Steps in the buying process::
Locate a home on which you would like to make an offer. If it is a private transaction and no real estate agent is involved, have your lawyer draw up a contract of purchase and sale. If there is a realtor involved, they can draw up the contract for you and present it to the vendor for acceptance. Please note that once the contract is accepted and signed by the vendor, there is a firm and binding contract and it is too late to change your mind or to ask for additional conditions to be included in the contract. The only exception would be for any "subject conditions" that you have written into the contract. You may wish to include a provision that your obligation to complete the Contract is subject to review of the Contract by your lawyer.
Locate a lawyer (if you haven't involved one in step one) to assist you in closing your purchase. For many people the money invested in the purchase of real estate is the largest expenditure they'll ever make and we therefore recommend that you use a lawyer rather than a notary public. A lawyer can provide a legal opinion on the title and can assist if there are complications in your transaction. We suggest that you call around and compare costs. Neither lawyers nor notaries public mind giving an estimate. Make sure, however, that the estimate includes fees and disbursements. Disbursements are the expenses incurred by the lawyer or notary public in handling your transaction (for example, search fees, registration costs and delivery and photocopying costs). Whether you are hiring a lawyer or a notary public, it should be someone you trust. At some point in the transaction, you will be paying a large sum of money to that lawyer or notary public to hold and use in the purchase of the property.
Locate financing. Since most of us are unable to pay cash for a house, it will be necessary to locate a bank, trust company or other lending institution to lend you money. Which one to choose? We advise you to shop around and to carefully evaluate the cost of financing by considering the following:
. mortgage processing/appraisal fee a lending institution may charge a fee for deciding whether to lend money to you.
. interest rate
. how often is the interest compounded (the more often it compounded, the higher your effective rate of interest)
. amortization period
. prepayment penalties (for example, if you resell the home before the end of the mortgage term)
. renewal fees at the end of the mortgage term
. does the lending institution require a survey certificate or title insurance? If so, normally you will be responsible for this cost.
Here is where your lawyer should take over for you to attend the following things:
. review final contract of purchase and sale
. order and review land title and tax searches
. provide you with an initial report on title and taxes
. prepare legal documents
. order forms from the building management company indicating that the vendor has paid all fees owing to them (for condo.)
. forward documents to vendor for execution
. receive and review executed vendor's documents
. meet with you to review searches and documents and to have you sign documents
. receive your money to use in the purchase
. present documents for registration at the land title office
. receive a post application search
. receive the lending institution's money to use in the purchase
. forward money to vendor
. if new property, hold back money for builders' liens
. interim report on title to you and to the lender
. receive State of Title Certificate
. release any holdback money
. final report on title to you.
Of particular importance is the initial land title search, especially in the case of condominiums where there are a number of dwelling units sharing one building. In order to regulate the use of the building by the various suite owners, the Strata Property Act provides a set of bylaws to govern the conduct of the people in the building. Any modifications to these bylaws will appear on the land title search. Typical modifications are to prohibit pets or rentals. In the case of some condominium buildings, the buildings and lands are owned by the government and the owners of the suite in fact only own leases.
While your lawyer is attending to step four, you will have to attend to these items:
- open hydro and cablevision accounts
- arrange for telephone service
- arrange for insurance on the property or, for a condo, on the contents of your suite (the management company places fire insurance on the building)
- arrange to obtain keys through the real estate agent
- arrange for movers
Before making an offer to purchase, make sure you take into account all the costs. The following items should be included in your calculations:
Gross purchase price
+ property transfer tax (1% on first $200,000, 2% on the balance) [unless you qualify for exemption]
+ sales tax on property and/or appliances (applies only to purchase of a new home)
+ legal fees and disbursements
+ municipal taxes (if the vendor has paid taxes for the whole year, you will have to reimburse him for the portion of the year you own the property)
+ maintenance fees (if the Vendor has paid maintenance fees for the whole month, you will have to reimburse him for the portion of the month you own the property)
-amount of mortgage
+ mortgage processing fee, interest adjustment cost, survey certificate, legal fees and disbursements
+ insurance premium and insurance binder costs
+ if condo, any move in fees and certificate costs
= net amount of money you need
This article contains only a general overview and may not discuss all items relevant to a particular transaction. Every transaction is unique. For more information, please contact your real estate agent or your lawyer.