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MLS
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- MLS, what is it? How can it help me find a home?
- Multiple Listing Service provides a large database where listings are displayed. The database gives access to the information on homes for sale to thousands of potential searchers. Over 20,000 Realtors have access to more in depth information but all can search MLS. Realtors are experienced using the system and this works in your benefit when you are looking or selling on MLS.
- Showings, what happens?
- When someone wants to see a listed home, they make an appointment with the listing brokerage or request that their Realtor make the appointment. Often a number of appointments will be made together to see several properties in one outing. The selling brokerage will call the buyer agent with a lock box number, or arrange to show the home to an individual if they have no realtor. Buyers will always visit an empty home accompanied by a Realtor. Individuals alone are not permitted through an empty home. When they have finished looking at the home the Realtor will replace the key in the lock box after locking the house. A visiting Realtor will leave his business card to indicate he has come through.
- Chattels and Fixtures?
- Loosely defined, a chattel is something that is not attached to the home, while a fixture is not surprising, fixed to the home. For example light fixtures and built in shelving are fixtures, while furniture and pictures are chattels and usually move with the seller. Oddly, the house key is considered a fixture! When preparing a listing or an offer, it is important to clearly list any fixture excluded (commonly ornate chandeliers) and list all chattels included, such as stove and refrigerator as well as window blinds.
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How do I know How Much to Offer?
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- How do I figure out the correct price to offer for a Home?
- Home pricing is a complex subject and this is one area where your Realtor's help can invaluable. To arrive at a price for your home, Nick Boothby goes through an extensive excercise.
He will inspect the property and note any special feature or upgrade, as well as potential problems.
He will look at the area, neighbourhood, neighbours around your home. Nick will then look up in the MLS Database, similar properties that have sold recently and compare them to your home adjusting for fewer or more features. Using his experience and knowledge he will analyze the data he has collected and arrive at an opinion of value. It is part science and part guts and experience. Have Nick Boothby prepare an opinion of value for your home.
- What is the value of a parking spot?
- The value is dependant on the location and amount of parking available in the area. If parking is scarce then parking can be a substantial benefit to your home. In the Beach downtown condo buildings underground parking spots have sold for over 20 thousand dollars.
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Deposit
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- Why a deposit and who gets it?
- A deposit shows the seller that the buyer is serious. It is in fact putting your money where your mouth is. Banks like to see large downpayments because it means there is more equity in the home. Usually the Listing Broker keeps the deposit in his special deposit trust account. This account is strictly controlled by law, and is protected from bankrupcies and fraud by a special insurance. Once the deal is accepted by both sides it becomes part of the money being paid by the buyer for the home. If no deal is made, the depost is returned to the buyer with no deductions taken from it.
- How much deposit should I make?
- It is customary to make a 25% downpayment if at all possible. This allows a buyer to get a conventional mortgage at the best rates. It is possible to purchase a home with much less however. In that case the difference is insured with CMHC and the buyer pays the insurance premium as part of the mortgage. Interest rates are not as favourable in this case.
It is common to present a cheque at the time of offer and there are substantial advantages to having a large cheque. It is very reasurring to a seller to see money up front. It implies you are serious and have the resources to purchase the home. Sometimes a cheque is presented at the time of offer, with a promise of further money at acceptance of offer by the seller. If the deal falls through you get the full amount of your deposit back. It is kept in a special trust account usually by the listing broker. The seller doesn't get any money until the deal closes.
- How about cash or a certified cheque?
- Everyone has a story of someone walking in with a paper bag full of cash to pay for their home. However now, because of money laundering, grow houses profits, and terrorist activities, walking in with large bags full of money will be met with suspicion rather than admiration. Realtors (and others) have to report large cash transactions.
It is desirable to certify your cheque before presenting it with your offer. It has the effect of giving sellers a nice warm confident feel in your ability to go through with the purchase. In the event of multiple offers, it is one more thing in your favour. Deals have been lost where the only difference was a certified cheque.
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Improvements and Renos?
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- Upgrades and Renovations, what is the value of an upgrade?
- Home values and returns on renovations depend on many factors such as the location of the property, i.e. province, rural/urban, the neighbourhood, and the quality of the materials and workmanship.
Some Renos return better than others. The Appraisal Institute of Canada reports that the following types of renos return the best:
Kitchen or Bathroom renovation will bring back 75% to 100% of investment back, while Interior and Exterior paint will bring back between 50% to 100%.
These are significant returns on investment! Some improvements bring very poor returns and buyers are often not willing to pay anything extra for them. Swimming pool (10-40% return) or Skylight (0-25% return) are not good investments.
- Liens, what are they and how do they affect a property?
- There are different kinds of liens, but one of the most common is a mechanic's or construction lien. This type of lien is put into place when the property owner owes money for materials or labor which improved the property in some way. This includes among other things, repairs, maintenance, new construction, landscaping and renovation.
When purchasing real estate, it is important to make sure there is no lien on the property. If there is you will not be able to obtain a clear title. A title search will usually indicate whether or not a lien exists. It should also indicate the details regarding a lien or other encumbrances against the title. Searching the title is one of the services provided by your lawyer.
NOTE: This is only for general information and is not intended as legal advice.
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How Much is Parking Worth?
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- How much is a parking spot worth?
- The value is dependant on the location and amount of parking available in the area. If parking is scarce then parking can be a substantial benefit to your home. In the Beach downtown condo buildings underground parking spots have sold for over 20 thousand dollars.
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Buying Process
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- What are the steps usually followed in buying a home?
- Clarify what you need and want, what you can afford, when you want to buy, and where you want to live or invest. Order Nick Boothby's e-report "Are You Ready to Buy?" This is a handy workbook that helps you focus on the details of your new home.
Usually you need to establish how much you can afford (see Boothby's handy Maximum Mortgage Calculator just close the window to return to the Buying FAQ )
Once the details are resonably clear in your mind, you can start actively looking. Contact Nick and discuss your requirements, then ask him to automatically send you MLS listings if you are comfortable with the internet. Otherwise he will look into MLS and search for properties you might be interested in.
He will make appointments to show you the properties and will help you assess them. When you find something that you want to put an offer on, he will assist you and prepare and present the offer for you. He will also assist you in negotiations.
Once an agreement is made he will assist you with any of the condition fulfilments and waivers if required. Once an agreement is reached, your lawyer will do title searches and figure out adjustments. You will usually arrange to have the home inspected if its a house, or for the Condo Status to be sent to your lawyer for inspection. You will have arranged your mortgage details in collaboration with your financial institution. On closing day, you will sign final mortgage papers and will pay Land transfer taxes to the government. Payments will be made to the seller. You will also be expected to pay your lawyer.
- How are offers presented?
- An offer is prepared by the buying agent in collaboration with the buyers. The offer will have several components, but essentially it will state how much the buyers are willing to pay, how much they offer as a deposit, when they want to close, what they expect to get besides the house, commonly this includes appliances or window shades or curtains. The offer will also include any condition that the buyers would like. Conditions such as satisfactory inspections and arranging financing are common conditions.
The buying agent will contact the selling brokerage and advise them of his intention to present an offer. This is referred to "registering an offer". The offer will then either be faxed to the selling brokerage, or presented in person by the selling agent to the sellers and their agent. At this point the seller can accept the offer or refuse the offer, or make a counter offer changing some of the clauses. Each offer and counter offer is given a time period during which the other party can respond. If there is no response, the offer dies. If one of the parties signs the offer with no changes, there is a deal.
- Multiple offers?
- When more than one buyer prepare and present an offer we speak of multiple offers. Usually multiple offers help a seller get a higher price through competition. If too many multiple offers are received it can be an indication that the property was listed too low. Sometimes a home will deliberately be listed low in the hope of attracting multiple offers.
- I have a firm deal. When does the seller get my money?
- The Seller get paid on closing day. Lawyers and Brokers will have calculated and adjusted various costs. This amount will include the deposit paid by the buyer. Costs such as taxes remaining to be paid up to closing date, any outstanding utility, lawyers fees, commissions are all possible fees and adjustments payable by the parties.
- I've signed the final papers but I want to change my mind?
- Once a deal is firm it is a contract and cannot be modified without consent from both parties. It is not uncommon to change the closing date for example. A formal request must be made to the other party who may or may not accept. The process to ammend is similar to that of presenting an offer, with a document being prepared, signed and sent to the other party. Once both parties have agreed and signed the document, the change then becomes binding. A confirmation of execution is done just like in the offer acceptance. You cannot unilaterally revoke a firm agreement.
- Can I change the agreement once its complete?
- If both sides agree to an ammendment, then the change can be incorporated into the agreement and become part of the contract.
- What does the seller have to tell the buyers? Are there disclosure requirements?
- It is essential to disclose any existing condition that would seriously affect the value of a home or that might have a significant effect on the opinion of the purchaser of the home. If serious issues are not disclosed, and the purchaser chooses to go to court with his complaint, seller will be in a poor position and might be found liable. Such conditions as Urea Formaldehyde, termites, structural problems are obvious cases. Any not at arms lenght transactions, which affect the price of the home should also be disclosed. NOTE: This is only a brief description and does not costitute legal advice. If you have a question regarding disclosure consult your lawyer. Your Realtor can also help you or point you to a proper authority. Realtors are legally bound to strict disclosure rules.
- Can I come back into the Home after I've agreed to purchase but before the closing date? I need to get a contractor to measure the place for some changes, and I want to get curtains made?
- There is no automatic right of access granted to a buyer. The seller has no legal obligation to allow you back into the home until closing time. In reality, the seller will often allow you to come back before closing. Ask your realtor to arrange it. Usually a clause will be added to the purchase agreement permitting one or more re-entries to the property. This allows you to not only measure or plan your move, but also allows you to check that everything is as expected BEFORE closing. If damage has occured, or appliances have been replaced, you will be in a better position to have things put right if you have not closed the deal yet.
- Can I put conditions in my offer. I'm not sure I will be able to get a mortgage?
- Conditions are very common in offers. Purchase conditional on satisfactory inspection, financing, getting insurance, selling your own home, have all been included in offers. In a buyers market, there is not much to stop you from putting them in. If the market is brisk and there is a chance of multiple offer, where other purchasers will present offers with no conditions, then you will be at a disadvantage if you present a conditional offer. A seller prefers to see an offer with no conditions attached and you should try to eliminate conditions if you can. You might do a pre inspection before making an offer, or you might actually sell your home before you buy.
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Buying Costs
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- Besides the actual cost of the home what else do I have to pay when I buy a home?
- There are a number of other costs associated with the purchase of a home.
The Land Transfer Tax is assessed on the value of the home. Read more about this and use Nick Boothby's handy Land transfer Tax calculator and table. To return to the FAQ, simply close the Land Transfer Tax window.
Another common cost is that of any Inspections you might request. It is common to buy a home conditionally on a satisfactory Home inspection. In Termite areas, it is common to do a Termite inspection. If there are any specific suspicions about a home, an electrical, or plumbing inspection might be a safeguard you are willing to pay for. Inspections are not mandatory but add a level of comfort to the purchase of a home. (A standard building inspection might cost between $500-$800).
When buying a Condo, it is usual to request a Condo Status Report which details the financial condition of the Condo corporation, and identifies any special problems or extra costs expected to impact the owners. The actual certificate costs about $100.
Lawyers Fees for checking the Condo Certificate, Title and registering transfer of the title, as well as any other request you make, such as checking the purchase agreement. Fees usually start around $1000.
There are usually adjustments made to the selling price. These adjustments sort out who owes what part of various costs at the exact date of sale/purchase closing. There are usually tax adjustments if the previous owner owes taxes, or if the owner has paid taxes covering the period when you will be owning the property. There might be utilities adjustments. These adjustments can add or subtract to the amount you pay.
Although not strictly a cost of purchasing, you might have to purchase new furnishings such as window dressings, carpets or other furnishings. You might also have agreed to take on some of the previous owner's contracts, particularly security monitoring or maintenance contract.
You might have agreed to pay extra commission to a Realtor to help you search. If you have contracted to pay more than the listing agent offered, then you would be responsible for the difference you agreed on.
Moving and Storage costs are other costs that are incurred.
If your date of closing is not exactly the date you have to move out of your old home, there might be some costs associated with bridge financing, or with temporary apartment rental.
Legal Costs, associated with the transfer and various searches as well as the Lawer's fee are another cost.
It is sometimes necessary to pay for valuations or surveys. CMHC (Canadian Mortgage and Housing Corporation) has developped a cost calculator. Of course not all cost apply to all transactions.
- Adjustments? Can you be more specific.
- When you agree to purchase a home you agree to a specific closing date. All the costs related to the home before that date are the responsibility of the seller, while all the costs after that date are yours, unless specifically agreed to otherwise. You pay from the day of closing (the full day is your responsibility). One of the services you expect from your lawyer is to figure out what the adjustments are. He will consider utilities, taxes, and any other expense linked to the home. A precise calculation will be made and the selling/buying cost will be adjusted to reflect the various costs and credits outstanding.
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Inspections, Lawyers, Title Insurance
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- Inspectors, what do they do and are they worth it?
- There are several type of inspedtions that can be done on a home. General building inspection, termite, electrical and more. These are done to reassure buyers, or morgage lenders that the building is safe and sound and worth the money that is being paid. Inspections also help estimate what renovations are required or help establish that the building is a resonable risk for an insurance company. The most common inspection is is the general building inspection. It is done by a licenced individual who usually has a building or engineering background. He will go through the home and check the various systems (electrical, water/sewage,) look at structural elements such as foundations and roofs, look at drainage, estimate the condition and life expectancy of roofing, cladding and finishes. Check for the presence of UFFI (urea formaldehyde insulation) and asbestos. Typically the inspector will check the water pressure and verify electrical outlets windows outside cladding. The inspector will also look for damage. The inspector will prepare a report and present it.
Inspectors do not see through walls and do not see hidden problems. Their experience will often allow them to suspect some hidden problems even if there is no obvious signs.
Sometimes an inspection is requested by the seller to reassure potential purchasers that there is no problem. In termite areas a report might be presented by the seller to reassure buyers.
A building inspection is worth it and is a small price to pay for added security in a large purchase such as a home. Building inspections cost about $500. The size and age of home will influence price.
- I heard that insurance can be hard to get?
- Because of very large settlements due to increased natural disasters, and other causes, insurance companies are more reluctant to insure properties that are more statistically at risk (in their eyes). Older homes, knob and tube wiring, homes in flood plains, insulbrick are all criteria that make insurance companies nervous. If you contemplate purchasing an home with any doubtful features, or an old home that has not been sold for many years, check with your bank and insurance company.
- Can I take over the previous owner's insurance
- Unlike mortgages that are sometimes taken over by buyers, the insurance cannot be transferred. You must arrange your own insurance.
- What happens if the inspection showed flaws in the home? Do I have to go through with the purchase?
- If you have made your offer conditional on a satisfactory inspction you can refuse to close because of serious flaws brough to light by the inspection. NO PROBLEM!
If you did not write an inspection condition in your offer, you are expected to close good or bad inspection.
If the flaws are major it will be likely you can get out of the deal but it is not automatic. You will need to negotiate with the seller, who might offer to repair or fix the problem or offer a reduction in price. You will need to seek legal advice.
If the seller knew of a serious problem and did not disclose it, it is likely you will be able to get out of the deal but it is not a trivial process, it is much better to do an inspection before making an offer, or making an offer conditional on inspection. There are serious professional penalties for a Realtor who does not disclose a known problem.
The seller is not required to disclose small problems however and you need to be vigilant and carefully inspect any home you plan to purchase.
In the worst case scenario, you might have to go to court to attempt to get out of the deal.
- Do I need a lawyer?
- Although there is no strict legal requirement saying you MUST have a lawyer, they provide significant benefits to their client. They do the title searches, make sure there is no outstanding problem on the building title, help establish adjustments, ensure there is no taxes outstanding, verify the Condo Status documents, advise you on your purchase and the wording of complex offers/counter-offers. They provide knowledge and experience. The added security is well worth the investment in almost all cases.
- How do I find a lawyer
- Word of mouth and personnal recommendations are often your best route. All Brokerages will have lists of potential lawyers if you require them. Nick Boothby has suggestions that he offers clients who ask. It is to be noted that Nick Boothby NEVER takes a referral fee for any recommendation.
- What is Title Insurance? Do I need it and is it expensive?
- It insures against such defects in title, which may occur from conflicting ownership claims, liens, undischarged mortgages, consents and the like. It will cover compliance and access issues i.e. work orders, permit violations, fences, boundaries, tenancies, rights of way, certain easements etc. It is supposed to be in force for as long as the purchaser or his/her heirs own the property. Title Insurance gives assurance of good title and reduces the number of searches and expenses you will have to pay when you purchase.Title Insurance is used now for most Ontario real estate transactions. Most lenders are more comfortable with lending where title insurance is obtained and some lenders have preferences for who is to provide the insurance. Having title insurance will sometimes satisfy lenders that a survey is not necessary and many lawyers will charge more if title insurance is not purchased. Title insurance costs about 350. for a 500,000 home. Any cost presented here is only a ROUGH estimate and will vary according to the circumstances. Please check with your Lawyer/insurer.
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Do You Have a Question
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- Do You have a question?
- Send Nick Boothby your questions and he will answer or direct you to the appropriate authority.
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