What Are Your Costs?
- Purchasing a home involves one-time costs and monthly expenses.
- The largest one-time cost is the down payment. It usually represents between 5-25% of the total price of the property.
- In addition to the actual purchase price, there are a number of other expenses that you might be expected to pay for. These are listed below:
|Mortgage Application and Appraisal Fee||At time of application|
|Appraisal Fee||At inspection|
|Property Inspection (optional)||At inspection|
|Deed and/or Mortgage Registration||Closing|
(sometimes provided by seller)
|Land Transfer, Deed Tax or Property
Purchase Tax (in Quebec within 3 months following signing)
|Mortgage Interest Adjustment and
Take Over Fee (if applicable)
|Adjustments for Fuel, Taxes, etc.||Closing|
(and application fee if applicable)
|Home and Property Insurance||Closing and on-going|
|Connection Charges for Utilities
such as Gas, Water and Electricity
|Date of move|
|Moving Expenses||Date of move|
Other Costs May Include:
- Appliance repairs
Typical monthly costs incurred with home ownership are mortgage payments, maintenance, insurance, condo fees, property taxes and utilities.
What Are Market Conditions?
The real estate market is always changing. It helps to understand how market conditions can affect your position as a buyer. The main factors that affect market value are location, property, condition of home, comparable properties, market conditions and the economy.
No matter the condition or desirability of your home, its value will be affected by current market conditions. As your Real Estate Professional I can provide you with current real estate market conditions and explain their impact.
The supply of homes exceeds the number of buyers (supply is greater than demand). In this market, prices tend to drop and the homes stay on the market longer. Thus your home may take longer to sell and you will have less negotiating power in terms of the selling price. Fortunately, you will be in the driver’s seat when making an offer on your next home.
The number of buyers exceeds the number of homes on the market (demand greater than supply). In this market, prices are increasing and homes sell quickly. As a seller, you will probably have more negotiating power and obtain a higher selling price for your property. Unfortunately, you will be on the other side of the fence when purchasing your next home.
The number of homes on the market is equal to the number of buyers (supply equals demand). In this market, prices are stable and homes sell within a reasonable period of time, if properly priced. It is a calm atmosphere with buyers having a satisfactory number of homes from which to choose.
Why A Pre-Approved Mortgage?
Having a pre-approved mortgage will give you the confidence of knowing exactly what you can spend on a home before you start looking. You will also be protected against interest rate increases while you look for your new home.
Your financial institution, Mortgage Specialist or Mortgage Broker will answer your questions and help you determine which financing terms and options are right for you.
Finalizing Your Mortgage
Once you’ve found the home you want to purchase, there are some documents you’ll probably be asked for in order to finalize your financing. They will include:
- A copy of the real estate listing of the property. If the home is still to be built, the mortgage lender will need to see the architect’s or builder’s plans and details on lot size and location.
- A copy of the offer to purchase or the building contract, if this document has been prepared.
Documents to confirm employment, income and source of pre-approval.
If you have a pre-approved mortgage, it’s a simple matter of finalizing a few details which your Mortgage Specialist will explain to you.
Elements of an Offer
There are six key components to the elements of an offer. They are:
Depending on the local market conditions and information provided by me, your Real Estate Professional, the price you offer may be different from the seller’s asking price.
Your deposit shows good faith and that you are serious about buying the home. It is held in trust by the listing brokerage if the offer is accepted and applied against the selling price on closing. The deposit is usually between 5% and 10% of the sale price or more depending on the circumstances and closing date.
Includes the total price offered and the financing details. You arrange your own financing or ask to assume the seller’s mortgage, especially if it has an attractive interest rate.
There are a wide variety of conditions that you can place in your offer. It is extremely common to make your offer conditional on a home inspection by a certified home inspector and conditional on bank financing. If you own another property, your offer may also be subject to you being able to sell your property.
- Inclusions & Exclusions
These might include or exclude appliances and certain light fixtures or decorative items, such as window coverings or mirrors. If a “chattel” requires a screwdriver, hammer or other tool to be removed and the Seller intends on taking it with them, it should be noted under exclusions.
- Closing or Possession Date
It is usually (but not always) the date people move in to their “new” home as well. It is the date that title to the property and keys are handed over to you, the Purchaser, in exchange for funds. The transaction is finalized with the services of your lawyer and the Seller’s lawyer.
Making an Offer
When it comes time to make an offer I can, as your Real Estate Professional, provide current market information and will assist you in drafting your offer.
As your Real Estate Professional, I will communicate the offer, sometimes known as an Offer to Purchase, to the Seller or the Seller’s representative, on your behalf. I will negotiate the offer on your behalf and represent you in your best interests.
Sometimes there may be more than one offer on a property coming in at the same time. As your Real Estate Professional, I can guide you through this process.
Firm Offer to Purchase
Usually preferable to the seller, because it means that you are prepared to purchase the home without any conditions. If the offer is accepted, the home is yours.
Conditional Offer to Purchase
Usually means that you have placed one or more conditions on the purchase, such as “subject to home inspection”, “subject to financing” or “subject to sale of buyer’s existing home”. The home is not sold until all the conditions have been met.
Accepting of Offer
Your Offer to Purchase will be presented as soon as possible. The seller may accept the offer, reject it, or submit a counter-offer. The counter-offer may be in reference to the price, the closing date, or any number of variables. The offers can go back and forth until both parties have agreed or one of you ends the negotiations.
After there has been a “meeting of the minds” and the price and terms have been agreed to, the next step (if applicable) is to contact a home inspector to arrange for a home inspection and the lending institution to arrange for full approval, inclulding a bank appraisal of the property you purchased.
Home Inspectors are a Must
Buying a home is one of the most important investment decisions you will make in your lifetime. As such, it makes sound financial sense to enlist the services of a qualified home inspection company to ensure your home is as solid and secure on the inside as it is on the outside.
Home Inspectors are independent third parties who represent you and prepare a thorough report of the structural and mechanical soundness of the home (including roof, electrical system, heating/cooling system, plumbing, foundation, insulation where visible etc.). Your home inspector will identify visible defects on the property as at the date of inspection, suggest practical low-cost solutions, and provide estimates regarding costs for any work required. It is not a guarantee or warranty, but rather a thorough “inspection” and analysis of the integrity of the home. Shortly after the inspection has taken place, a report summarizing the findings is generally provided to the potential purchaser.
Based on the results of the inspection, you decide whether or not you are satisfied with the report, and if yes, a “Waiver” is prepared, signed and forwarded to the Seller which in effect “waives” that condition out of the offer.
Home inspection costs often range according to size, age, and location of the home. As your Real Estate Professional I can recommend a reputable home inspection service or assist in arranging for a home inspector to visit your property.
When you purchase a home, consider how you will protect your investment.
Most mortgage lenders insist on fire insurance coverage at least equal to the loan amount or the building value, whichever is less.
You should also consider a homeowner’s policy that combines fire insurance on the building and its contents with personal liability coverage. Consult your general insurance agent or broker for professional advice on home insurance.
Mortgage Life Insurance
Mortgage life insurance (MLI) is inexpensive coverage on your life which protects your family or beneficiaries by paying off your outstanding mortgage in the event of your death. For just pennies a day, you will have peace of mind knowing your beneficiaries will be mortgage free. MLI premiums are based on two factors: your age and mortgage amount. Your premium is added to your mortgage payment so there’s no extra paperwork, and it remains the same until your mortgage is paid off. Joint coverage for spouses is also available.
Disability Insurance is important if your mortgage payments depend entirely or in part on your income. Disability insurance provides replacement income if an accident or illness prevents you from working.
Job Loss Mortgage Insurance
Recently insurance companies have started to offer Job Loss Mortgage Insurance. This insurance covers the mortgage payments in the event that you involuntarily lose your job.
Helpful Moving Tips
Use this helpful checklist as a reminder of the things you need to do before you move.
Book the movers. You can choose to have the movers pack everything, or just the breakables, or you can pack yourself. It’s a good idea to obtain estimates from several different companies.
If you own your present home:
- Arrange to have your gas, water, and electric meters read on the day you leave and have the bills forwarded to your new address.
- Have your oil tank read and filled before your sale closes, and provide a receipt to your legal professional 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 home:
Give necessary written notice to your landlord and make arrangements for the return of any rent monies you have on deposit. The Tenant Protection Act states it is illegal for the deposit monies to be collected.
At your new home:
Make arrangements for the gas and electric utilities, water softener, telephone and cable TV to be connected on the day the sale closes.
- Get “Change of Address” cards from the post office and send out well before moving day.
- Have the post office forward your mail to your new address.
- Cancel any contracted services and pre-authorized cheques.
- Inform gardening, dry cleaning, garbage pick-up, newspapers, magazines, diaper and other home services. Arrange for service at your new address.
- Obtain a letter of introduction from your current branch to help establish new accounts. 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(s) effective the day of the move.
- Collect all items out for cleaning, repair or storage. e.g. fur coats, dry cleaning.
- Make special arrangements for the moving of perishables, such as plants.
- Make special arrangements for the moving of your pets.
- Dispose safely of all flammable liquids as it is illegal for movers to carry them.
Why Hire a Legal Professional?
A legal professional is there to represent your interests and to process the legal documentation required. As your Real Estate Professional, I can provide you with the names of legal professionals who specialize in real estate.
The legal process differs from province to province. Your lawyer will advise you on the steps to be taken before the keys to your new home are presented to you.