Index
Buyer Information
Understanding Market Conditions
The real estate market is always changing. It helps to understand how market conditions can affect your position as a buyer.
Market Conditions |
Characteristics |
Implications |
| Buyer's Market: The supply of homes on the market exceeds demand. |
High inventory of homes. Few buyers compared to availability. Homes on the market longer. Prices tend to drop. | More time to look for a home. More negotiating leverage. |
| Seller's Market: The number of buyers wanting homes exceeds the supply or number of homes on the market. |
Smaller inventory of homes. Many buyers. Homes sell quickly. Prices usually increase. | May have to pay more. 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 sell within an acceptable time period. Prices generally stable. | More relaxed atmosphere. Reasonable number of homes to choose from. |
Obtain 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 Mortgage Specialist will answer your questions and help you determine which financing terms and options are right for you. Your Mortgage Specialist and Real Estate Professional work as a team to help you find the right home and select the best financing.
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.
The Major Elements of an Offer
1. Price
Depends on the market and the buyers, but generally, the price offered is different from the asking price.
2. Deposit
The deposit shows the buyer's good faith and will be applied against the purchase price of the home when the sale closes. I will be able to advise you on the suitability of the amount of the deposit being offered.
3. Terms
Includes the total price the buyer is offering as well as the financing details. The buyer may be arranging his/her own financing or may ask to assume your existing mortgage if you have an attractive rate.
4. Conditions
These might include "subject to home inspection", "subject to the buyer obtaining financing", or "subject to the sale of the purchaser's property."
5. Inclusions and Exclusions
These might include appliances and certain fixtures or decorative items, such as window coverings or mirrors.
6. Closing or Possession Date
Generally, the day the title of the property is transferred to the buyer and funds are received by the seller, unless otherwise specified.
How to Make an Offer
When it comes time to make an offer, I will be able to provide current market information and will assist you in drafting your offer.
I will communicate the offer, sometimes known as an Offer to Purchase* to the seller, or the seller's representative, on your behalf. Sometimes there may be more than one offer on a property coming in at the same time. I can guide you through this process.
Offer to Purchase
a legal document which specified the terms and conditions of your Offer to Purchase the home.
The offer can be firm or conditional.
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
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.
Acceptance of the 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.
Hire a Legal Professional
A legal professional is there to represent your interests and to process the legal documentation required. Your Royal LePage Real Estate Professional can provide you with the names of legal professionals who specialize in real estate.
The legal process differs from province to province. Your Royal LePage Real Estate Professional or legal professional will advise you on the steps to be taken before the keys to your new home are presented to you.
Have the Home Inspected
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.
A home inspection will determine the structural and mechanical soundness of your home. Your home inspector will identify existing and potential problem areas, suggest practical low-cost solutions, and provide estimates regarding costs for any work required. Shortly after the inspection has taken place, a report summarizing the findings is generally provided to the potential purchaser.
By commissioning a home inspection prior to purchase, you're protecting both yourself and your investment, as well as buying a little peace-of-mind.
Home inspection costs often range according to size, age, and location of the home. I can recommend a reputable home inspection service or arrange for a home inspector to visit your property.
Purchasing Costs
Land Transfer Tax
See land transfer tax calculator
Legal Fees
Legal fees range between $600 to $700 plus any disbursements such as searches, photocopies, couriers, and mortgage arranging costs. The average fee is about $850 plus GST.
Mortgage Application Fee
It costs lenders money to process your application and some may pass these costs on to you. However, due to the competitive nature of the mortgage industry, some may waive this fee, especially if you have other accounts with them.
Mortgage Insurance
If your down payment is less than 20% of the purchase price, this insurance protects the lender against default. The cost to you ranges from 1.25% for 20% down to 3.75% for 5% down and is added to the mortgage principal.
Mortgage Life Insurance
This is a form of term life insurance that pays off the balance owing if you die. Many lenders offer the option of buying this insurance and adding it to your monthly payments. Be sure to speak with your insurance agent as well and compare the cost of obtaining your own policy instead.
Appraisal Fee
Most finance companies will have their own appraiser determine the value of the property. The borrower pays the cost, which is usually at least a few hundred dollars.
Home Inspection Fee
Some lenders require a professional home inspection, or for peace of mind, the buyer often wants the home inspected anyway. It is well worth the cost, which is usually in the $250 to $350 range.
Land survey fee
Many lenders require a plot plan or survey of the property you intend to purchase. Ensure that one is available, that is current enough or acceptable to your lender and if it isn’t, whether or not title insurance is an option. If you have to deal with a new survey, the cost can be substantial ($1200 to $1500 for a typical subdivision property). This cost can be borne either by the Seller, the Buyer or shared by both.
Homeowner's Insurance
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
When lenders refer to mortgage insurance, they're referring to coverage that's provided by CHMC or MICC for a high ratio mortgage. 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
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.
Buyer’s Checklist
Use the 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 monies you have on deposit.
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.
General
- 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.
Glossary of Buying Terms
AMORTIZATION PERIOD:The actual number of years it will take to pay back your mortgage loan.
APPRAISED VALUE:An estimate of the value of the property. Conducted for the purpose of mortgage lending by a certified appraiser. This appraisal is not to be confused with a building inspection.
ASSUMABILITY:Allows the buyer to take over the seller's mortgage on the property.
CLOSED MORTGAGE:A mortgage that locks you into a specific payment schedule. A penalty usually applies if you repay the loan in full before the end of a closed term.
CONDOMINIUM FEE:A common payment among owners which is allocated to pay expenses.
CONVENTIONAL MORTGAGE:A mortgage loan issued for up to 80% of the property's appraised value or purchase price, whichever is less.
DOWN PAYMENT:The buyer's cash payment toward the property. The difference between the purchase price and the amount of the mortgage loan.
EQUITY:The difference between the home's selling value and the debts against it.
HIGH-RATIO MORTGAGE:A mortgage that exceeds 80% of the home's appraised value. These mortgages must be insured for payment.
INTEREST RATE:The value charged by the lender for the use of the lender's money. Expressed as a percentage.
LAND TRANSFER TAX, DEED TAX OR PROPERTY PURCHASE TAX:A fee paid to the municipal and /or provincial government for the transferring of property from seller to buyer.
MATURITY DATE:The end of the term, at which time you can pay off the mortgage or renew it.
MORTGAGEE:The person of the financial institution that lends the money.
MORTGAGE INSURANCE:Applies to high-ratio mortgages. It protects the lender against loss if the borrower is unable to repay the mortgage.
MORTGAGE LIFE INSURANCE:Pays off the mortgage if the borrower dies.
MORTGAGOR:The borrower.
OPEN MORTGAGE:Allows partial or full payment of the principal at any time, without penalty.
PORTABILITY:A mortgage option that enables borrowers to take their current mortgage with them to another property, without penalty.
PRE-APPROVED MORTGAGE:Qualifies you for a mortgage before you start shopping. You know exactly how much you can spend and are free to make a "firm" offer when you find the right home.
PREPAYMENT PRIVILEGES:Voluntary payments in addition to regular mortgage payments.
PRINCIPAL:The amount borrowed or still owing on a mortgage loan. Interest is paid on the principal amount.
REFINANCING:Paying off the existing mortgage and arranging a new one or re-negotiating the terms and conditions of an existing mortgage.
RENEWAL:Re-negotiation of a mortgage loan at the end of a term for a new term.
SECOND MORTGAGE:Additional financing. Usually has a shorter term and higher interest rate than the first mortgage.
TERM:The length of time the interest rate is fixed. It also indicates when the principal balance becomes due and payable to the lender.
TITLE:Legal ownership in a property.
VARIABLE-RATE MORTGAGE:A mortgage with fixed payments, but fluctuates with interest rates. The changing interest rate determines how much of the payment goes towards the principal.
VENDOR TAKE-BACK MORTGAGE:When the seller provides some or all of the mortgage financing in order to sell their property.