HOW TO BUY A PROPERTY
Buying real estate is one of the biggest and most important purchases that you can make in your lifetime, meaning it is important to get it right.
What really makes the process a success is if you are able to move into a home you can see yourself living-in, while staying on budget.
Before embarking on this process, it is important to determine if now is the right time for you to make this purchase, both financially and mentally.
Since housing prices have soared over the last decade, affordability is top of mind in this decision.
Consulting with a real estate agent and a mortgage broker are wise resources to consider helping you make this tough decision of whether now is the right time or not.
Before you start looking for your dream home, decide if you’re ready for home ownership by considering some initial questions:
What can I afford?
What are my options?
What do I need in a home?
Am I OK with the risks?
Am I ready for the responsibility of home ownership?
Knowing and understanding what is involved in the purchase of a home and where you will be able to live comfortably is an essential first step in the home buying process.
Here are 10 steps guid to buy a real estate:
1-MORTGAGE PRE-APPROVAL PROCESS TO DETERMINE YOUR BUDGET
A mortgage pre-approval is when your mortgage broker has sent in your basic financial information (income, credit score, current debts, etc.) to the lender for review.
From there, the lender will have determined the maximum amount of money they will lend you, along with an estimated interest rate and monthly mortgage payment.
Many home sellers nowadays will not even look at offers if the buyer is not pre-approved.
Pre-approval assures the sellers that you are a motivated and ready buyer that is certain of their affordability and not just taking a shot in the dark from an online calculator.
During the pre-approval process, you will need to confirm your down payment and how much you will be putting down.
Minimum down payment rules in BC are as follows:
-5% for properties for the portion of the purchase price under $500,000
-10% of the portion of the purchase price above $500,000 but less than $1,000,000
-20% on the purchase price for properties valued above $1,000,000
The amount that the bank is willing to lend you plus your down payment will be the maximum purchase price that you can afford.
There are various sources available for your down payment:
-RRSP withdrawal: You can withdraw up to $25,000 per borrower to be used towards your down payment. The funds have to be repaid within 15 years and you cannot take out RRSPs unless they have been in your account for at least 90 days.
-Gift: A common way for buyers is to receive a gift from a family member to help with their down payment
-Borrowed funds: You may borrow funds from a line of credit to assist with your down payment.
2- OTHER BUYING AND CLOSING COSTS:
To complete the transfer of title there are a number of costs in addition to the purchase price that you will need to consider.
In short, some costs associated with the subject removal period and closing are:
-Home inspection fees
One of the common subjects to put in an offer is a home inspection clause; therefore, this buyer cost is typically incurred during the subject removal phase.
A home inspector will come and inspect the property as well as provide a report on the condition of the home.
The fees range and is typically $400-$1000 depending on the size of the home and the complexity of the inspection.
-Notary or lawyer fee
This fee ranges from $1000 to $2500 depending on complexity of the deal and whether or not they need to order additional documents.
-Property transfer tax
If you are a first time home buyer then you may qualify for a property transfer tax exemption.
In BC the property transfer tax is calculated as 1% of the 1st $200,000 and 2% on the balance up to $2,000,000,
3% on the portion of the fair market value greater than $2,000,000, and if the property is residential, a further 2% on the portion of the fair market value greater than $3,000,000.
If your purchase price is less than $500,000 and you are a first time home buyer that matches the exemption requirements then you are exempt from the entirety of the tax.
-Goods and Services Tax (GST)
The GST on a new home is 5% of the price.
3-FIND YOUR REALTOR
Having a realtor to guide you through the process of buying a home is an absolute necessity as the agent’s expertise will benefit/protect you the most.
The buyer’s agent will make sure that your best interests are protected all the time by Determining market value of a property so that you don’t overpay, advising you in the right direction considering all pros & cons,
explaining all the advantages and disadvantages of different options, showing you homes and all of the great neighbourhoods based on your criteria, writing a good offer that protects you the most,
reviewing documentation related to your purchase and assisting you towards completion to ensure a smooth transaction.
The service of a realtor when you are purchasing a home is free and the seller pays your agent’s commission.
4-PRIORITIZE WANTS/NEEDS AND KNOW YOUR EXPECTATION :
Make a list of your needs vs. your wants.
Everything you want may not be realistic within your budget, so it’s important to narrow down exactly what you need. Everything else included after your needs will just be a bonus!
Bring your list with you when you go to check out homes. Once you’ve determined a very strict list of needs and wants, it’s time to go out and search for homes! You’ll have the chance to attend open houses.
Not every home you see online will still be available or have an open house – have your realtor check availability and book private showings.
5-NARROW THE SEARCH:
After checking out some homes you should be able to narrow down exactly what you like and don’t like.
From there, your realtor should perform a comparative market analysis for you to determine the market value of your favourite homes. If they are within your budget, then rank those homes from best to worst
and decide which home you would like to write an offer on.
The process of finding the right home can take anywhere from one day to more than a year. Take your time, and know when the right one really comes along and go for it.
6-WRITE AN OFFER:
Once you’ve found the home that you can see yourself living in, the next step is to write an offer with a Contract of Purchase and Sale.
Your realtor will be the one that can make recommendations on what to include in the offer to keep you safe and protected, as well as help to estimate market value to ensure that you don’t overpay for the home.
In a hot market, there may be an exact date when the seller is reviewing offers, and in this case you may be encountering a multiple offer scenario.
Alternatively, if the home has been on the market for a long time or the seller has requested it, they may be doing offers on a first come first serve basis.
Whether in multiple offer or single offer cases, Your realtor will negotiate on your behalf to ensure to get the best result that benefits you the best. During the negotiation process your agent will inform you step by step and advise you to make a wise decision as you are the decision maker.
*When writing an offer you’ll need to decide on dates, subjects, included/excluded items, price/deposit, terms to ensure you’re protected,expiry time/date of your offer.
*Subjects that you will typically see in a real estate offer are:
-Subject to financing
-Subject to title search
-Subject to property disclosure statement
-Subject to inspection
-Subject to fire/property insurance
-Subject to strata documentation (if applicable strata property)
The above subjects will ensure that the buyer is able to perform due diligence on the property with regards to the most important matters of purchasing a home.
7-SUBJECTS REMOVAL AND PROVIDE DEPOSIT:
Subject removal is there for the buyer to perform due diligence on the property as well as ensure that their finances are in order prior to handing in the deposit.
Typical subjects that you will need to perform prior to the subject removal date which is usually 7-14 days long, are financing, inspection, title, property disclosure statement, and strata documents if required.
During the subject removal period you and your realtor are working actively to perform due diligence on the property with regards to the included subjects. Another reason thatn you need your realtor expertise.
If you are satisfied with all of your subjects before the subject removal date, then you will proceed and provide the deposit. If you are not satisfied with the results of the subjects that you have the option to collapse the deal and walk away.
The deposit is typically 5% of the purchase price, and is held in trust by the buyer’s agent’s brokerage until completion.
This deposit will form a part of your down payment on the home. Once you remove subjects and provide the deposit, the deal is now considered “firm” and all you have to do is wait until you move in!
8-CHOOSING A NOTARY OR LAWYER:
Anyone buying or selling a home needs a notary or lawyer to represent them in their real estate transaction.
If you are buying and selling, it is best to keep the same notary or lawyer for both transactions.
They will be the ones to draft up a statement of adjustments for you, in which you will know how much money is due upon completion and what the exact closing costs are to complete. In the case that something goes wrong,
they will be your representation to ensure things are smoothed out.
9-CLOSING/COMPLETION:
Prior to closing, your realtor will instruct their conveyancing team to send your notary or lawyer all of the documents that they need to start your file and work towards completion.
Your lawyer or notary should have already calculated how much money you will need to bring in a week or two prior to closing in order to complete the transaction.
You will be instructed to bring them a bank draft or certified cheque to cover the balance of any funds necessary to close, along with proper government issued ID.
The completion process requires a fair amount of paperwork to go through, and you will need to sign off on documents required in order to complete the transfer.
Depending on which lender you use, you may also have to visit the branch to review important mortgage details like preferred payment dates and ensure that they have all of the documents that they need before closing.
10-POSSESSION AND MOVING IN:
Your possession day will have been stipulated in your contract of purchase and sale, along with the time that you should receive the keys.
Make sure that your realtor reviews this with you and tells you exactly when you are able to move in so that you can schedule with your movers accordingly.
The sellers should have already cleaned the house, but a secondary clean before you start moving all the furniture in won’t hurt!
Your realtor should pass the keys along to you at the time of possession and double check that they are all working and none are missing as per the contract.
** HOME OWNERSHIP IS AN AMAZING EXPERIENCE THAT YOU WILL REMEMBER ALL THE TIME. IT IS MY PLEASURE TO ASSIST YOU AND BE PART OF THIS MEMORABLE PROCESS BY MAKING IT STRAIGHT-FORWARD FROM THE START…