What You Need To Know After You Choose Your Home

After you’ve exhausted all of the possibilities of locations in your preferred area, the asking price is within your budget and the property suits all of your needs, it’s time to proceed with the sale. This is initialized with an offer to the seller. It starts with formatting the The Agreement of Purchase and Sale, which sets out the terms and conditions between the buyer and seller. It begins with you presenting the offer, following with them hopefully accepting it (after the conditions, if any, have been met), the offer then becomes legally binding. Both the buyer and the seller must hold up their end of the agreement and finalize the purchase. Both parties must understand what’s in the offer before they sign to avoid any legal complications. If you so choose, you can add special conditions in the offer. Every sale is unique, so it’s critical you do your due diligence and ensure that every aspect is covered.

The standard form has the full legal names of the buyer, seller and the agent involved in the transaction. The legal description of the property along with the municipal address, the lawyer will ensure that everything is specific and accurate. The purchase price must be there, including the deposit. When you submit an offer, you are generally expected to submit a deposit to demonstrate serious intent to buy the property. This is usually in the form of a certified cheque payable to the listing broker in trust. When the agreement is finalized, the amount is credited towards the purchase price.

There are generally clauses specific to the agreement of the purchase. As every offer is unique, they will have different conditions which protect the buyer or seller. If you are arranging a mortgage to buy the property, it’s customary to insert a condition making the offer conditional upon financing for a specified period of time. In the event that you are unable to arrange adequate financing within the allotted time period, the offer becomes null and void, the deposit is then returned to you, and neither party is under any further obligation to proceed.

As the buyer, you have the ability to add additional clauses to the agreement. This can be anything from adding new drapery to painting the walls. Be aware that if a seller receives two offers, one with conditions and one without, they will most likely be more inclined to accept the unconditional (firm) offer. Consult your lawyer concerning the use and wording of conditional clauses.

The irrevocable date and time is the period at which the other party must respond to your offer. The offer will become null and void if no agreement is made. This is typically done under 72 hours. The closing date (or completion date) is when the parties complete the transaction. At this point all of the paperwork is filed, all funds paid out and the buyer receives the title to the property. The closing date is typically 30 – 60 days from the date of the agreement, but it can be longer for new sales.

There is a wide array of items included within the purchase price of the property. Fixtures are permanent improvements that remain with the property as part of the sale. Chattels are moveable pieces that are not physically attached. The distinction is not always clear. If the chandelier in the dining room is a family heirloom the seller will most likely want to keep that. Since it could be defined as a fixture, it should be listed as an exception in the offer. From a legal standpoint, it’s a fixture and not mentioned in the offer, it is considered part of the sale. In order to avoid confusion, any items you are unsure about should be listed in the offer. These items are not limited to: area rugs, light fixtures, curtains, dishwasher, custom furniture, water heater, storage shed and satellite dish.

I would strongly advise having your lawyer review the offer before you submit to the seller. After this agreement, you are legally liable for the conditions as stated in the agreement. If timing is critical, you can insert a clause making the agreement conditional upon your lawyer reviewing the offer, which is usually within a couple of days. Be aware that it’s only the lawyers job to review the paperwork and ensure that you are protected. It’s not their job to comment on the value of the property.

After the offer is signed, a meeting is then arranged with the seller and the listing agent to negotiate the terms. The seller can accept, reject or make a counter-offer, but only during the irrevocable period (before the deadline). If the offer is rejected, it may be because your initial offer was too low or the terms were not acceptable to the seller. At this point, you may want to raise your price and try again. In the event the seller makes a counter-offer, this is a good sign as it indicates that they are interested in the potential to close the deal with you. You have the ability to go back and forth to negotiate the price and terms until you are both satisfied. Be aware of what the seller is looking for to streamline this process, you don’t have to match this but you may have to compromise. Unless you absolutely require a condition that the seller is unhappy with, don’t let it sour and potentially ruin the transaction. You may have to decide on what’s more valuable to you: the conditions or the price of the property. Always remember what you’re trying to accomplish, ideally both parties getting a fair deal.

Written by: Spencer Maxwell

What You Need To Disclose When Buying Or Selling A Property

We are coming from a legal, disclosure and real estate position. As either a seller or buyer of a property, it’s to know what needs to be disclosed to cover your best interests. A latent defect is anything in the property that cannot be discovered during a professional and thorough inspection. A patent defect is anything within the property that can be discovered by a general viewing or professional inspection. A seller’s market is when properties for sale are scarce, while there are a large number of buyers. Competing buyers are more likely to take the property as is, we don’t recommend this as it creates more risk. The first 10 days are important as that is your due diligence period (conditional period), a huge component of this is examining the property physically or “otherwise.” “Otherwise” refers to issues that aren’t visible to the naked eye. Regardless of where the market is leaning, always look over the property with a keen eye.

As the seller, here are the general provisions you are bound by:

Any visible defects or something that can be discovered with an inspection does not need to be disclosed by the seller. This is not limited to a stain behind a picture frame, damaged counter tops or cracked windows. This can even include plumbing, as long as the pipes are visible.

If there are any latent defects, the seller must disclose them. If there is an aspect that was not covered, the purchaser has the option of suing after closing.

The seller is legally obligated to respond truthfully or risk legal action. The buyer has the opportunity to insert a clause in the purchase of agreement that the seller states that during their occupancy there has been no illegal drug activity, suicide, murder or natural death.

As the buyer, here are the general provisions you are bound by:

Be proactive during the home inspection process within your due diligence period (conditional period). We would advise utilizing a professional to look for any hidden defects that would dissuade you from purchasing at the selling price.

This can be anything that has the potential to be dangerous, unfit to live in or unfit for the needs of the buyer. If this is not brought to the attention of the buyer, they have the potential to sue even after the purchase is finalized, potentially years down the line. This is not limited to hidden water damage, mold, smoke damage or anything that affects the structure of the property. If there is any issue with the property, the seller can take legal action simply stating that the buyer must have known about the issue. We advise that buyers research if there have been any prior insurance claims from the previous owner.

If there has been a history of violence or illegal activity that does not need to be disclosed. The seller does not need to inform the buyer if a murder, suicide or any drug selling has occurred on the property. Most buyers do care about this. It’s on the onus of the purchaser to Google the address and/or ask the neighbors.

The “As Is” clause is when you are willing to purchase the property in it’s current state. No conditions or alterations are required in the sale of the property. This refers to anything within the property. It can be anything from the pool supplies to the pests in the walls.
The “As Is” clause should be generally seen as a warning to potential buyers as they aren’t providing assurance about anything in the property. This is usually done when the property is being sold under the power of sale or an estate sale. Selling under the power of sale is when the buyer is unable to pay off the mortgage and the lender gains the rights of the property. If the home is dangerous, uninhabitable or there are hidden defects this will not protect the seller. The clause can be interpreted. It’s all a matter of perspective as what makes a home uninhabitable to the individual. An estate sale is when everything in the home is sold due to divorce, death, bankruptcy or other legal matters.

We strongly recommend that you build a team experts, which include a realtor, real estate lawyer and home inspector. As a buyer or seller, this is the best way to keep yourself protected. A home inspection is strongly recommended for either side of the transaction. As a seller, you can gauge what needs to be fixed to have the property at it’s pique value. There are a number of things that can go wrong, but if you’re diligent and educated you will be protected.

The Numbers You Need To Know For Real Estate

   Buying a home is a very costly process, and very likely the largest expense in one’s life. There are a wide array of fees and payments you need to make before and after you settle in. It’s not overwhelming if you know why and what you are paying for. There are different types of payments, upfront and monthly. If you can manage all the costs and put the research in, it will be more of an adventure than a chore. The upfront costs consist of the down payment, home inspection fees, appraisal fees, legal fees, land transfer tax, moving costs, closing adjustments and new home costs. The monthly expenses include the mortgage payment, property taxes, home insurance, utilities and condominium fees. With all of these aspects calculated, you will know the true costs of the purchase of your property.

The vast majority of home buyers, new and old, don’t have the capital available to outright purchase a property. Fortunately, mortgages are there to assist. The down payment is a portion of the price of the home, typically between 10 – 20%. This is to demonstrate your intention to completely purchase the property. The larger your down payment is, the less mortgage you will have to pay off, which can result in less interest over the years. There is also a deposit involved when you sign the contract to assert that you will purchase, which is subtracted from the down payment.

The home inspection fee is not a necessity, but we would strongly recommend it before you finalize your offer to purchase. This has the potential to present areas that need repairs or maintenance. It will assist you in getting you getting your home to its potential. The inspector will generally provide you with a written report. The price range is generally between $350 – $500.

The appraisal fee comes from the financial institution that extends the mortgage, to ensure that the property meets their criteria for the mortgage. The buyer is generally responsible for the fee, but it can be built into the admin fee they charge. If so, ensure that you get that in writing. The admin fee includes photocopies, paperwork and various other administrative aspects. This fee is anywhere from $500 – $700.

Legal fees are definitely a necessity for the purchase of the property, as you require a lawyer to look over all of the legal documentation. This includes photocopies, disbursements and title insurance, which protects you against fraud. Ensure that you get a lawyer that specifically deals with real estate rather than a general practitioner as they will be more knowledgeable. A reputable real estate lawyer will cost between $1,500 – $1,800. There are other lawyer’s that will quote you at around $800, this usually comes along with additional disbursements which can add up to much more.

The Land Transfer Tax is an additional fee that varies depending on your province. In Ontario, you are required to pay a one-time provincial tax, a percentage depending on the amount of the purchase price of the home. In Toronto, there is also a municipal land transfer tax. Saskatchewan is the only province without this tax.

Moving costs are inevitable, whether you are hiring movers or doing it yourself. If you plan on moving during the peak spring/summer months, you should contract service 2 – 3 months in advance if possible.

Closing adjustments are paid after the finalized purchase of the property. This is not limited to property taxes, utility bills and condominium common expenses. This is usually paid by the seller prior to closing, then allocated based on the closing date. You are responsible for reimbursing these amounts to the seller at closing.

New home costs are additional expenses you should take into account if you are purchasing a new property. This is not limited to kitchen appliances, tools, gardening equipment, cleaning materials, carpets, curtains or possibly new furniture. 

Mortgage payments are a monthly expense that continue until the entirety of the home is paid off. This constitutes your biggest outlay of funds. This is determined by a wide array of factors and variables, including the down payment, interest rates and the term. Payments can be weekly, bi-weekly or monthly.

Property taxes are generally billed twice a year at six-month intervals. This can be remitted directly to the municipality by you, in which you may be required to periodically show proof of payment to your financial institution. You can also include a provision for the payment of your property taxes in your monthly mortgage payment. Your financial institution will retain your tax contributions in a separate account (on which you earn interest), remitting on your behalf as required by your municipality.

Home insurance is required for coverage against fires, theft, liabilities and other risks of loss. The mortgage lender requires that you provide your lawyer or notary with proof that your insurance is in place by the date of closing. Your insurance company will generally call you with a list of questions about your new home.

Utilities are monthly payments which include heating, gas, electricity, water, telephone, internet and possibly cable. Some of them may be included in the purchase.

Condominium fees are another likely fee if you purchase a unit or townhouse. You will likely be required to contribute to exterior maintenance and upkeep of the common areas on a monthly basis. Your property manager or condominium association can provide full details of the services and monthly fees.