Buying Real Estate: The Home Buying Process
Select a REALTOR®
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Arrange Financing to Determine What You Can Afford
Before you start looking it's important to know what you can afford. This'll save you time by eliminating those homes that are out of your price range and will help you narrow your search by clarifying neighbourhood and type of home. If you require financing it's crucial you obtain a mortgage pre-approval as soon as possible. The two main reasons are:
- When you are pre-approved, your interest rate is locked-in at today's interest rate. If rates rise tomorrow, you are not affected by this increase because you are locked-in.
- Competing offers are a common occurrence on well valued real estate. Imagine you have found your dream home. You decide you would like to write an offer. We then find out another buyer is interested and you'll be competing with another offer. You will be in a much stronger negotiating position if your financing has already been arranged.
There are a number of factors to consider when obtaining a mortgage pre-approval:
- What type of mortgage is best for you?
- What should the amount of the down payment be?
- Are you eligible for any home-buyer incentive programs?
- What are the fees associated with a mortgage application?
- Documents needed to secure a mortgage pre-approval include:
- Proof of income such as pay stubs and employment letter, or a notice of assessment if you are self employed
- Length of time with employer
- Proof of down payment and your ability to pay closing costs such as recent bank and investment statements
- Proof of any other assets like a car, cottage or boat
- Information about other debts
What Kind Of Home Are You Looking For?
Once you've determined what you can afford, it is important to have a clear picture of your perfect home. This will help us focus on finding the right home for you.
Choose Your Neighbourhood
When considering which neighbourhoods to look in, the following factors should be considered:
- How long will your commute to work be? Will you need to be near public transit?
- Do you prefer an older community with mature trees and character, or would you rather live in a newer community?
- Will you need to be located near schools or specific facilities?
- What other amenities would you like nearby? Beaches, parks, shopping?
- Are you to far from family and friends, or perhaps to close?
The Home's Exterior
Although you will spend most of your time inside, the exterior is what will end up costing you the most if something goes wrong. Keep an eye out for:
- The age and type of roof
- Whether the structure is rainscreened
- The age of the perimeter drainage
- Visible water damage
- Evidence of termites or rot
The Home's Interior
During your home search, keep both aesthetics and function in mind. You already know how many bedrooms and bathrooms you would like, but also ask yourself the following questions:
- Do you prefer an open floor plan or for the rooms to be separate for more privacy?
- How much cabinet space do you need in the kitchen, and do you need an area for a kitchen table?
- Do you like big bedrooms or would you prefer more living space?
- How much storage space do you need, and how many parking stalls?
- Do you need an outdoor area such as a fenced yard, patio, deck or balcony?
There are several factors that will influence your decision when purchasing a condo, such as:
- How much money is in the contingency reserve fund?
- Are rentals allowed, and if so, how many rental units are permitted at any time? How many units are currently being rented out?
- Are pets allowed? How many and what size/type?
- Have any special assessments been voted on or have any structural problems been noted that will lead to an assessment in the future?
- Make sure you read the Strata Council Minutes and the Minutes from the Annual General Meetings, as well as the financial statements, bylaws and rules and regulations for at least the past two years.
It's Time To Make An Offer
After you've seen several homes and found one that feels like the right home for you, it's time to make an offer. There are several things to consider, so make sure you communicate everything you want in the offer to your agent.
Have your REALTOR® do a comparative market analysis for you. This will show you the fair market value of the property. The following factors could affect your offer price:
- Property condition
- New home improvements
- Market conditions (supply and demand)
- Seller's motivation
- Seller concessions - do you want them to give you a carpet allowance or are you asking them to help you with closing costs? If you are - expect to pay a little more.
You will be putting up some money to show the seller you are sincere about purchasing his or her home. A typical deposit is 5% however this may change depending on the circumstances.
The majority of home buyers need mortgage financing. Even if you have been preapproved, the lender will still need time to have the appraisal done, order title, etc. Your agent will advise you as to how much time is needed.
It doesn't have to be a 'hot' market for a seller to have the luxury of choosing between multiple offers on their property. If you find yourself in a multiple offer situation, don't panic and don't withdraw your offer - you may be the highest bidder and won't even know it if you pull out. Go through at least one round of negotiations before you decide to withdraw. Have a price in your mind of where you want to go, and stay in the game until that price has been reached. Too many buyers lose the property by pulling out too soon.
From Offer To Closing
Once your offer has been presented to the seller the negotiating process begins. There are likely to be numerous counter-offers going back and forth between you and the seller. Here are a few important things to remember:
- Your offer is just that - an offer - until it has been accepted and agreed to by both you and the seller. At any time during the negotiating process another offer from a different buyer could be made - thus creating a multiple offer situation. A seller is free to accept whichever offer they prefer. A wise buyer will try to come to an agreement with the seller in a reasonably short period of time.
- Many contracts have stipulations on when the buyer must make his mortgage application. Please be sure to check your contract and abide by its requirements.
- If your contract calls for a home inspection, please select your home inspector as soon as possible and let your agent know who they are. Your service providers have a limited amount of time to protect your interest.
- Be sure to comply with all requests of your lender after the mortgage application has been done. Not producing the documents or information they need could jeopardise you getting your mortgage on time.
- Generally, the buyer accompanies the home inspector at the inspection. Please allow at least 2-3 hours for an average inspection. More time may be necessary for a large home.
- Your agent will act as coordinator for all activities from this point and will keep everyone in the loop.
- If necessary your agent will work to negotiate any repairs that were noted during the home inspection. Remember, routine maintenance items are common and typically not negotiated on.
- Your walk through inspection (typically on new homes) will be scheduled as per your sales contract - normally a few days prior to completion. Your agent will schedule this with you, the seller and the listing agent.
If all of this sounds a little overwhelming - don't worry - you're in good hands. Your real estate agent has been through this many times and will be there for you during the entire process. Relax and enjoy the experience.