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Step 6: Choosing your team of professionals
To go back to the scenario where I was helping my friends with their homebuying questions, there was a look of shock on their face when I asked who was on their “Team” of pros that would help them close their deal. “Professionals?“
“Sure” I replied: “My team has helped you put together your mortgage preapproval. That’s one team of professionals that you have working for you. Who else will you be using?”
More dull stares.
My friends are solidly educated and are really quite quick – but this was the first time that they’ve ever purchased a home! On the spot, they and couldn’t fathom what I meant. “Let’s break it down: How are you going to find a home? If you’re buying an older home that’s a “fixer-upper”, who will inspect it for you to help you from buying a lemon? Are you going to get a contractor to do some renovations to the property? Who’s going to process the legal documentation at the closing? These are all pros that you need to have on your team!”
The gears started to turn!
Simply put, there are a handful of professionals that you may need to help you through your transaction. Here are a few of them:
Mortgage professional:
Why use a mortgage broker? Mortgage lenders are competing for your business. New programs, features and options are being introduced every day. Knowing what’s right for you – and how much to pay for your financing – is becoming increasingly complicated. Maybe that’s why more than one in five Canadian mortgages are now handled by mortgage brokers. Consumers like you are discovering they just don’t have the time to shop from one lender to the next, trying to figure out which deal is best.
Your Realtor:
At the core of their profession, your Reator’s job is to help save you money. Even before helping you find a new home, they will provide you with information about areas of the city, neighborhoods and their amenities as well as specific properties that you would like to learn more about.
Once you’ve found a home, they’ll write up the Offer to Purchase with you, present it to the vendors and then negotiate price and other terms of your purchase contract. Once your offer is negotiated, they’ll help coordinate other aspects of the transaction such as appraisals, surveys, home inspections etc… as need be.
To learn more about how a Realtor can help you, please click here for a detailed brochure, home hunting guide and checklists!
Your Appraiser:
Appraisers check out properties and assess their fair market value.
From the perspective of your mortgage lender, they want to ensure that they’re not over-lending and that the funds that they’re lending you are adequately secured with the property that you are purchasing (or, eventually, perhaps refinancing). From your own perspective, you’ll still want to make sure that you’re paying the right amount for the home that you’re getting.
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Especially in volatile markets (either up or down), the valuations of properties is subjective to a certain degree, but these accredited professionals use a systematic approach to ensuring a fair and just valuation of your home.
As previously mentioned, for insured transactions, the cost for having an appraisal completed is generally included in the fees that the mortgage insurers charge. If you are purchasing a home with a ‘conventional’ mortgage (where the mortgage is 80% or less than of the value of the property) and your lender requests an appraisal, the fees are usually your own cost.
Your Property Inspector:
There are hundreds of reasons to hire a property inspector, with “peace of mind” being right at the top of the list. You may have seen dozens of homes by the time that you’ve written an offer and had the offer accepted by the purchaser, but you’ve only seen the home’s curb appeal and the veneer of the fresh paint and maybe the staging accessories. What stage is the roof in? How long until the water heater or central heating unit dies on you? Is there reason to believe that there may have been any form of water damage? There are thousands of similar questions that you should have about your new home – these are things that will help you enjoy it more or could cost you thousands of dollars in repair bills.
In Canada, it is a relatively new convention that the real estate industry has created a National Certification process for professional home inspectors. The British Columbia government has recently announced that it would be the first province in Canada to license home inspectors. As of March 31st, 2009 anyone wishing to practice as a home inspector in British Columbia will require a license. It is logical that based on the success of this initiative, many other provinces will follow suit.
Although we here at Trimor do not endorse any specific home inspection team above another, we do endorse the concept of having your new home inspected to ensure that the property is in safe and livable conditions: the near-nominal cost for the inspection (some may charge more if they do a video-walkthrough of your property for further reference and proof) is well worth the peace of mind that it will bring you.
Your Contractor:
Have you decided that your home needs a little bit of sprucing up? Maybe it’s an entire “gut it to the walls” job? I’m betting that your zest for this comes from the ever-popular DIY shows on TV. It’s so inspiring walking through Rona and Home Depot, isn’t it? Sure is… until you run out of time or come across something that you know nothing about! You’ve probably heard the age-old saying: “a job worth doing is worth doing RIGHT”. Although simple things like painting are not major undertakings (depending on the size of your home), things like flooring, plumbing, wiring, ripping out walls, etc… sure are. Some things are better left to pros.
This is such an in-depth and important topic that CMHC has written an entire ‘how to guide’ along with supporting videos, checklists and sample contracts. Although I’ve had my share of good and bad experiences with real estate developers, homebuilders and contractors in the past, I’d trust the mortgage insurers to offer unbiased, insightful tips and tricks to help you choose the right contractor for your needs. With a couple million transactions under their belt over the years, they’re far more informational on this topic that I can be!
Your Lawyer:
Although we can’t directly recommend one for every real estate market across Canada, there are undoubtedly lots of good lawyers in your local market. Beyond your own research, the rest of your team of Professionals, your friends, family or people at work could likely recommend a lawyer for your needs. Sometimes, your homebuilder will provide you with one. However you find your lawyer, just make sure that they’re well versed in real estate law. Be sure you ask how they structure their fees, and get an estimate of the other legal costs you can expect.
There are many, many legal steps to transferring ownership of land from one person to another. Even if pitfalls like fraud, government legislation, zoning issues or unpaid taxes don’t come up, your lawyer will more than earn their pay by making the legal transfer of the home a smooth one.
They are profession exists to help you through this process. Although they could likely speed through the meeting in 15-20 minutes, be sure to ask them questions if you don’t understand anything. Explaining "legalese" and the ramifications of certain actions in plain language is a big part of what a lawyer does.
Step 7: So now you’re ready to buy?
You’ve surfed, walked through and personally inspected piles of homes. You’ve now found one and are ready to *deep breath* take the plunge!
Here are some basics about placing an Offer to Purchase (also known as Agreement of Purchase and Sale) on it:
To be legally binding, a contract for the purchase and sale of real estate MUST be written and signed. Verbal offers and acceptance do not warrant a binding agreement for real estate transactions.
The contract should contain specific and detailed information about:
- The legal names of the vendor and the purchaser entering the transaction
- The civic address of the property in question; if it is readily available, and legal land description
- The sale/purchase price
- The downpayment (if any)
- Chattels included in the purchase price (appliances, specific lighting, garage door openers, etc)
- The possession date/closing date of the transaction
- Condition dates: requests for appraisals, surveys, inspections, financing conditions, etc. These can allow the purchaser to effectively back out if the property has insurmountable or unacceptable defects or if market conditions shift to disagreeable financing rates/terms.
- Cancellation date if conditions are not met; Penalties for non-completion of the contract, if any.
To review some templates for separate provinces across Canada, click here. Your Realtor could also help you with successfully completing these in your respective jurisdiction.
Step 8: Wrapping it all up – what happens on closing day?
Now you get the keys, right?
RIGHT!
Assuming that all has proceeded well and to your satisfaction as well as that of the vendor, your lender will have forwarded the mortgage instructions over to your lawyer’s team for completion. Usually a few days before possession, your lawyer will have you set up an appointment to sign off on the mortgage documentation as well as the land transfer documents.
On possession day, at a pre-determined time (by 12:00 noon on the closing day), you will gain access to the property’s keys and you become a homeowner!
You can start to move your possessions in and make your home!
Step 9: Now that you’re in your new home…
Excellent! You’re in the door. We’ve already helped you learn about the expenses of homebuying and some ideas to learn more about what some renovations and repairs may cost, so as a follow up we’ll walk through some other “rules of thumb” to keep in mind as you move forward through home ownership.
Create a monthly budget. It’s likely that you’ve had some form of financial plan that has helped you get to the point where you’re now able to own a home. This practice is even more important now that you have a home. Be sure that you’re not over-saving so that you can enjoy life; Hopefully you’ve also prevented over-spending on your home so that you’re not “house poor”.
Make sure that your budget has an emergency fund for surprises. This will help you with expenses that arise like fixing the water heater, central heating/cooling system and other repairs that are not covered by your insurance or condo fees. Further, although you’ve had a stable form of employment that has helped you get into the property, job losses do occur; many financial planners agree that having a savings account that could help you live through three months without income is adequate to help keep you safe and comfortable.
Don’t miss your mortgage payments. This will help ensure “best rates and terms” as your current mortgage term ends. No-one wants to lose the home that they worked so hard to earn; the best way to prevent problems is to stay in touch with your lender and discuss problems with them if they do arise. Both mortgage insurers CMHC and GE have recently created programs to help facilitate mortgage work-outs and prevent foreclosure.
Ensure that you have adequate home insurance. This will help protect you and your family against damages from fire, flooding (sometimes), earthquakes, theft, vandalism, etc. Most times, your home policy will also have some form of coverage for the contents of the home as well.
Regular Maintenance and Repair on your home is vital. Dripping taps, creaky floorboards and exposed wires may seem small now, but these could turn into larger problems and fire hazards over time. The adage: “an ounce of prevention saves a pound of solution” applies here. CMHC has actually created a “Maintenance Calendar” to help keep you on track!
Step 10: ENJOY YOUR NEW HOME!!!
Happy House Hunting!
Thank you kindly,
