbecues or enjoy sitting outside? Will the traffic noise bother you?
Buying outside of your budget - We are all familiar with more funds going out than what is coming in. Kids these days always want the best regardless of whether you can really afford it or not. It is very easy to buy beyond your means as you count on dual incomes until the new baby arrives. It is better to buy the home you need and can comfortably afford than experience being forced to sell and buy down - or worse.
Overlooking schools and children - Is your new home close enough for the children to walk to their new school? Is there bus service just down the street? Does the school offer academics suitable to your children's needs? Or is it right next door and you've reached a point in your life where you would prefer quiet solitude?
Yard Maintenance - Your own swimming pool, meticulously manicured lawns and beautiful English garden are wonderful things to have - given that you are willing and able to look after them. Do you want to spend the time required to keep everything in top working order? Do you have the funds required to hire a full-time landscape architect if need be? In some cases, you may be better suited for townhouse living where yard maintenance is included and the local rec centre offers swimming/exercise programs tailored to your lifestyle needs.
Unexpected Costs - It is not unusual to reach the closing date only to find that hidden expenses have occurred. Such items as land transfer tax and condo fees may be pro-rated, while contents insurance and taxes can be paid monthly or in advance. Avoid stressful discoveries by asking for these figures in advance. Avoid hidden and questionable costs at closing time by asking your Lawyer to list exactly what fees will be charged at closing.
Understanding Market Conditions
The real estate market is always changing. It helps to understand how market conditions can affect your position as a Buyer.
Buyer's Market:
The supply of homes on the market exceeds demand. High inventory of homes with fewer buyers. Homes sit on the market longer while prices tend to drop. You'll have more time to look for a home and more negotiating leverage.
Seller's Market:
The number of Buyers wanting homes exceeds the supply of homes on the market. A smaller inventory of homes. Homes sell quickly. Prices usually increase. You'll need to make decisions quickly. Conditional offers may be rejected.
Balanced Market:
The number of homes on the market is equal to the demand or number of buyers. Demand equals supply. Sellers accept reasonable offers. Homes or condos sell within an acceptable time period. Prices are generally stable. A more relaxed atmosphere with a reasonable number of homes to choose from.
We have been experiencing a Seller's Market recently and are in the process of slowly switching to a Balanced Market.
Once you've gone over what you can afford in your preferred location, it's time to start looking at some properties! Showings or viewings as we Realtors call them are just that - we will arrange appointments to take you to have a look at any properties you are interested in. Generally home and condo Sellers prefer reasonable notice for showing appointments. We prefer to give Sellers at least 12 hours notice for courtesy sake. Who knows what their life is like, if they are working shiftwork, have children or pets that they may need to arrange to be out of the home for the showing, or need tidy up the dishes, give a quick vacuum, shovel the snow on the front walk, etc. We firmly believe the best thing to do is to be as courteous as possible - especially since you may end up in negotiation for the purchase of their home! Put yourself in their shoes. In the event that the property is currently tenanted, we must legally give the tenant 24 hours notice.
Once we've gone out and looked at some places eventually you'll find one that will be "the one". Sometimes buyers want the first place they see - it is perfect and that is it. Others like to be more selective and look at way more before making a decision. The important thing to remember is that if you seriously want to buy, getting out and looking at everything asap is very important. Looking at places once every week for three months is not going to be a fair comparison.
Real estate is a time sensitive experience, that's the really unfair and stressful part of it. All we can suggest is that if you really want something to go after it sooner rather than later. We have had so many clients want to "sleep on it" over the weekend "just to make sure" and often it sells in that time to someone else! This really does happen - and often. So please don't think we are pressuring you when we suggest you put your interest on paper. We are not trying to pressure you, rather, we know that if a place is attractive to you then it is also attractive to other Buyers. Generally, once a Buyer has been "burned" by waiting and losing out, they will jump on the next thing they really like. Let's hope it's not the place you are "sleeping on" or thinking over for a couple days! Not that you shouldn't think about it - but just beware that if you wait too long you may lose out. We've seen it happen way too many times!!
Once you have decided on a place the next step is to make an offer to purchase. We likely will go back to our office where we can type this up with you. Alternatively, depending on the circumstances, we can prepare an offer over the phone with you and then meet you at a location convenient for you to go over the details and signatures. We also carry standard blank offers with us at all times in case a client wants to put something down on paper anytime anywhere, you never know the situation.
We do warn you - the paperwork may seem tedious, but it is there to protect you and your best interests. So get your signing hand ready…stretch those fingers!!
Normally we will contact the listing agent to let them know we are preparing an offer. Often she/he will give us any specific details they would like included or any details their Seller is firm on. For instance, often a Seller needs a certain closing date because they have already purchased another home or condo and thus prefer the two closings to happen on the same day. Other reasons for contacting the listing agent would be to find out the length of time they need to contact the Seller - especially if he or she is out of town, etc. Gone are the days where the Buyer and Seller sat down with their agents and hashed it out at the Seller's kitchen table until midnight. These days it is commonplace for the offer to be negotiated by fax rather than in person.
The Major Elements of an Offer
Price: Depending on the local market conditions, your opinion of value and market information provided by ourselves - the price you offer may be different than the Seller's asking price. Generally we like to try to go in lower than the asking price to save you some money. But a word of caution - in this market, "low-ball" offers are not being negotiated - they are being laughed off by Sellers, so it's best to go in seriously or not at all.
Deposit: The deposit shows good faith and will be applied against the purchase price of the home when the sale closes. This is submitted after the Agreement of Purchase and Sale is accepted. It is generally 5-10% of the purchase price - however, often on smaller purchase amounts (under $300,000) the Buyer will put down a deposit of $5000 or $10,000.
The deposit cheque will need to be in the form of a certified cheque or money order ONLY and must be submitted within 48 hours of the offer acceptance. Real estate offices will no longer accept personal cheques. This deposit money is put into the listing brokerage's Trust account where it is held until the sale closes. There is no interest earned on money held in a real estate Trust account. However, if you are putting a large deposit down, you may request for it to be put into an interest bearing account so you may accrue interest. Since most sales close about 30-90 days after the offer is accepted, there is very little interest to be earned unless it is a very large deposit or an extra-long closing.
Terms: Include the total price offered and the financing details.
Conditions: These include "subject to Buyer obtaining a mortgage", "subject to home inspection", etc.
Inclusions and Exclusions: These might include appliances, certain fixtures or decorative items such as window coverings, light fixtures, etc.
Closing or Possession Date: This is the day you will take possession of the home or condo. It should be on a weekday since Lawyers are needed to facilitate the closing and exchanging of keys. A suggestion would be to avoid a Friday since if there are any delays the property will be able to "close" the next day rather than having to wait over the weekend.
Generally, the Seller will either accept your offer right away (which is rare), or they will "sign it back" to you with their changes. Most Sellers are sticklers on only two things - the highest selling price they can get (of course!) and the most convenient closing date for them. But every Seller is different, so be ready.
When the offer comes back to you with the Seller's changes it is up to you if this is something you will accept. A word of caution here - often offers can go back and forth over small things that unfortunately can make emotions run even higher than they already are. Losing out on a home over $1000 does happen - because the two sides are too emotional and frustrated to give in and either pay a little more or take a little less. Believe me, it is not worth the stress. Sometimes you have to really think if it is worth fighting over - if so then be prepared to walk away. My advice is to know your limit on price range before hand and decide how negotiable you are on your desired price and closing dates.
Once both sides have agreed on everything you'll have an accepted offer or Agreement of Purchase and Sale. It often takes a day or two for everything to be agreed upon and finalized.
The next step will be to submit a certified cheque or money order to the listing brokerage. You can give this to us to drop off or take it over yourself, whichever is most convenient. It is vitally important that the deposit is given in no later than 48 hours of the acceptance of the offer.
We also need to forward a copy of the Agreement of Purchase and Sale to your Lawyer and mortgage provider as soon as possible. We will need their contact information from you so we may fax copies to them for you.
Normally there will be conditions in the offer such as "subject to Buyer (you!) obtaining a mortgage", "subject to home inspection", etc. These will have specific time limits (standard is 3-5 business days) for the conditions to be satisfied by.
Finalizing Your Mortgage
99% of all offers will have a conditional clause in the offer stating that the offer is conditional upon the Buyer obtaining a mortgage - unless you are buying the place with cash!! Since you've already been pre-approved, you'll need to provide your lender with some additional documents in order to finalize your financing.
These will include:
1) A copy of the listing of the property. If the home is still to be built, the mortgage lender will need to see the builder's plans and details on size and location.
2) A copy of the Agreement of Purchase and Sale and waivers for any conditions as mentioned above.
3) Documents to confirm employment, income and source of pre-approval if from a different lender.
The first two items we will send for you, so not to worry. If you require a mortgage specialist or Lawyer, we can recommend a few names to you.
Once the conditions are satisfied (i.e. you have your mortgage approval paperwork, the inspection was satisfactory to you, etc) within the specified time limit (3-5 days) then we will prepare a document called a waiver. You'll need to sign this waiver to remove the conditions from the Agreement, thus making it a firm and binding contract. We will make sure to forward a copy of the waiver(s) to your mortgage representative and your Lawyer.
Closing Day and Moving
Book the movers at least one month in advance - even if you are planning on renting a truck and doing it all yourself, the same advice applies! Especially in the summer months when there are so many people moving. You can choose to have the movers pack everything, or just the breakables, or you can pack it all yourself. It's a good idea to obtain estimates from several different companies.
If you own your present house or condo:
*Arrange to have your gas, water and electric meters read on the day you leave and have the bills forwarded to your new address. Some Lawyers can arrange this for you and will charge an additional fee.
*Have your oil tank read and filled before your sale closes and provide a receipt to your Lawyer if required.
*If the water heater or furnace is rented, arrange for a transfer of the rental agreement to the purchaser.
*Disconnect your telephone, cable TV, and water softener.
If you rent your present house or apartment:
*Give necessary written notice to your landlord (60 days) and make arrangements for the return of any monies you have on deposit.
For your new home:
*Make arrangements for the gas and electric utilities, telephone and cable TV, internet access to be connected on the day the sale closes.
General suggestions:
* Fill out the address change/mail forward package at the post office at least 3 weeks before moving day - trust us on this one!
* Cancel any contracted services and pre-authorized account debits for such.
* Inform gardening, dry cleaning, newspapers, magazines, diaper and other home services. Arrange for service at your new address if desired.
* Obtain a letter of introduction from your current bank to help establish new accounts if needed. Transfer trust or bank accounts and securities.
* Cancel or transfer social, athletic, civic, religious or business affiliations and memberships.
* Arrange for transfer of medical, dental, prescription and optical records.
* Change the address on your driver's license effective the day of the move.
* Collect all items "out" for cleaning, repair or storage. (e.g. dry cleaning).
* Make any special arrangements for the moving of your pets.
We will also arrange what's called a "buyer's visit" for you to go back and take a look at your soon-to-be home or condo again about a week or 2 before it closes. This can be for measuring purposes, or just to take a look and make sure everything is in order - no new damage, no changes that have not been agreed upon in writing, etc. Please let me know when is convenient for you. Again, we recommend we give the Seller at least 24 hours notice for this.
On your closing date you'll need to see your Lawyer to sign the last couple things and receive the keys to your new place! Many Lawyers will suggest you come in a couple days before the closing date to go over the paperwork with you when it's less stressful. Then all you'll need to do on closing day will be to pick up the keys from your Lawyer's office. Usually most closings happen in the afternoon - generally before 3pm.
Please feel free to call us for any questions or concerns you may have. We know what you are going through - we have bought and sold homes personally and know how different it is to be a participant than the Realtor facilitating it. Don't be afraid to voice any and all opinions and ask any questions you have. Now - relax! You will be moving into your new home or condo in no time!!!
We hope this is a bit of helpful information for you in your expanding knowledge of home buying. Please feel free to contact us should you have any questions or are ready to embark on your home buying journey!