So You Have Decided to Buy a Home?
This is great news! Whether you are a first time home buyer, or perhaps a seasoned pro, no matter how many times you have bought or sold real estate, it is a job that involves experience, strong negotiation skills, time, and money. Since a lot of people are getting involved in our market – You are not alone!
Whereas every buyer is unique in his needs; each buyer shares similar questions and concerns.
- How much I can afford?
- Do I need a Realtor®?
- Where is the best area to buy a home?
- How do I get the best possible price?
Logically, the first step to finding the right home is – know where to begin. The best way to buy a home is to get educated! This guide will answer some basic questions and outline some key points that should boost your confidence in finding the right place to call home.
STEP 1: Get Approved
This fiercely competitive Vancouver real estate market commands us to have our buyers prepared. Most often when competing in a multiple offer scenario, the successful bidder is usually the one with his finances pre-approved. The most important step to home buying is to make sure you know how much you are eligible for and can afford, first and foremost.
Talk to a Mortgage Broker – A mortgage broker does not stop working at 5pm like most banks do. He works for you when you need him. Please note your broker can be mobile or stationery.
Since most real estate deals happen in the evening or on the weekend, you want to know that your broker is available when you need to speak with him. Let him know when you will be out with your realtor® so he knows if you are calling him during these times, it is because you have pressing questions that need answers immediately based on the situation for the property in question. Remember to get a copy of your pre-approval! By having a copy of your pre-approval in hand you will likely leverage yourself to a more attractive position – from the Seller’s eyes.
When you book your appointment with your broker, he will advise you what documents you will need to bring to support your application. During your appointment with your mortgage broker, he will ask you a series of questions to help qualify you. Several aspects are considered when determining how much you can safely spend when buying your home. He will need to know how much you can comfortably afford. This will include how much you have for your down payment, the amount of deposit (which is different than your down payment and often seen as 5% of your purchase price), your current annual income, and your current financial expenses and obligations. Typically, your Gross Debt Service and Total Debt Service ratios will be factored by the answers you provide to his questions. After meeting your mortgage broker, you will know how much you can afford to spend on your home.
STEP 2: Realtor® or No Realtor®?
Most real estate transactions occur with the help of a Licensed Realtor®. A good real estate professional will offer you quality insights that will save you time and money. The following are just a few good reasons why you should be working with a Realtor®.
- It’s FREE! – Some people believe that if they go directly to the listing agent, they will save money… This is not always the case. In most cases, the seller pays the agent’s commission, so use your own Realtor®.
- Don’t overpay! – Like most buyers, you want to know that you are not overpaying for your home. A great Realtor® will show you relative, most recent sales and what is currently available for comparison sake as well as where the market trends are leaning. This will aide you in making a well informed decision on how much is a fair price to offer.
- Protect your best interest – As a Buyer, you must remember that the Listing Agent is “bound” to work in the best interest of his Seller. This is why you need to have your own Realtor®. Someone who represents you and your best interests. Who you work with matters… A great Buyer’s Agent will:
- Listen to your needs first
- Will offer you “full disclosure”
- Will provide you with details for ALL listings from Estate Sales, Foreclosures, Currently active properties for sale, and even expired properties that may have not sold in the past but are possibly the most suitable for your needs.
- Will tell you which clauses are best to protect your interests. Ie: Subject to financing, Subject to inspection, etc.
- Will negotiate the best price & terms possible, including completion and possession dates most suiting to you.
- Will follow up on property details which could include possible liens on title, Easements and Right of Ways, how much the seller originally purchased the property for and when, the trends for that specific neighborhood and even follow up with the city to ensure zoning and official community plans are suitable for your needs.
- Negotiations – Expert negotiating requires skill! A great real estate professional has mastered the art of communication and negotiation – They are one. Your Realtor® will assist you in determining the best price to offer, what you should include or exclude and will have the confidence to tell you when to walk away.
- Details – Your Realtor® will guide you through every step of the home buying process. He will ensure a smooth transition from start to finish. He will prepare your documents, review them with you, have you sign them present on your behalf, then, will continue to follow up with his brokerage to be certain, your Notary or Lawyer have everything they need for closing. This will help you have an enjoyable home buying experience.
STEP 3: Know What You Need and Want
Focus on these main points.
- What? Do you need a Condo, Townhouse or Detached home? Of course this is dependent upon you and your family needs so create your shopping list. Spell out what you need. Start with the number of bedrooms, number of bathrooms, minimum size, etc. Include what you want and equally important, what you do NOT want.
- Where? Know what neighborhood you wish to live in. Again, part of this decision is based on needs. I.e.: Schools, shopping, transit, doctors, recreation, proximity to work, etc. The other part may be based on affordability.
- When? Do you have time constraints? Do you have to move by a certain time? Do you need to provide notice to a landlord? Or if you own your home, do you need to sell before you can make your purchase?
STEP 4: Let’s Begin
90% Of home buyers begin by looking online. The public sector site such as Realtor.ca is a great database however the shortcoming is that it typically takes 2 or 3 days for the real estate board information to update to the public sites. This means the information you will find here may already be stale dated and or worse – sold.
At this stage of the game, you will have chosen your agent with confidence. From here, your Realtor® will engage you with his own customized search engine which narrows down properties to only your specific criteria, only in your specified areas.
When you are working with this type of access you will know what properties in your preferred area are listing and selling for and which ones didn’t sell. This information will prove to be a invaluable and will help you feel like a pro.
After your Realtor® has set up your personal search engine, using the criteria you have both discussed, you will start to receive emails that match your needs and wants. Let your agent know which properties you like and want to see. He will arrange those appointments for you both to take a look at. Once you have chosen your most favorite property, we proceed to step 5.
STEP 5: Prepare Your Offer and Present
Choose your price, terms and subject conditions – Your Realtor® will analyze the most relative comparables showing you properties which may be very similar or different than the one you wish to bid on. The information will include what is currently for sale, properties which have sold within a certain time frame and homes which did not sell. This information will help you determine what a fair price to offer is.
You don’t want to pay more than what the home is potentially worth, but when you are competing in a multiple offer scenario; your agent may advise you to consider adjusting your price based on the number of offers being presented.
Prepare your paperwork – Your Realtor® will draft your Contract of Purchase and Sale. Here he will cover the property address, your offer price, your deposit, your completion date, your adjustment and possession date, your inclusions, your exclusions, your subject conditions when they are due to come off and terms which remain, also, when your offer will expire. He will also have you sign a Working with a Realtor® form and take information from your identification for Fintrac as well as have you sign a Disclosure of Remuneration, so you know how much he will be paid for representing on your behalf.
Review your offer – Your agent will explain in full detail all of the terms of the contract so you know what you are agreeing to prior to signing.
Presenting your offer – Your agent presents your offer to the seller and his agent, negotiating on your behalf.
One of three things will happen now…
- The seller “rejects” your offer – not too common but can occur
- The seller “counters” your offer – They may ask for a higher purchase price, or ask for a larger deposit, or ask for different dates or even possibly may scratch out parts of our subjects or terms. At this point, your agent will work with you to determine if these changes are manageable for you. Here, we may counter back on our price or accept or in some cases, trust your Realtor® when he says “it may be time to walk away”. Or…
- The seller has “Accepted” your offer – Yay!
STEP 6: Prepare to Remove your Subject Conditions
If your offer has no subject conditions, as is often the case with Vancouver real estate, your offer will now be considered a Firm and Binding deal. Otherwise, if your offer contains subject conditions, now we must work to achieve the conditions in order for us to remove them on or before the specified dates indicated in our offer.
A great agent will immediately provide you copies of your offer and either advises you to forward them on to your broker or he himself will send them to your mortgage broker so he can finalize your financing needs within the designated time frame. Depending on the lender selected, we may need to arrange an appointment for a bank appraisal. This is normally only a few minutes and is usually conducted by an independent appraiser hired by the lender and is typically arranged directly with the seller and his agent.
A smart Realtor® will wait until the appraisal has been performed before he advises you to hire your inspector. Why spend money when you don’t have to.
If you have waived your inspection clause, we proceed. Otherwise, hire only an experienced and Licensed Home Inspector. This appointment could take a few hours to perform but is worth every penny for your big investment. Your agent should be able to provide you a list of qualified candidates. If the property has too much going on or too much work to be done, your agent may ask you if you are ok with the findings or if you wish to walk away.
Once satisfied that you have managed to meet your needs with your subject conditions, your agent will prepare another document to remove your said subject conditions. You will sign this declaring that you are satisfied with your results and ready to proceed. We forward this to the seller’s agent and we now proceed with closing as a firm and binding deal.
STEP 7: Get Ready to Close
You will often see closing dates ranging from 30 to 90 days for completion, sometimes more or less. It is recommended that you consider a minimum of 3 weeks so there are no additional charges incurred by the lawyer/notary for rush ordered documents.
Preference should be given to having completion and possession/adjustment dates to be 1 day apart. This is suggested because if the funds have not yet arrived to the other lawyer, or the title has not registered, we cannot exchange keys
Here are a few details to take care of before your closing date:
- Documents – Your Realtor® and his conveyance office, will provide your lawyer or notary with the paperwork associated with your purchase. However, you too, may also have to provide him details related to your purchase, including insurance, down payment, other documents or details your agent may not be privy to.
- Monies needed for closing– Know how much money you will need to proceed with closing. Some expenses to be prepared for are as follows:
- Your legal fees – the amount your notary or lawyer will charge you
- Appraisal fee- sometimes covered by your mortgage broker
- Survey Certificate – If seller didn’t provide a copy
- First time buyers using CMHC will have insurance fees to cover
- Property taxes and utility bills – taken care of on the statement of adjustments, paid by you, reimbursement to sellers
- Property transfer tax –Depending on the purchase value and whether you are a first time home buyer, or buying a brand new property. Find out the new rules for property transfer tax.
- Arrangements for moving day – Decide who you will use for your moving. Will you move yourself? Rent a moving truck? Or hire a professional moving crew? Plan ahead, book in advance. De-clutter – Let go of things you have not used in a while, consider donating to a worthy cause.
- Insurance – Have your insurance lined up prior to closing. Your insurance agent will have a list of questions to answer to help determine proper coverage and eligibility. If you have been renting, you will now purchase home owner’s insurance and will need to know the primary differences, which you will discuss with your insurance agent.
- Services – You will want to contact the providers for your telephone, internet, cable, gas, hydro, water companies, etc to let them know you are moving, when and where. You will tell them to either do a move order or close your account and provide you the final bill. Make your arrangements early, so you are not without services. You will also want to let your doctors, dentists, vets, schools, subscriptions and the like know of your move so your information is current. Remember to Update your driver’s license, and put in a change of address card with Canada Post.
STEP 8: Congratulations!
After all is said and done… You have successfully achieved your purchase, have the keys and are now able to move in to your new place called home. We hope you will love your new home and will create new memories to share with your loved ones. We also hope your home buying experience was a good one and look forward to helping your friends and family with theirs. Congratulations – Enjoy!