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A Road Map to Home Buying

7 Easy Steps to Buying a Home

If you're planning on buying a home, congratulations!   You'll be joining the ranks of hundreds of families who realize that home ownership offers a number of benefits including building equity, saving for the future, and creating an environment for your family.  When you own your own home, your hard-earned dollars contribute to your mortgage. The equity you earn is yours.  Over time, your home will increase in value.

 

STEP 1 –Determine what you’re looking for in a new home and when you would like to move.  Our “Home Buyer Worksheet” is designed to help you narrow your focus so that you make a sound buying decision.  Email us for your copy of the Worksheet.

STEP 2 – Sign a Buyer Agency Agreement. This guarantees that your agent will follow a strict code of ethics and, your needs will be professionally represented throughout the entire process of buying your home. It will also give you access to homes that are not listed, as we network with our colleagues so that we know about homes coming up for sale before they’re listed.

STEP 3 – Determine Affordability: Meet with Mortgage Broker or Representative from a financing institution and obtain a Pre-Approved Certificate. Your Mortgage Representative will highlight all the extra costs associated with buying your home and will “lock” you into a rate guarantee.

STEP 4 – Viewing Homes: Most buyers start their search on-line, but seeing a home in person will give you a better feel for the suitability of the home and neighbourhood.  Ensure you work with a local Realtor who is knowledgeable about the area and can point out the positives and negatives.

STEP 5 – Making an Offer: When you find your dream home, you should present a competitive offer immediately. Dawtrey & Barnes have years of contract and negotiation experience. We will work with you in developing an offer price based on recent past sales of similar homes in the same neighbourhood. We will structure a contract that protects your interests and ensures there are no surprises.

STEP 6 – Conditional Agreement: Once we have a conditional agreement, the property will be temporarily off the market until conditions are met. Conditions can range from home inspections to financing, or other more specific clauses that may apply to a particular property. These final details will be managed and any necessary inspection will be performed to ensure the property is “perfect” for you.

When you're ready to act, contact us.

 

  BUYER AGENCY AGREEMENT

Entering into a Buyer Agency Agreement has countless advantages and no disadvantages.  When you sign a Buyer Agency Agreement, you are simply agreeing to “hire” a personal representative who, by law, must represent your best interests to the best of his/her ability.  All of this personal service is available at absolutely NO COST TO YOU!

About this time you are probably saying to yourself, “This sounds too good to be true!  What’s the catch?”  The “catch” is that you are signing a legal document between you and the Buyer’s Agent that will establish a legal relationship with duties and obligations on the parts of both parties. 

Client responsibilities:

  • to not engage the services of another agent during the contract timeframe
  • to provide a detailed statement of the type of property sought   

 Agent responsibilities:

  • learn about client needs and wants
  • identify suitable properties for client’s consideration
  • communicate positive and negative aspects of properties as they relate to client’s needs
  • disclose fully any known defects or stigmas about homes or areas
  • help client make informed decisions about properties/neighbourhoods
  • negotiate the absolute best price and terms for their client
  • structure and negotiate a contract in client’s best interest
  • protect the client's interests
  • provide an honest assessment of the property in terms of market value
  • NOT disclose any confidential personal information in regards to client’s financial information, credit history, mortgage approval status or the maximum the buyer is willing to spend
  • know the market and understand local factors that influence pricing

By signing a Buyer Agency Agreement, you agree to let your agent represent your home buying needs exclusively and you agree that your Agent should be compensated for the services in guiding you professionally through the home buying process.  Of course, the beauty of the situation for the buyer is that you don’t have to pay the fee, as commission is paid to the Buyer’s Agent by the Listing Broker.

Some people believe that they can save money by dealing with the Listing Agent.  However, this is like using the same lawyer if you were being sued by someone, in order to save money on legal fees. When you hire a Buyer’s Agent, your interests are professionally represented, and you have more control and peace of mind than if you are simply sold any home you find.  Buying a home is a big decision and it is important that you work with a professional.  The Dawtrey & Barnes Team are devoted to providing ethical, professional, world-class service!  We will guide you through the home buying process and represent your interests exclusively as we help you find a home.

DETERMINE AFFORDABILITY

It is very important to meet with a Mortgage Representative early in the process.  Your Mortgage Representative will highlight all hidden fees, and ensure that you are looking for homes in a comfortable price range. 

What is a Mortgage Broker?  Just as an insurance broker finds you the best deal on insurance, a mortgage broker finds you the best deal on a mortgage.  Rather than working for one financial institution, they are independent and deal with lots of financial institutions.  This allows them to offer you more choices and more competitive rates.  It also means that their advice is impartial and based on your best interest.  Mortgage Brokers will help you get the best rate possible, locked-in so you don’t have to rush into any decisions about buying.

CMHC (Canadian Mortgage and Housing Corporation).  If your down payment is less than 20%, your loan is considered a high ratio mortgage and will require CMHC Insurance.  The cost of this insurance is usually added onto the mortgage amount, so this is not an out-of-pocket expense.  Your Mortgage Representative will go over this with you in detail.

Keep in mind that while you don’t need the down payment until closing (possession date), a DEPOSIT is required at the time of offer.  This amount is roughly 3-5% of the purchase price.  This “show of good faith” amount is held in a trust account by the listing broker until closing, at which time the funds are forwarded to the lawyers.  Make sure you have ready access to a deposit amount – if the funds are locked-in, you may have to arrange for a line of credit.  Talk to your Mortgage Representative about this.

 

How much do you need for closing costs?

You're pre-approved for financing and you know how much you can spend to buy your next home.  You know exactly how much you have for a downpayment.  However, you also need to know approximately how much money you're going to need to close on the house, in addition to the downpayment.

Wide variances can exist in closing costs owing to unique circumstances concerning a specific property and local market practices.  In the Oakville/Burlington area, the following is a list of expenses typical to the purchase of a residential home.

Land Transfer Tax is a provincial tax payable by the person(s) purchasing the property (with some exceptions) and is calculated on the total purchase price of the home.  The rate is ½% on the first $55,000; plus 1% on the amount from $55,000 to $250,000; plus 1 ½% on the remainder of the purchase price; plus ½% surcharge on single family homes and duplexes for the amount over $400,000.  Click on this link to calculate Land Transfer Tax:

http://www.landtransfertaxcalculator.ca/

 

Legal Fees:  The bill from your lawyer will include the basic fee as well as disbursements which are any costs your lawyer incurs to search the property title and to close the sale. These additional costs include everything from registering the mortgage to a law society levy the lawyer has to pay, plus HST where applicable.  Most lawyers will take the time to explain anything you don’t understand. While basic fees and disbursements vary, you should expect to pay anywhere from $1,000 to $3,000 for legal fees, including disbursements, to close an average home.  Title insurance will be arranged by your lawyer.

Survey:  This is usually provided by the property owner at no cost.  However, if there is no survey or an outdated survey, your lawyer may recommend getting a new survey.  The cost of getting a property surveyed varies according to type of survey as well as size, type and location of property.  Costs range from $1000 and up.  A cheaper alternative is to get Title Insurance, which costs approximately $300.00.  Your lawyer will advise you regarding the survey requirements.

Mortgage Costs can also vary, depending on the type of mortgage and your bank’s policies.  Application fees range from $150 to $250 and in some cases are waived by the financial institution.  In the case of “hi-ratio” mortgages (i.e. where the downpayment is less than 20%), there is also a mortgage insurance fee.  The two major insurers of hi-ratio mortgages are Canada Mortgage and Housing Corp (CMHC) and GE Capital, both of which will give you the option of paying the fee on closing, or adding it to the mortgage principal.  Most purchasers add it to their mortgage principal.  The insurance fee varies and is less than 5% of the mortgage amount.

Adjustments refer to those items that have been prepaid beyond the closing date by the Seller, and are pro-rated as of the date of closing.  This may include things like property taxes, utility charges, fuel costs, interest on assumed mortgages, rent, etc.   For example, if property taxes of $2400 have been paid in full for the year by the Sellerr and the closing date is August 01, then the purchaser will pay an “adjustment” of  $1000 (5 months @ $200 per month).  This amount is then given to the Seller.  The “Adjustments” are calculated and paid out by your lawyer.

Home Inspection:  This amount is not paid at closing, but should be budgeted for.  It will be paid at the time of the home inspection, which is usually done within 5 days upon acceptance of the offer.  The cost of a home inspection depends on the size of the home, and ranges from $300 to $600, plus HST.  Additional inspections such as mould or radon gas testing, swimming pool, well or septic system inspections cost extra.

This summary of costs is by no means exhaustive.  There may be other costs you may incur and it is wise to get proper estimates from your mortgage company and lawyer.

 

MAKING AN OFFER

 

In negotiating the purchase of your new home, the initial step will be to instruct your Buyer Specialist to make an Offer to Purchase.  This offer must be in writing and must be accompanied by a deposit cheque to show good faith (usually 3%-5% of the purchase price). 

Normally, the initial offer is not accepted by the seller.  The seller may make changes; this constitutes a Counter Offer by the seller.  The offer can be counter-offered any number of times by buyer and seller.   When the buyer and seller agree on all terms, then we have an Agreement.  At this point, the deposit is due and it is time to arrange for final approval on financing and to arrange for a home inspection.

The deposit is in the form of a personal cheque, certified cheque or bank draft.  The amount is deposited and kept in a trust account by the listing real estate company, and is not turned over to the seller until closing.  This money represents your good faith and is fully refunded if conditions are not met (i.e. major problems are discovered during the home inspection.)  Once the deal is “firm” (i.e. after conditions are met) then the deposit is non-refundable.

 

AN ACCEPTED AGREEMENT OF PURCHASE AND SALE

 

CONGRATULATIONS!  We have come to the point where you think the task of “buying a home” is finished.  However, there are a few more steps that are necessary in order to complete the home buying process.

Once we have found the perfect home and we have a conditional agreement, it is our opportunity to launch a series of plans and checklists.

When we have a conditional agreement, it is time to:

 

  • Hire a lawyer
  • Arrange a Home Inspection
  • Make your mortgage application and finalize your financing
  • Ensure any other documents required are delivered in a timely manner

 

We will guide and assist you through this process!

In order to make sure the home you’ve chosen is a smart buy, we recommend a home inspection by a qualified home inspector.  We will write the offer up, conditional upon you receiving a satisfactory home inspection report (usually you have 5 days to complete the inspection).  By having a building inspection, the home’s vital systems and structure are inspected, including the furnace, air conditioning, water heater, appliances, roof, wiring, porches and decks, garage, plumbing and foundation.   The inspection will determine the condition of these items and any defects that may need to be corrected.  The approximate cost of this service generally runs around $400.00   Other tests and inspections that may be required include swimming pool, radon tests, mould, well and septic systems, and water potability, depending on location and type of residence.  A building inspection allows you to purchase the home with confidence. 

Even if you have been pre-approved for a mortgage, it is still wise to make the offer conditional upon final mortgage approval.  Your bank or financial institution may want to do a separate appraisal on the property.  If you are pre-approved for financing, it usually only takes 24 hours to get the final mortgage approval, however, we usually make the offer conditional for 5 days to allow lots of time for this approval.

 

The day of closing, your lawyer will:

 

  • Receive money from the mortgage company and confirm any differences in interest rates.
  • Make sure that the home is properly transferred into your name and free from liens or other legal claims and problems.
  • Represent you in closing the deal, delivering monies, receiving the deed and other closing documentation.
  • Have the keys available for you after closing (usually late afternoon on the date of closing)

 

Buying a home can be a complicated task, with lots of opportunities for problems.  By using the services of a professional, experienced Realtor, you will have a trained consultant and advocate on your side, guiding you through the process and making it a pleasant and hassle-free experience.  Call the Dawtrey & Barnes Team to buy your next home. 

 

 

 

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