The first step in purchasing a home is to decide how much you are willing and able to spend. Unless you have the assets to pay cash for a home, you will need to speak to a bank or other lender to find out how much they are willing to lend you on a mortgage. It is a good idea to obtain pre-approval on a mortgage before making an offer to purchase a home. This ensures that you know exactly how much you can afford to spend and eliminates the need to make an offer conditional on financing.
Once you have arranged your financing, you can start looking for a home in your price range. If you are looking for a new home, you will probably deal directly with the builder. If you are looking for a resale home, you will most likely need a real estate agent to help you to find a suitable home. You should be aware that in most cases your real estate agent will earn a commission which is payable by the vendor on your purchase of a home. This creates a potential conflict of interest and there is legal precedent that the agent's primary responsibility is to the vendor, not to the purchaser.
When you have decided to make an offer on a home, an Agreement of Purchase and Sale will be prepared by your agent or by the builder. This sets out the description of the property, the selling price, the amount of deposit, any fixtures or chattels included, and the closing date for the transaction, along with a number of other legally significant clauses. In most cases for resale homes a standard form contract printed by the Toronto Real Estate Board or the Ontario Real Estate Agents Association will be used, although there may be a number of additional clauses written or type in. A builder will ussually have their own standard form agreement. Whether you are buying a new home or a resale, you should have the agreement reviewed by your lawyer before signing it.
The deposit you pay is negotiable between you and the vendor, but is commonly around 5%-6%. In the event that you are unable to complete the purchase you may forfeit the deposit to the vendor. You may also be liable for damages in addition to the deposit if the vendor is unable to sell the house for the same price you had offered.
If at all possible you should obtain a survey from the vendor before signing the agreement. The survey can be attached to the agreement and form part of it through a reference in the description part of the main agreement. In many instances the vendor will not have a survey, or only have a very old survey. You should be aware that lenders will usually require an up to date survey before agreeing to advance money on a mortgage. If the vendor is unable to provide you with one, you may have to pay to have one prepared for you. This can cost anywhere from $700 to a few thousand dollars depending on the property.
Once the Agreement of Purchase and Sale has been signed by both you and the vendor, you should take a copy of it to your lawyer as soon as possible. He will need as much time as possible to conduct searches on such matters as title, zoning, building code compliance, taxes and hydro arrears. In addition to lawyer's fees, you will have to pay for the cost of these searches, as well as the cost of registering your deed and mortgage. A significant additional cost will be for Land Transfer Tax which, depending on the selling price of the home, can amount to several thousand dollars.
After the purchase has been completed, your lawyer will usually contact you and turn the keys to your new house over to you. This will most often be in the afternoon of the day set for completion of the purchase, so you should not plan on moving in until late afternoon or evening on the day of closing.
If you have any more questions, or require a lawyer for the purchase of a home contact Bryan Dale today!