The Buying Process
Getting pre-approved means the Lender in question will have already completed the formalities surrounding your application for a mortgage and will help you save time when it comes to closing the purchase agreement.
Getting pre-approved will also give you a good indication of what you can afford, and this will help simplify your search because you will know just what is within your means. In addition, pre-approval can help you during the negotiation process as sellers are known to favour buyers who have indicated serious interest by coming with pre-approval.
Ive had clients who insisted they would have no problem qualifying for a mortgage. It was one of those great experiences where they found their dream house - the home had everything they wanted and was listed for a lot lower than market value by very motivated sellers.
Unfortunately, because they had not obtained pre-approval on a mortgage, it took them longer to solidify their financing and their dream house was sold to a couple who had everything in place and were ready to proceed.
Without pre-approval you run the risk of losing out to another buyer while you are trying to get your financing in order.
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I will provide the information you need to choose the right house for you and your family and it will protect you from making a decision that can cost you money and cause headaches for years to come.
When it comes to home buying, a market analysis relates to information about surrounding homes in the neighbourhood that:
- Have recently been sold
- Are currently listed for sale
- Are considered expired listings – homes that were listed and failed to sell
Pending city/municipal changes:
It is important to look into future planning for the neighbourhood you are considering. You will want to know if that beautiful greenspace behind the home you are looking at is going to stay that way or if there is plans for future development that will drastically change the setting. Not only could this have a bearing on your day-to-day life, but it will also play a role in the appreciation and resale value your property.
I can go to local governing bodies on your behalf and find out if there are any changes planned that will have a negative impact on a particular property.
Buying a home without conducting a home inspection is in my opinion playing with fire. A home inspection is a crucial part of the home buying process because it gives you an indication of the home’s condition. Home inspections do leave some room for error however since home inspectors aren’t allowed to look under floors or behind walls in most instances.
Properly conducted home inspections can identify a number of existing and potential problems, and are always highly recommended. If you are concerned about the money you’d have to spend to hire a home inspector, simply look at it as a small price to pay to avoid unexpected expenses down the line.
A good home inspection should encompass the following:
- Going through the basement and attic
- Checking all electrical fixtures, wiring and appliances
- Checking the roof
- Looking for any obvious structural damage
- Looking for pest infestation
It is important that you deal with a trustworthy home inspector. We all know that you will find unethical people in any industry – that does not make the industry unethical. I'm always happy to give you a list of inspectors that have shown ethical business models through my years in the business.
Making an Offer
The following are the components that go into an offer and are things you should be aware of.
Terms: Your offer could include a number of ‘terms including the total price you’ve offered as well as details surrounding your financing
Inclusions/Exclusions: These would specify items that are to be included or excluded from the sale, and could include appliances, fixtures, window coverings, pool equipment if applicable etc.
Conditions: These are often referred to as Subjects and could include any stipulations laid down by either party, and their fulfilment is required for the sale to proceed as planned. These are typically added to protect the interests of the given parties and allow time for due diligence. The most common conditions are for home inspections, financing, review of strata documents, taxes and insurance.
Deposit: Although not a necessity, a buyer can provide a deposit to the seller to serve as assurance until the closing takes place. A deposit often shows how financially sound the buyer is – although not always the case, a higher the deposit can indicate that the buyer is more financially capable.
Purchase Price: This refers to the amount the buyer has offered to buy the property in question, and can be different from the seller’s asking price.
Closing Date: This refers to the date when the legal ownership would transfer to the buyer, and unless otherwise specified, all payment related matters are taken care of by this time.
Possession Date: This is the date when the buyer actually takes physical possession of the property in question – generally this is the day after completion.
An offer can be drafted with or without conditions. An offer with conditions is known as a conditional offer, and one without conditions is known as a subject free offer. From a buyer’s perspective, both come with their share of advantages and disadvantages.
For example, an offer which relies on a positive home inspection can be withdrawn if the home inspection process reveals any problems. On the other hand, if your offer is subject to your mortgage being approved within a given time frame, you might lose out on the opportunity due to a delay in the approval of your mortgage.
Other clauses that can find their way into conditional offers include, ‘subject to the buyer’s home selling’, ‘subject to the council allowing pets’, etc.
The fewer conditions you have, the greater the incentive for the seller to sell to you and a better stage is set for you to negotiate on the price
Accepting an Offer
Accepting an offer is the home owner’s prerogative, and this is something the purchaser has little to do with. The seller has the right to reject an offer, make a counter offer or accept an offer as it is (the chances of which are slim).
Counter offers not only address the price, but can also address aspects like the closing date, inclusions/exclusions, etc. Offers can also be countered multiple times before an agreement is reached. Typically we see offers go back and forth on an average of three times although there have been cases where that has reached as many as ten times!
If you don’t like the counter-offer, saying no is your prerogative. Know that when sellers make counter offers they would not want to give you too much time to make your decision, because, among other things, they know you are likely considering other alternatives. Bear in mind that until the deal is finalized the seller has the right to show the home to more potential buyers, and will probably do so. Only when all the ‘subject to’ clauses have been removed and all the conditions have been met will you have a binding agreement.
And now for the most exciting part – closing the deal and moving day! Here are some things you should do before your closing:
- Arrange for all relevant insurances (home, fire, and mortgage).
- Make sure that all the paperwork with your lender is complete so that it does not cause any delay in the closing.
- Take into account all additional fees - your lawyer, property taxes, insurance premiums, moving costs, renovation costs etc.
- Arrange for basic services and utilities like cable TV, phone, electricity and gas to be connected or transferred to your namebefore you move in.
- Be sure to check that all appliances are working upon possession – don’t leave this for even a few days!
I've heard of situations where a buyer has moved into their new home the day before they were to leave for a two week trip. Because of their immediate departure they did not have time to use the washer and dryer. Upon their return after 14 days away they unpacked two suitcases of laundry only to discover that the washer did not work. The sellers argued that the washer was in working order on possession date. Although it was stipulated by the buyers that all appliances be in proper working order on possession, they could not guarantee that that was the case or prove when the washer broke – in the end they had to pay for the repairs themselves.