Click HERE to download the PDF version of the Home Buyers Guide
1. Find a Realtor: It is important that you choose a real estate agent who is experienced and knowledgeable in your search area. More importantly, you must feel comfortable and reassured by this person as you will be spending lots of time together and will be relying on your Realtor to make the largest purchase of your life.
2. Documents:
a) At the first practical opportunity, your real estate agent will present you with a document entitled Working with a Realtor. Signing this document does not bind you to your agent. The pamphlet explains the different types of representation in the industry and by initialing and signing it, you acknowledge having read and understood its contents.
b) Next your agent will present you with a Buyer Representation Agreement which is an agreement that formally documents your exclusive relationship with the Realtor for a defined geographical area and time period.
c) As of June 23, 2008, the Federal Government through the Financial Transactions and Reports Analysis Centres of Canada (FINTRAC) requires Realtors to document the personal information of all parties to a real estate transaction. FINTRAC receives, analyzes, assesses, and discloses financial intelligence on suspected money laundering, terrorist financing and threats to security of Canada. As a buyer you will be asked to provide identification - driver's license, passport, or birth certificate. The Realtor will record the information but does not need to photocopy the document. When you submit an offer on a property, you will also be required to indicate the account information from which the deposit monies were drawn.
3. Mortgage Broker: Before you begin your search, it is recommended that you contact a mortgage broker to determine how much money you can borrow to purchase a home. This amount plus your deposit will become the budget for your home search. If your downpayment is less than 20% of the purchase price then you will be required to pay mortgage insurance (between 0.5% and 3.75% of the amount borrowed) which is rolled into your mortgage. Click here to learn about the new rules regulating mortgage insurance and click here for a list of Mortgage Brokers in Toronto.
In Canada, you are able to borrow up to $25,000 from your RRSP to buy your home. The money must be paid back in pro-rated amounts over the following fifteen years. For more information about the Canada Home Buyers Plan, click here.
4. Lawyer: Once a deal is reached, the lawyer takes over and ensures the deal closes on schedule. It is important that you find a lawyer who specializes in real estate. It is preferable to find a lawyer before your search begins so that the process runs smoothly once the offer is accepted. Click here for a list of Real Estate Lawyers in Toronto.
5. Showings: Determine your search criteria so that your Realtor can provide you with a proper list of properties to view: budget, location, number of bedrooms, number of washrooms, number of parking spots, property type (detached, semi-detached, townhouse, condo), property style (bungalow, 2-storey), as well as any other requirements such as an inground pool, central air conditioning, basement apartment, etc. Print off the Home Buying Checklist and bring a copy to each showing. If you see 5 or 6 homes in one day it can be quite difficult to remember all the features of each home. The easy-to-use Home Buying Checklist will make it easy to remember what each home has to offer.
6. Property Match Emails: Your Realtor will set you up on the MLS system so that you will receive daily emails of all new properties that match your search criteria. Click here to see what an MLS listing looks like.
7. You Found THE House: When you find the house that you would like to purchase, your Realtor will provide you with comparable sales in the area in order to establish an offer price. If you are in a multiple offer situation, the rules of the game change dramatically, and the final selling price is likely to exceed the list price. In these situations it is imperative that you do not get emotionally involved in the process. If you offer $100,000 over asking, you may end up winning the bidding war, but your lending institution may not appraise the house for the amount that you paid, and you will be responsible to make up the difference. In short, know your budget and stick to it!
8. The Offer: When it comes time to signing the offer, it is important that your Realtor explains all the clauses in the Agreement of Purchase and Sale (Freehold or Condo). You can click here to read the plain language version of the Agreement of Purchase and Sale. You will submit a deposit with the offer that is approximately 5% of the purchase price. The money must be in the form of a certified cheque, bank draft, or money order made out to the listing brokerage in trust.
9. Conditions: You can make an offer conditional on any number of things, the most common being financing and inspection. If your conditional offer is accepted, you will have an agreed upon number of days to fulfill the conditions. If all the conditions are met, you will sign a waiver and the agreement will become firm. If, for example, you are unsuccessful at obtaining proper financing or the home does not pass inspection, the deal will fall through, you will sign a Mutual Release, and your deposit will be returned in full.
A home inspection is essential when you purchase a home. An inspector may reveal issues with the home that can seriously affect your decision as to whether or not to proceed with the purchase. Insurance issues are of particular importance when it comes to a home inspection. For example, many insurance companies will not insure a house if there's evidence of a buried oil tank or if it has Knob and Tube wiring. To learn more about Knob and Tube wiring, click here. Also, there are many neighbourhoods in the City of Toronto that are infested with termites. If you choose to buy in one of these areas, it is wise to have the property inspected by a certified termite inspector before proceeding.
If you are buying a condominium, your offer will likely be conditional on your solicitor's approval of the Status Certificate. This document outlines the current financial status of the condo corporation as of the date of issue. The condo corporation has 10 days to issue the document (usually at the expense of the seller) and once provided to your lawyer, he or she will have an additional 3 days to review it. If it is met with approval, you will sign a waiver and the deal will firm up.
10. Multiple Offers: Over the last few years, the Toronto market has experienced a real estate boom and as such there have been many instances of multiple offers. When faced with the prospect of competing against 8 or 10 other buyers, it is wise to perform your due diligence prior to the offer date so that you can enter the bidding war with a firm offer, ie no conditions. Obviously offer price and possession date are other factors in determining whether your offer is accepted but your chances are drastically lower if you enter the process with a conditional offer. Perform the home inspection and get approved for financing prior to the offer date to improve your chances of succeeding in a multiple offer situation.
11. The Offer is Firm: Congratulations! Your offer was accepted and you now have "x" days before you take possession of your home. During this period, you can visit the property for the purpose of taking measurements and decorating (the number of times must be stipulated in the agreement). Your lawyer will be hard at work making sure the transaction runs smoothly by performing the appropriate land searches. You'll need to make arrangements with the utilities (gas, water, cable, hydro, phone) to let them know you'll be moving in. You'll also have to arrange home insurance. It would be wise to book a mover immediately, especially if you are closing at the end of a month which is when moving companies are normally at their busiest.
12. Closing Costs: It is important to factor in closing costs to your budget when purchasing a home. I normally suggest setting aside roughly 2% of the purchase price of the property for closing costs, although this figure has risen (to approximately 4%) since the City of Toronto implemented its municipal land transfer tax. Upon closing you will be responsible to pay your legal fees (which can range from $600-$1200 depending on the lawyer), disbursements, adjustments (to property taxes, utility bills, etc.), title insurance, and land transfer tax. If you purchase a home within the city limits of Toronto, you will be required to pay municipal land transfer tax which is in addition to the provincial land transfer tax. Click here to learn about the land transfer tax and the first time buyer rebate programs and click here for a land transfer tax calculator.
13. Possession: The day has arrived! During the day, your lawyer will electronically transfer title from the seller's name into your name, monies will be exchanged and once the transaction is completed, your lawyer will be given direction to hand over the keys to your new home. Congratulations - the home buying process is now complete.
