Buying a home is a BIG DEAL! It’s an exciting process as you wander through other people’s homes trying to visualize yourself and your family living there. How good would your coffee taste sitting on that sunny porch? How loud would your kids be if you were in the family room and they were playing in their bedrooms? How festive would your stockings look hung on that fireplace mantel?
All that is part of the house hunt, but there are also some other important questions to ask when buying a house. We’ve compiled some great questions we regularly get asked by our clients that we think will help you!
Why should I use a REALTOR®?
Buying a home is not like buying a used couch on kijiji. There are lots of working parts to a real estate transaction that many people are unaware of. That’s where a REALTOR® comes in!
REALTORS® receive extensive training to become certified and licensed by CREA (the Canadian Real Estate Association), and actively participate in continuing education on a regular basis. As members of CREA, REALTORS® are not only regulated under provincial laws, but also under a strict code of ethics. This provides consumers (buyers/sellers) protection and options for recourse.
Unlike most homebuyers, REALTORS® are immersed in the real estate market and have a strong grasp on pricing trends and comparable sales that are essential when evaluating a property’s pricing, and ultimately negotiating a final amount.
REALTORS® have access to the local board’s MLS® system so they can provide you with new listings as soon as they hit the market. Their network of contacts is also invaluable as they can connect you with properties before they are even posted on MLS®.
Lastly, but definitely not least, is convenience! A REALTOR® acts as liaison, scheduling showings with the various sellers, providing background information on the property that is not typically common knowledge and ultimately, keeping the often emotional negotiations at arms-length.
Should I talk to a bank before I look at homes?
The short answer is YES! The first step in purchasing a new home should always be to talk to a bank or a mortgage broker to really understand what you can afford and what you are comfortable paying on a monthly basis.
We don’t want you to waste your time looking at homes that don’t fit in your price range, or worse, get your heart set on the perfect property only to see you disappointed when it does not fit within your monthly spending limit. Figuring out your finances saves you time and emotional stress.
At times when the market is moving quickly, typically the spring and fall markets, if you have already sorted out your financing with a pre-approval, you can usually offer a shorter conditional period to a seller. Why is this important? For a seller, a shorter conditional period is more desirable in the event that you do not move forward with the purchase as they can get the house actively back on the market quicker. When you are in a multiple offer situation, an offer having fewer or better conditions will usually be selected over another offer if the price points are similar.
It is important to note with any pre-approvals that they are not guarantees of funds, only guarantees of rates for a set period of time, based on the information you have provided. At the actual time of purchase, all the information provided needs to be verified, and any missed payments or changes in spending habits could affect the amount available through a mortgage. Other factors to take into consideration are down payment, closing costs, mortgage default insurance, property taxes and regular monthly costs such as water and heating, which will be property dependent.
What are the upfront costs of buying a home?
When many homebuyers think about the costs associated with buying a home, the down payment is what comes to mind. While the down payment is typically the largest portion of your upfront investment, there are some other fees to consider so that you are financially prepared.
Once you have made a conditional offer on a home, most buyers will have a home inspection done to check for any deficiencies in the property, which is typically under $500. Following a satisfactory inspection and having all other conditions satisfied, the sellers will require a deposit. This can be dependent on the purchase price, however, buyers can expect to pay at least $5,000. This deposit will then count towards your down payment.
For most homebuyers, a down payment will usually be 5% or more of the purchase price of the home. For those with a down payment of less than 20%, mortgage loan insurance will be required to protect lenders against mortgage default. These costs are based on a percentage of the mortgage amount and can be paid in a lump sum or added to your mortgage and included in your monthly payments. Most lenders will require an appraisal of the home to be purchased. Sometimes, as an incentive to work with them, a lender will cover the cost which typically sits around $350, while at other times, the buyer is responsible.
When purchasing a condo, it’s prudent for a buyer to obtain a status certificates or estoppel. This document is a report on the current state of the condominium corporation, allowing you to see how the building is managed, a financial snapshot and whether or not any lawsuits are pending. Status certificates generally range from $100-$150.
Upon closing of a property, the province requires that you pay land transfer tax. This is based on the purchase price of the home, however, first time home buyers do qualify for a refund of up to $2,000.
Legal fees are also due upon closing. Buyers can expect to pay anywhere from $500-$1,500 plus HST. Condo purchases can have higher legal fees due to the added time requirement reviewing the status certificate.
Finally, buyers need to be aware of closing adjustments, such as pre-paid tax or utility bills or interest adjustments on the new mortgage, as most lenders charge interest on a set day of the month. These will typically be calculated by and paid to your lawyer who will disburse the money appropriately.
The Canadian Mortgage and Housing Corporation has a great home purchase cost estimate worksheet that will provide be helpful in providing you with a rough outline of what upfront capital you will need to purchase your new home.
Should I use a home inspector? What happens if they miss something?
These are great questions to ask when buying a house! A home inspection, although not required, is a wise choice for most home owners. Typically for a small fee (usually under $500), a home inspector will go through the home from top to bottom, looking for deficiencies in the foundation, the roof, heating and cooling systems, plumbing, electrical service and many other structural components. Once complete, they will provide you with a report outlining any problem areas and expected costs to remedy them. This report serves as a tool to make an educated decision about whether to continue with the home purchase and if so, potentially as a bargaining tool when discussing price adjustments.
Home inspectors, prior to an inspection, have clients sign a contract explaining the limit of liability. Typically this includes areas of the home that they can not access, such as anything underground or behind walls. There are no hard and fast rules about who a court will side with should a problem arise, however, if a problem that falls within the limit of liability has been blatantly overlooked the buyer can usually count on some path of recourse.
Your best bet is to select a home inspector that is recommended by a Real Estate Agent you trust and whom has had plenty of experience inspecting homes similar to the type of property you are looking at. Ultimately, always remember, before signing any contracts, read the fine print and make sure you are protected.
How much are land transfer taxes? Who pays them?
Land transfer taxes are paid by anyone acquiring property in Ontario, typically the buyer, and is based on the purchase price of that property. There are some exemptions, however, these do not affect the majority of real estate transactions in Ontario.
Current Land transfer tax rates are as follows:
0.5% up to an including $55,000
1.0% above $55,000 up to and including $250,000
1.5% above $250,000
2.0% above $400,000 where the land contains one (1) or two (2) single family residences.
If you are purchasing your first home, you may be eligible for a Land Transfer Tax Refund for First-time Homebuyers, which is a refund of up to $2,000.
What is title insurance?
Title insurance is an insurance policy, protecting property owners and their lenders against losses related to the property’s title or ownership. Typical coverage usually includes unknown title defects, existing liens against the property’s title, encroachment issues, title fraud and errors in surveys and public records.
While title insurance isn’t required in Ontario, it is extremely commonplace for buyers to purchase it as it provides coverage for the duration of the property ownership for a one-time fee, also known as a premium. Your lawyer will provide further information and counselling on whether or not it is right for you.
The Financial Services Commission of Ontario provides a very informative brochure that is a must read for all buyers.
What are property taxes like in Barrie?
The 2015 taxes for residential and multi-residential properties in Barrie is 1% of the property value as assessed by the Municipal Property Assessment Corporation (MPAC). This is a combination of both the Provincial education levy and the municipal levy.
Is Barrie a good city to invest in Real Estate? What is the rental market like in Barrie?
Barrie was ranked the 3rd best place to invest in Ontario by REIN (Real Estate Investment Network) for 2014 and beyond. With Barrie’s growing population and affordable housing, getting into the rental market is more attainable. Additionally, Barrie has some of the highest rental rates and lowest vacancy rates in Ontario. In 2014, the vacancy rates were at the city’s lowest in over a decade at only 1.6%, according to the Canadian Mortgage and Housing Corporation (CMHC).